Speaker McCarthy Proposes $1.5 Trillion US Debt-Limit Increase
(Bloomberg) — US Speaker Kevin McCarthy proposed a bill that would raise the US debt limit for about a year and cut federal spending, ahead of a planned House vote on the Republican proposal next week.
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The plan would increase the debt ceiling by $1.5 trillion, enough to stave off a US payments default until at the latest March 31, 2024. It also contains a host of conservative proposals that are non-starters with congressional Democrats and the White House.
The McCarthy plan would bring discretionary spending back to 2022 levels — a $130 billion cut. Future increases would be capped at a 1% annual rate for the following decade.
The reductions “are not draconian, they are responsible,” McCarthy said. “If Washington wants to spend more it will have to come together and find savings elsewhere just like every single household in America.”
The plan would also rescind unspent Covid-19 funds, impose tougher work requirements for anti-poverty benefits and ease regulations on energy projects.
McCarthy estimated that the bill would cut budget deficits by $4.5 trillion over a decade.
The speaker hopes that, if the House can pass the proposal, President Joe Biden will then engage in talks to resolve the ongoing stalemate over raising the $31.4 trillion debt limit. Without an increase or suspension of the ceiling, the US would default on payment obligations as soon as June — an event Treasury Secretary Janet Yellen has warned would cause economic and financial “collapse.”
“House Republicans have a plan. The Senate does not,” McCarthy said. “And the president is ignoring the debt crisis. 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.”
It’s unclear if McCarthy can get the support of the 218 Republicans he will need to pass the bill in the coming days, in the face of united Democrat opposition.
Republicans now control the chamber 222-213. That means McCarthy’s efforts to rally his conference behind a bill can’t succeed if more than four GOP members oppose it — if all House members vote and all Democrats oppose it.
A handful of Republicans have said they are undecided on the plan, including Representatives Tim Burchett and Victoria Spartz. Still, McCarthy told reporters he’s confident the bill will pass.
In a last-minute concession to the conservative House Freedom Caucus, the bill would end hundreds of billions of dollars in tax breaks for clean-energy projects and the purchase of qualifying electric vehicles. It would also end an $80 billion funding boost to the Internal Revenue Service that’s designed to boost audits of the wealthy.
Those features target elements of Biden’s Inflation Reduction Act, which passed last year. But the GOP plan doesn’t repeal popular drug price cuts — sparing House moderates a painful vote.
What is on the cutting block, however: Biden’s student debt relief plan. McCarthy also said the legislation would put limits on the executive branch’s regulatory power more broadly.
Biden has said that he will only accept a no-strings-attached debt ceiling increase or suspension from Congress, but has indicated he is open to separate budget talks about fiscal 2024 spending levels with the GOP.
Biden has released his own $7 trillion budget proposal that would reduce deficits by $3 trillion over a decade compared with current law — mostly through tax increases. Biden has demanded the GOP produce its own 10-year plan and admit that it wants to cut spending in order to pay for an extension of trillion of dollars in tax cuts enacted by former President Donald Trump.
The fractious GOP conference has been unable to agree on such a budget proposal, however, and has instead focused on formulating the debt-ceiling bill with the deadline for a default looming.
Analysts at Goldman Sachs Group Inc. on Tuesday warned that, due to declining tax receipts, the date for a US default could be closer to June — rather than August, as some economists have predicted. The Treasury Department is expected soon to offer an update on the timeline for when it will exhaust special measures to keep within the current, $31.4 trillion debt ceiling and avoid a default.
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