UPDATE: 5:17 P.M.
WASHINGTON (Reuters) -Republican U.S. House Speaker Kevin McCarthy on Wednesday unveiled a plan to raise the nation’s debt ceiling by $1.5 trillion and cut federal spending by three times that amount, laying out an opening position in what is likely to be a tense partisan debate over government borrowing.
McCarthy‘s proposal, which he unveiled on the floor of the House of Representatives, would cut the total amount of domestic and military spending to 2022 levels and cap growth at 1% annually in years to come. It would not touch retirement and health programs that are projected to expand dramatically as the population ages.
President Joe Biden and the Democratic-controlled Senate are likely to reject the proposals, but McCarthy said they would serve as the basis for negotiations between the two parties over raising the federal government’s $31.4 trillion debt limit in the coming weeks. Failure to raise the debt ceiling would lead to default that would shake the U.S. and world economies.
McCarthy‘s plan would also repeal green-energy incentives signed into law by Biden last year, boost domestic oil and gas production and scrap his $400 billion student-loan forgiveness effort.
It would claw back unspent COVID-19 relief money, cancel a recent budget increase for the Internal Revenue Service and impose stiffer work requirements for some benefit programs.
Congress would gain greater power to block Biden administration regulations under the proposal as well.
McCarthy said the package would lower spending by $4.5 trillion over the coming 10 years. That would not be enough to eliminate budget deficits that are projected to add more than $20 trillion to the national debt over that time period.
“President Biden has a choice: Come to the table and stop playing partisan political games, or cover his ears, refuse to negotiate and risk bumbling his way into the first default in our nation’s history,” McCarthy said on the House floor.
He did not say when the House of Representatives, which his Republicans control by a narrow 222-213 majority, would vote on the plan.
Biden reiterated his position that Congress should raise the $31.4 trillion debt limit without conditions, as it did three times under his Republican predecessor, Donald Trump.
“Take default off the table, and let’s have a real serious, detailed conversation about how to grow the economy, lower costs and reduce the deficit,” he said at an appearance outside Washington.
Biden’s budget, released last month, would save $3 trillion over 10 years largely through tax hikes.
POTENTIAL CONSEQUENCES
The nonpartisan Committee for a Responsible Federal Budget praised McCarthy‘s plan as a “realistic and extremely welcome first step.” But Democratic Representative Richard Neal dismissed it as “not serious.”
The U.S. federal government has already reached the borrowing limit and by this summer is expected to hit a point where it will no longer be able to meet its financial obligations without action by the divided Congress.
Treasury Secretary Janet Yellen has warned the federal government could run out of ways to cover its debts by as soon as early June.
The $1.5 trillion increase proposed by McCarthy could cover the government’s needs until early next year, setting the stage for another debt ceiling fight in the midst of the 2024 presidential election campaign.
It was unclear whether McCarthy‘s plan would unite House Republicans. A sizeable contingent of hardline members have dismissed the risks of failure to act, while others might balk at its limits on military spending.
A lengthy 2011 standoff over the debt ceiling led to a first-ever downgrade of the federal government’s credit rating, which rattled markets and raised borrowing costs.
(Reporting by Richard Cowan and Andy Sullivan; Additional reporting by Andrea Shalal in Accokeek, Maryland, and Katharine Jackson in Washington; Writing by Andy Sullivan; Editing by Scott Malone, Nick Macfie, Jonathan Oatis and Cynthia Osterman)
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WASHINGTON (Reuters) -U.S. House Speaker Kevin McCarthy on Wednesday plans to unveil a plan to raise the nation’s debt ceiling by $1.5 trillion, two sources said, as Republicans dig in on a standoff with Democrats over the government’s borrowing limit.
McCarthy will introduce to the Republican-controlled House of Representatives a bill that includes most of a proposal he laid out on Monday that included cutting the federal budget to 2022 levels and capping spending growth at 1% per year in exchange for raising the $31.4 trillion limit, a House Republican aide said.
The White House on Wednesday reiterated its position that Congress should raise the debt limit — a move necessary to pay for the costs of previously approved spending and tax cuts — without conditions, as it did three times under Democratic President Joe Biden’s Republican predecessor, Donald Trump.
The U.S. federal government has already reached its $31.4 trillion borrowing limit and by this summer is expected to hit a point where it will no longer be able to meet its financial obligations. Without action by the divided Congress, that would trigger a historic default that would shake the U.S. and world economies.
A source who was briefed on McCarthy’s proposal but not allowed to speak publicly, said the speaker would propose a $1.5 trillion increase in the limit. That could cover the government’s needs until early next year, setting the stage for another debt ceiling fight in the final months of the 2024 presidential election campaign.
McCarthy leads a fractious caucus that holds a narrow 222-213 majority, including a sizeable contingent of hardline members who want sharp spending cuts and dismiss the risks of failure to act on the debt ceiling. So far House Republicans have not produced a proposed budget of their own, a move that Biden contends would be a necessary starting point for negotiations on spending.
Even if McCarthy’s proposal were to pass the House, it would be unlikely to find support in the Democratic-controlled Senate.
The White House last month proposed its own budget, which it said would cut the nation’s deficit by nearly $3 trillion over 10 years, though it relied on increases in taxes on businesses and the wealthy, rather than spending cuts, to do so.
The nonpartisan Congressional Budget Office last month laid out a range of options to address the debt, which showed that higher tax collections would have significantly more impact than spending cuts.
(Reporting by Richard Cowan; Editing by Scott Malone, Nick Macfie and Jonathan Oatis)
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