Kevin McCarthy, the Republican speaker of the House, has detailed his plans for averting a looming crisis over the US debt ceiling for the first time, with a bill that would push the risk of a default into next year but would require the rolling back of several White House policies.
McCarthy and House Republicans have sought to tie raising the debt ceiling to steep budget cuts, while president Joe Biden and congressional Democrats have urged Republicans to agree to a higher federal borrowing limit without condition. A failure to raise the debt ceiling risks plunging the US government into default as soon as June, according to some estimates.
McCarthy on Wednesday introduced what he described as a “clear plan for a responsible debt limit increase”. The bill would raise the debt ceiling by $1.5tn, averting risk of default until 2024.
But it also includes a lengthy list of Republican policy priorities that Democrats are almost certain to reject, including capping government spending at fiscal year 2022 levels, clawing back unspent Covid-19 relief funds and repealing the Biden administration’s investments in the Internal Revenue Service.
The bill would also scrap certain green subsidies, end Biden’s student loan forgiveness programme, and reinstate work requirements for welfare payments, including food stamps.
Any legislation to raise the debt ceiling would need to be approved by both chambers of Congress and signed into law by Biden. While Republicans control the House of Representatives, Democrats hold the reins to the Senate.
The House is expected to vote on McCarthy’s proposal as soon as next week. But it remains unclear whether the bill will garner enough Republican support to pass. Republicans control the House by a razor-thin margin, meaning a small number of GOP lawmakers could scupper the legislation.
McCarthy’s latest salvo came as Biden addressed union workers in Maryland. The president’s remarks were intended to act as a foil to McCarthy’s speech on the debt ceiling earlier this week at the New York Stock Exchange.
Biden on Wednesday described the situation as “really dangerous”, and accused Republicans of holding the economy hostage.
“Maga Republicans in Congress are threatening to default on the national doubt . . . unless we do what they say, they’re going to default, unless I agree to all these whacko notions,” Biden said, in a reference to former president Donald Trump’s “Make America great again” slogan.
“To default would be worse than totally irresponsible,” he added. “It would mean cutting Social Security and Medicare, higher interest rates for things like credit cards, car loans [and] mortgages . . . The entire economy would be at risk.”
The US Treasury earlier this year began taking “extraordinary measures” to meet the federal government’s obligations. But those measures are set to run out in the coming months if the debt ceiling is not raised.
Janet Yellen, Treasury secretary, has said it is “unlikely” the department would run out of money “before June”, and most economists have projected a so-called “X-date” in July or August.
Economists at Goldman Sachs had been projecting the X-date would fall in early August, but on Tuesday revised their estimates to late July. They warned, however, that a risk of default could come as soon as early June if tax receipts were below expectations.