House Speaker Rep. Kevin McCarthy (R-Calif.) said Wednesday that investors should be worried about the deadlock in Washington over raising the debt ceiling as the United States inches closer to a possible debt default, which both Democrats and Republicans have warned would be terrible for the economy.
“Unfortunately, I tried to sit down with the president and the president doesn’t want to communicate,” McCarthy said, adding that since a meeting with Biden on Feb. 1, the only communication between the two on the debt ceiling has been via letter.
Republicans have been working on a deficit-reduction proposal, and McCarthy suggested that once Congress returns from recess later this month, there might be “some news” in this regard.
Asked whether he plans to speak to investors about the GOP proposal in the meantime in order to reassure markets, McCarthy said that Wall Street is right to be worried.
McCarthy and Biden Trade Jabs
In his letter to the president, McCarthy warned that Biden’s refusal to negotiate spending cuts to get GOP backing on raising the debt ceiling “could prevent America from meeting its obligations and hold dire ramifications for the entire nation.”“With each passing day, I am incredibly concerned that you are putting an already fragile economy in jeopardy by insisting upon your extreme position of refusing to negotiate any meaningful changes to out-of-control government spending alongside an increase of the debt limit,” McCarthy wrote.
Biden replied to McCarthy, saying that he’s prepared to consider Republican proposals for spending cuts as part of a budget plan, but that such discussions must be separate from “prompt action on the Congress’ basic obligation to pay the nation’s bills an avoid economic catastrophe.”
Failure to reach an agreement over the debt ceiling could lead to a default on U.S. debt obligations, an outcome that many economists have warned would be disastrous.
Rather than negotiate with the GOP on spending cuts as part of raising the debt ceiling, Biden and his Democrat allies in Congress have demanded that Republicans make their spending-cut proposals public.
‘Pretty Good Negotiating Tactic’
McCarthy has so far declined to present the GOP budget proposal, and Republicans have signaled they may try to pass their own debt ceiling bill without waiting for a deal with Democrats.“We need to send over what we think ought to be part of the debt limit and let the Senate respond, let the Biden administration respond,” said Rep. Gary Palmer (R-Ala.), the chairman of the House GOP conference’s policy committee.
Rep. Tom Cole (R-Okla.) said Republican leaders have been in talks about passing a short-term debt ceiling bill to coincide with the end of the fiscal year on Sept. 30, which is the deadline for Congress to pass appropriations bills.
Rep. Kevin Hern (R-Okla.), chair of the Republican Study Committee, told reporters last week that he expects Republican leaders to draft a comprehensive list of debt ceiling demands by the end of May, likely before Republicans put forward their budget proposal.
It’s unclear what kind of headway Republicans will be able to make with Democrats in putting forward their debt ceiling demands as they and Biden have so far insisted on a clean bill to raise the $31.4 trillion borrowing cap.
Republicans have taken issue with Biden’s big-ticket spending, blaming it for sending inflation to multi-decade highs.
Since taking office, Biden has signed off on trillions in spending, including the $1.9 trillion American Rescue Plan, the $1.2 trillion Infrastructure Investment and Jobs Act, the $745 billion Inflation Reduction Act, and, most recently, a $1.7 trillion omnibus package passed at the end of the last Congress.
Without congressional approval to raise the debt ceiling, the Treasury Department relies on so-called “extraordinary measures” to keep the government functioning.
