WASHINGTON — Representative Kevin McCarthy of California finally clinched the House speakership in a dramatic midnight vote early Saturday, but the deal he struck to win over holdout Republicans also carries the risks of a continuing political impasse that could crippling the US financial crisis. could destabilize system.
Economists, Wall Street analysts and political observers are warning that the concessions he has offered to fiscal conservatives could make it very difficult for McCarthy to muster votes to raise the debt ceiling. It could prevent Congress from doing the basic tasks of keeping the government open, paying the nation’s bills, and avoiding default on America’s trillions of dollars in debt.
The speaking battle and a fractured House majority suggest that President Biden and Congress may be on track for the bloodiest debt-limit debate later this year since 2011, when former President Barack Obama and a new Republican majority in the House The first had almost defaulted on the country’s debt. 11th hour deal cutting.
“If what we’re seeing is a symptom of a completely disintegrated House Republican convention that is going to be unable to come together with 218 votes on virtually any issue, that tells you that at the 11th hour Or the likelihood of reaching the last minute or whatever is very high,” Alec Phillips, chief political economist at Goldman Sachs Research, said in an interview on Friday.
The federal government spends far more money each year than it receives in revenue, creating a budget deficit that is projected to average more than $1 trillion per year for the next decade. Those losses will add to a national debt that topped $31 trillion last year.
Federal law sets limits on how much the government can borrow. But this does not require the government to balance its budget. This means that lawmakers must pass legislation to periodically increase borrowing limits to avoid a situation in which the government is unable to pay all of its bills, military pay, Social Security benefits and government bond holders. jeopardize the payment including loan to Goldman Sachs researchers estimate that preventing such a scenario would require Congress to raise the debt ceiling around August.
Understand the US Debt Limit
What is the loan limit? The debt ceiling, also called the credit limit, is a limit on the total amount that the federal government is authorized to borrow through U.S. Treasury securities, such as bills and savings bonds, to meet its financial obligations. Because the US runs a budget deficit, it must borrow large sums of money to pay its bills.
Raising the limit was once routine but has become increasingly difficult over the past few decades, with Republicans using the cap to force spending reductions. Their leverage stems from the potential damage to the economy if the limit is not raised. The raising of the credit limit does not authorize any new expenditure; It just allows the United States to meet existing obligations. If that cap is not removed, the government will be unable to pay all of its bills, including military members’ salaries and Social Security payments.
The exception to the debt-ceiling drama was Donald J. It was four years into Trump’s presidency when Republicans largely abandoned their push to tie the increase to the limit to cut federal spending. In 2021, Senate Republicans clashed with Mr. Biden as the cap-raising deadline loomed, but those lawmakers ultimately helped Democrats pass legislation raising the cap.
Some Democrats pushed last year to avoid this scenario when it became clear their party would lose at least one chamber of Congress. He expected to raise the limit again in a lame-duck session of Congress after the November elections that give House control to Republicans to avoid any chance of default before the 2024 presidential election. But the effort never gained traction.
As a result, the next round of debt-limit fractiousness could be the most fractious on record – as evidenced by the fight over the speakership. Conservative Republicans have already made clear they will not pass a debt-ceiling increase without significant spending restrictions, possibly including cuts in spending on the military and domestic issues related to national defense.
His power stems from the fact that Republicans have a much narrower majority than they did in the 2010 midterms, which empowered conservative holdings that opposed Mr. McCarthy. That group’s demands included drastically cutting federal spending and balancing the federal budget within a decade without raising taxes.
Mr McCarthy appeared to agree to those demands, promising not to raise the debt ceiling without major spending cuts – which included efforts to reduce spending on so-called essential programs, including Social Security and Medicare – a deal in which brought in several holdouts. Camp.
A speaker who violated that agreement could risk being ousted by the Republican caucus in the House. But Mr Biden and his party’s leaders in the Democratic-controlled Senate have vowed to fight those cuts – particularly to Social Safety Net programmes. This could mean a protracted impasse that lasts so long that the government runs out of money to pay its bills.
Hardcore budget buffs in Washington have long argued that the United States needs to stop spending — and borrowing — so much money and that the nation can’t afford its long-term debt. He has pushed for a variety of ways to reduce long-term spending increases, including cuts to health care for poor and older Americans. And many have called for eliminating some tax breaks while ensuring that the richest and corporations pay more.
Yet most of those fiscal hawks have described the Republican spending demand as reckless and likely to lead to a stalemate on key fiscal issues.
“His specific demand to balance the budget in 10 years is completely unrealistic. It would take $11 trillion in savings, said Maya McGuinness, chair of the Committee for a Responsible Federal Budget in Washington, which has long pushed lawmakers to reduce future deficits through spending cuts and tax hikes. .
“I want to save more money than a lot of people,” Ms McGuinness said. “But what they are asking for is not achievable.”
Mr. Phillips said moving toward the deadline to raise the debt ceiling would unleash chaos in financial markets, including stocks and Treasury bonds. If Congress fails to raise the debt ceiling and the government becomes unable to borrow more money, Mr. Phillips said, America would face a sudden reduction in federal spending that equals one-tenth of all daily economic activity.
“It doesn’t sound like a false alarm,” he said.
In 2011, Republicans and Mr. Obama agreed to a deal to raise the debt ceiling that also imposed future limits on increases in household spending. Ms. McGuinness, Mr. Phillips and other analysts expressed doubt that talks between Mr. Biden and House Republicans would do the same this time, as the faction blocking Mr. McCarthy’s ascent this week appears willing to settle for much more modest concessions. Not there. from the Democrats.
Administration officials have given no indication that they would negotiate with Republicans on a debt-limit increase — nor were they preparing for the possibility of the House speaker calling the debt- for a vote without spending cuts. Refused to increase the limit.
White House press secretary Karine Jean-Pierre told reporters at a briefing on Friday that Mr Biden expected Congress to raise the debt ceiling again without conditions.
“We have said that we should not use the debt ceiling in case of political fragility,” he said. “We’ve been very clear. If you look at what the Republicans in Congress did three times — three times during the Trump administration — were they able to deal with who was responsible, right? They did it again to raise the debt ceiling. Voted thrice from .. And so Congress should be held responsible once again.
Liberal lawmakers have already begun exploring how the House could raise the limit. A long shot idea: a so-called discharge petition signed by a majority of the House to vote on a bill. Such a move would likely depend almost entirely on Democratic votes with some Republicans involved. But this result is far from guaranteed; This will require extensive coordination by both parties and will lead to punishment and primary challenges to defecting Republicans.
Still, Republican Representative Brian Fitzpatrick of Pennsylvania acknowledged the possibility of such an agreement this week in an interview with CNN. “There are many options for bypassing leadership,” he said. “There aren’t a ton. But we have options at our disposal.”
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