WASHINGTON—California Rep. Kevin McCarthy finally secured the presidency of the House in a dramatic vote that ended around 12:30 a.m. Saturday, but his party’s dysfunction and holding up The deal he struck to win over Republicans also risked a lasting political stalemate. destabilize the American financial system.
Economists, Wall Street analysts, and political pundits say his concessions to fiscal conservatives made it very unlikely that McCarthy would garner votes to raise the debt ceiling, or even vote for such a measure. It could be difficult, warns Congress. That would leave Congress with its basic task of keeping governments running, paying the nation’s bills, and avoiding a trillion-dollar U.S. debt default. may not be possible.
The congressional battle, which spanned 15 ballots over four days, pitted President Biden and Congress on the most dangerous debt-limit debate since 2011, when former President Barack Obama and the House of Representatives won a new Republican majority. and suggested it could get back on track later this year. Nearly defaulted on the national debt before cutting the 11 hour contract.
“If all we’re seeing is any indication of a meeting of a completely divided House Republican party unable to gather 218 votes on virtually any issue, it could reach the 11th hour or the last minute. , Alec Phillips, chief political economist at Goldman Sachs Research, said in an interview on Friday.
The federal government spends far more money than it earns each year, creating a budget deficit projected to average over $1 trillion annually over the next decade. These deficits add to the national debt of over $31 trillion last year.
Federal law sets limits on how much the government can borrow. But it does not require the government to balance the budget. In other words, MPs will raise the borrowing limit to avoid a situation in which the government cannot pay all the bills, jeopardizing payments for military salaries, social security benefits, debts to government bondholders, etc. Laws to raise must be passed periodically. Researchers at Goldman Sachs estimate that Congress will need to raise the debt limit around August to stave off such a scenario.
Understanding the U.S. Debt Ceiling
What is the debt ceiling? A debt ceiling, also called a debt limit, is the maximum amount of money the federal government is permitted to borrow via U.S. Treasury bills, such as notes and savings bonds, to meet its financial obligations. The US has a budget deficit and has to borrow a lot to pay its bills.
Raising the cap was once the norm, but has become more difficult in recent decades as Republicans have used the cap as a stick to force spending cuts. Their leverage stems from potential damage to the economy if limits are not lifted. Lifting the debt limit does not allow new spending. It just allows the United States to fund existing obligations. If the cap is not lifted, the government will be unable to pay all bills, including military salaries and social security payments.
An exception to the debt limit drama is in the four years of Donald J. Trump’s presidency, when Republicans have largely abandoned their claims that raising limits would lead to cuts in federal spending. In 2021, Senate Republicans clashed with Mr. Biden as the deadline for raising the ceiling approached, but ultimately these senators helped Democrats pass legislation to raise the ceiling.
Some Democrats lobbied to avoid this scenario last year when it became clear their party was likely to lose at least one House of Congress. They hope to raise the cap again in congressional lame duck sessions after the November election that gave Republicans control of the House to avoid a possible default by the 2024 presidential election. But the effort never gained momentum.
As a result, the next round of debt limit brinks could be the toughest on record. Conservative Republicans have already made it clear that they will not pass a higher debt ceiling without significant spending cuts, including cuts in spending on military spending and domestic affairs not related to defense.
Their power stems from the fact that Republicans hold a narrower majority than they did after the 2010 midterm elections, which empowered conservatives to oppose Mr. McCarthy. Among the demands of this group were drastic cuts in federal spending and a push for him to adjust the federal budget within a decade without increasing taxes.
“Is he more willing to shut down the government than raise the debt ceiling?” South Carolina Rep. One of them recently told reporters. “It’s a non-negotiable item.”
McCarthy appears to have agreed to these demands, allowing public debate on the appropriations bill and raising the debt ceiling without significant cuts, including efforts to cut spending on so-called mandatory programs, including Social Security and Medicare. A deal that has resulted in many holdouts in his camp, including Mr. Norman.
If the chair violates that arrangement, he could risk being overthrown at the caucuses. One lawmaker could force a vote to oust McCarthy under the terms of the deal. But Mr. Biden and the leaders of the Democratic-majority Senate have vowed to oppose such cuts, especially when it comes to social safety net programs. This could mean a stalemate that lasts until the government runs out of funds to pay the bills.
Solid budget hawks in Washington have long argued that the US needs to stop spending and borrowing so much that the country can’t afford to pay its long-term debt. They have called for a variety of ways to curb long-term spending growth, including reducing health care costs for the poor and the elderly. And many are calling for the abolition of some tax incentives while allowing the wealthy and businesses to pay more.
But many of these fiscal hawks say the Republican spending demands are reckless and will likely lead to a stalemate on key fiscal issues.
“Their specific demands to balance the budget in 10 years are totally unrealistic. It will require $11 trillion in savings,” said the chairman of Washington’s Committee on the Responsible Federal Budget. Maya McGinius said.
“I want to save more money than most people,” said McGinius. “But what they are asking is unattainable.”
Phillips said rushing to a deadline for raising the debt ceiling would wreak havoc on financial markets such as stocks and government bonds. If Congress can’t raise the debt ceiling and the government can’t borrow more money, Mr. Phillips said the United States would see a sharp increase in federal spending, which is equivalent to a tenth of his total daily economic activity. said it would suffer a steep decline.
“This doesn’t feel like misinformation,” he said.
In 2011, Republicans and Obama agreed to a deal to raise the debt ceiling, which would impose future limits on domestic spending growth. He expressed skepticism that this time would be the same. Democratic Party.
Administration officials have shown no sign of negotiating with Republicans about raising the debt ceiling. The Speaker of the House has refused to put a vote on raising the debt ceiling without significant spending cuts.
White House Press Secretary Karine Jean-Pierre told reporters at a briefing on Friday that Biden hoped Congress would conditionally raise the debt ceiling again.
“We have said that the debt ceiling should not be used as a political brinkman,” she said. “We were very clear. If you look at what Republicans in Congress have done three times — three times during the Trump administration — they could have dealt with it in a responsible way, right? , voted three times to raise the debt ceiling.So Congress has to be held accountable again.”
Moderate lawmakers have already begun weighing the possibilities of how the House could raise the cap. One of her unfeasible ideas is a so-called expulsion petition signed by a majority of the House of Representatives to force the bill to be voted on. A move of that sort would probably depend almost entirely on the Democratic vote, with the participation of a few Republicans, but the outcome is not guaranteed. It exposes exiled Republicans to punishment and major challenges.
Still, Pennsylvania Republican Rep. Brian Fitzpatrick embraced the possibility of such a compromise in an interview with CNN last week. “There are many options for circumventing leadership,” he said. “There aren’t tons. But there are options at our disposal.”
