WASHINGTON (AP) – House Republicans are pushing debt ceiling talks to the brink, displaying risky political bravado as they prepared to leave town yesterday for the holiday weekend just days before the United States (US) could face an unprecedented default that could hurl the global economy into chaos.
A defiant House Speaker Kevin McCarthy said the debt ceiling standoff was “not my fault” as Republican negotiators and the White House failed to finish out talks. He warned they need more time to try to reach a budget-slashing deal with President Joe Biden.
But it’s clear the Republican speaker – who leads a Trump-aligned party whose hard-right flank lifted him to power – is now staring down a potential crisis.
Lawmakers are tentatively not expected back at work until Tuesday, just two days from June 1, when Treasury Secretary Janet Yellen has said the US could start running out of cash to pay its bills and face a potentially catastrophic default.
Fitch Ratings agency placed the US’ AAA credit on “ratings watch negative”, warning of a possible downgrade because of what it called the brinkmanship and political partisanship surrounding the debate over lifting the debt ceiling. Weeks of negotiations between Republicans and the White House have failed to produce a deal – in part because the Biden administration never expected to be having to negotiate with McCarthy over the debt limit, arguing it should not be used as leverage to extract other partisan priorities.
McCarthy is holding out for steep spending cuts that Republicans are demanding in exchange for their vote to raise the nation’s borrowing limit.
The White House has offered to freeze next year’s 2024 spending at current levels, but the Republican leader says that’s not enough.
“We have to spend less than we spent last year. That is the starting point,” said McCarthy, R-California.
Failure to raise the nation’s debt ceiling, now at USD31 trillion, would risk a potentially chaotic federal default, almost certain to inflict economic turmoil at home and abroad. Anxious retirees and social service groups are among those already making default contingency plans.
Even if negotiators strike a deal in coming days, McCarthy has promised lawmakers he will abide by the rule to post any bill for 72 hours before voting – now likely Tuesday or even Wednesday.
The Senate would also have to pass the package before it could go to Biden’s desk to be signed into law, right before next Thursday’s possible deadline.
The White House has continued to argue that deficits can be reduced by ending tax breaks for wealthier households and some corporations, but McCarthy said he told the president as early as their February meeting that raising revenue from tax hikes was off the table.
Donald Trump, the former president who is again running for office, has encouraged Republicans to “do a default” if they don’t get the deal they want from the White House.
Time is short to strike a deal.
Yellen said on Wednesday that “it seems almost certain” that without a deal the US would not make it past early June without defaulting.
“We are seeing some stress already in Treasury markets,” she said at a Wall Street Journal event.
