By Richard Cowan
WASHINGTON (Reuters) – US House Speaker Kevin McCarthy plans to make case for cuts to federal spending. 4 trillion debt ceiling speech at the New York Stock Exchange on Monday.
His speech comes as the federal government approaches a point sometime this summer when it will no longer be able to meet its financial obligations. Failure to act by a divided Congress would trigger a historic default that would destabilize the U.S. and world economies.
President Joe Biden’s Democrats, who also control the Senate, have been wrangling Republicans for months over next steps on restrictions, with the White House insisting that Congress unconditionally lift borrowing restrictions, as in Biden’s It did so three times under Republican predecessor Donald Trump.
McCarthy on Monday pushed back on Democratic arguments that his caucus has put the U.S. economy at risk by refusing to act.
“Make no mistake: The longer President Biden waits to come to his senses and make a deal, the more likely his administration will slip into the first default in our nation’s history,” McCarthy tweeted ahead of his speech that it was expected at AM ET (222 GMT).
Republicans who control the House of Representatives this week will try to agree on a proposal to lift restrictions until May 2024 — as the next presidential campaign accelerates — in exchange for Cut spending drastically. Such a proposal is unlikely to win the Democratic support it needs to take effect.
McCarthy leads a grumpy caucus with low approval ratings 222-31 The majority, including a large group of hardliners, want to slash spending and remove the risk of failing to act on the debt ceiling. House Republicans have so far failed to come up with their own proposed budget, a move that Biden sees as a necessary starting point for spending talks.
“I don’t know what we’re negotiating … I don’t know what they want,” Biden told reporters Saturday. , though it did so by raising taxes on corporations and the wealthy, rather than cutting spending.
The nonpartisan Congressional Budget Office last month laid out a series of plans to tackle the debt problem, suggesting that tax hikes would have a much bigger impact than spending cuts.
List of options
Republicans have been discussing spending cuts to programs ranging from homeland security and law enforcement to health, education and environmental initiatives. This could be done by freezing spending at 2022 levels or allowing growth of only 1% per year for a decade, which would not keep up with inflation or population growth, effectively cutting funding.
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Such a budget would not touch the main driver of debt that Republicans have complained about – Social Security and Medicare retirement and health care programs are expected to nearly double in cost in the coming 10 years, according to the CBO.
The closer Congress gets to the “X date” when the federal government won’t be able to pay its bills, the more nervous investors will be as they focus on the economic outlook. The last prolonged standoff over the debt ceiling occurred at 2011, leading to a historic downgrade of the US government’s credit rating, which rattled markets and raised borrowing costs.
House Republicans are also considering reforms to the debt ceiling, which misses entirely their goal of limiting the US budget deficit.
Currently, the debt ceiling is legally set at a specific dollar amount – now at 31.$4 trillion – although Congress Sometimes the limit is suspended, meaning it doesn’t apply for a set period of time. House Republicans now say they are considering indexing the limit on gross domestic product.
