On Thursday, the government of the United States hit its $31.4 trillion borrowing limit amid an impasse between President Joe Biden’s Democrats and the GOP-controlled House of Representatives that could lead to a serious fiscal crisis in a few months.
Janet Yellen, U.S. Treasury Secretary, informed leaders in Congress, including Speaker of the House Kevin McCarthy, that her department had started using unprecedented cash management measures to try to ward off default until June 5.
Republicans, who only recently won a House majority, intend to use the time until emergency measures by the Treasury are exhausted to compel spending cuts from the Democrat-led Senate and President Joe Biden.
Secretary Yellen warned the June dates were the subject of “considerable uncertainty” because of the challenge of forecasting government revenues and payments months into the future.
“I respectfully urge Congress to act promptly to protect the full faith and credit of the United States,” wrote Yellen to be congressional in a letter released Thursday.
However, there was no sign that either Democrats or Republicans were willing to budge.
GOP members of the House seek a “debt prioritization” plan to avoid default by pressuring the Treasury to prioritize debt payments and likely other priorities, such as Medicare and Social Security if the limit is violated during negotiations. Republicans aim to complete the legislation by the end of March.
Director of the White House Economic Council, Brian Deese, said Thursday the risks of unpredictability over whether or not the U.S. will honor its debts cause risks to the economy and its global standing.
“This is not that complicated. This is not about new initiatives or new opportunities. This is about meeting the obligations that this country has already made,” said Deese.
Representative Chip Roy dismisses concerns
“We’re not going to default on debt. We have the ability to manage servicing and paying our interest. But we similarly should not blindly increase the debt ceiling,” said leading conservative Representative Chip Roy.
Rep. Roy dismissed concerns about risking a recession or upsetting markets. “That’s what they say every time. It’s like clockwork. We’ve already barreled toward a recession. The question is what it’s going to look like — unless the combination of monetary policy and fiscal policy saves us from our stupidity of having spent so much money,” said Roy.
Negotiations on spending and debt prioritization aren’t expected to get into motion until lawmakers return to Washington next week.
The GOP plan calls for a balanced federal budget in 10 years by using House oversight to identify federal programs that can be scaled back or eliminated in spending bills expected to be released later this year from the House Appropriations Committee and capping discretionary spending at 2022 levels.
Meanwhile, Republicans in the House vow to reject broad government funding bills from Senate Majority Leader Chuck Schumer, similar to the $1.66 trillion omnibus bill passed by Congress late last year.
Officials at the White House also indicate that congressional Republicans supported multiple increases to the debt ceiling during the presidency of Donald Trump.
“We are optimistic that Democrats will come to the table and negotiate in good faith,” said GOP Representative Ben Cline, leader of a conservative task force on spending and the budget. “There’s a lot of room to negotiate when it comes to steps that can be taken to address the fiscal crisis that we find ourselves in.”