House Speaker Kevin McCarthy (R-CA) was meeting with House Republicans on Tuesday behind closed doors ahead of unveiling their proposal for raising the debt ceiling.
According to some reports, House GOP members, including the ultra-conservative Freedom Caucus, were generally open to the plan McCarthy outlined in a speech Monday on Wall Street.
On Monday, McCarthy said House Republicans’ forthcoming plan would seek to limit federal spending with proposals to return discretionary funding levels to 2022 levels “and then limit the growth of spending over the next 10 years to 1% of annual growth,” without “touching Social Security and Medicare.”
The plan he outlined further involves recouping tens of billions of dollars in unspent Covid relief funds.
House Rules Committee Chair Tom Cole (R-OK) said the bill could come up for a vote as soon as next week. “I’m confident we’ll have it and comfortable we’ll pass it,” he added.
However, the GOP’s plan, which also involves undoing much of the White House’s climate change agenda, has very little chance of passing as-is in the Democratic-controlled Senate.
The federal government reached its $31.4 trillion borrowing limit on January 19, at which time Treasury Secretary Janet Yellen told Congress the country could undertake “extraordinary measures to prevent the United States from defaulting on its obligations.”
However, both Yellen and the non-partisan Congressional Budget Office (CBO) have warned that those measures are likely to be exhausted sometime this summer, possibly as early as June.
President Biden and McCarthy have met once to talk about the debt ceiling, on February 1. Since then, Biden unveiled his own budget proposal, which advocated raising taxes on Americans who earn more than $400,000 a year, and called on McCarthy to reveal the House’s budget.
The White House has since refused to engage with McCarthy on the debt limit until he reveals that budget. On Monday, the White House dismissed McCarthy’s address to the New York Stock Exchange, saying “a speech is not a plan.”
McCarthy took the opportunity before Wall Street to rail against Biden, saying, “For 75 days, the President has ignored the debt ceiling.”
Yellen has warned that a default could cause “irreparable harm to the U.S. economy.” Federally backed debt is the backbone of domestic and global markets. A failure to make good on U.S. borrowing could set off panic on Wall Street and spark millions of job losses.
“Household payments on mortgages, auto loans, and credit cards would rise, and American businesses would see credit markets deteriorate,” she said, adding that social security payments would also be in jeopardy.
According to Moody’s Analytics, a stock market plunge as a result of debt default could wipe out 6 million jobs and $15 trillion in wealth.
The United States has never defaulted on its debt. But it has repeatedly come close, perhaps most notably in 2011 amid the rise of the conservative tea party movement in the House, which resulted in the only credit rating downgrade in U.S. history.
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