© Reuters. FILE PHOTO: U.S. Representative Chip Roy (R-TX) leaves after a meeting of the Republican conference on Capitol Hill in Washington, U.S., January 10, 2023. REUTERS/Jonathan Ernst
By David Morgan
WASHINGTON (Reuters) – The U.S. government was due to hit its $31.4 trillion borrowing limit on Thursday amid a standoff between the Republican-controlled House of Representatives and President Joe Biden’s Democrats that could lead to to a fiscal crisis in a few months.
Republicans, with a newly won majority in the House, intend to use the federal debt ceiling mandated by Congress to demand spending cuts from Biden and the Democratic-led Senate.
The Thursday deadline will have little immediate effect, because Treasury officials are prepared to begin employing emergency cash management measures to avoid default. More serious risks will arise closer to June, when the government approaches the so-called X date, beyond which the Treasury would be left without emergency maneuvers.
Before that deadline, there were no signs that either side was willing to budge.
“It’s something that should be done with no strings attached. We shouldn’t be negotiating around it. It’s the basic duty of Congress to do that,” White House press secretary Karine Jean-Pierre told reporters.
Instead, Republicans are seeking a “debt prioritization” plan that would seek to prevent default by urging Treasury to prioritize debt payments, and possibly other priorities like Social Security and Medicare, should the cap be exceeded. during negotiations. Republicans hope to complete the legislation by the end of March.
The prospect of brinkmanship has raised concerns in Washington and on Wall Street about a tough fight over the debt ceiling this year that could be at least as disruptive as the protracted 2011 battle that led to a credit rating downgrade. US military and domestic spending cuts.
“We are not going to default on debt. We have the ability to service and pay our interest. But we shouldn’t blindly raise the debt ceiling either,” Rep. Chip Roy, a leading conservative, told Reuters.
Roy dismissed concerns about unstable markets and the risk of a recession.
“That’s what they say every time. It’s like clockwork,” Roy said in an interview. “We are already heading towards a recession. The question is what it will be like, unless the combination of monetary policy and fiscal policy saves us from our stupidity of spending so much money.”
Congress adopted a comprehensive debt ceiling, the legal maximum amount of debt the government can issue, in 1939, with the intention of limiting its growth. The measure has not had that effect, since, in practice, Congress has dealt with the annual budget process, deciding how much money to spend, separate from the debt limit, in essence agreeing to cover the costs of previously approved spending. .
Negotiations on prioritizing debt and spending are not expected to get into full swing until lawmakers return to Washington next week.
The Republican plan calls for balancing the federal budget in 10 years by limiting discretionary spending to 2022 levels and using House oversight to identify federal programs that can be eliminated or reduced in spending bills expected to emerge from the Committee on House assignments later this year.
Meanwhile, House Republicans are vowing to reject Senate Majority Leader Chuck Schumer’s sweeping government funding bills similar to the bipartisan $1.66 trillion master package Congress passed. at the end of last year.
White House officials also point out that Republicans in Congress backed multiple increases to the debt ceiling when Republican Donald Trump was president.
Congress and the White House likely have until early June to reach an agreement on government funding before Washington faces the specter of a default for the first time, according to Treasury Secretary Janet Yellen. .
“We are optimistic that the Democrats will come to the table and negotiate in good faith,” said Republican Rep. Ben Cline, who leads a conservative task force on budgeting and spending. “There is a lot of room for negotiation when it comes to the steps that can be taken to address the fiscal crisis we find ourselves in.”
