Biden Puts Economy in ‘Jeopardy’ By Not Negotiating Debt Ceiling: McCarthy

President Joe Biden delivers the State of the Union address to a joint session of Congress, as Vice President Kamala Harris and House Speaker Kevin McCarthy (R-Calif.) applaud, at the U.S. Capitol in Washington on Feb. 7, 2023. Jacquelyn Martin/Pool via Reuters

House Speaker Kevin McCarthy (R-Calif.) is criticizing Biden for endangering the American economy by failing to negotiate the debt ceiling, with Sen. Joe Manchin (D-W.Va.) also asking for negotiations.

“The Senate’s done nothing,” McCarthy said in an April 27 interview with Bloomberg. “They haven’t done anything on the debt ceiling, and the president’s ignored this problem.” The House Speaker criticized Biden for placing the U.S. economy in “jeopardy” by refusing to negotiate the debt ceiling issue. The last time the two met to discuss the matter was on Feb. 1. McCarthy said that only House Republicans were serious about preventing a U.S. debt default.

On April 19, McCarthy unveiled legislation to raise the country’s debt ceiling by $1.5 trillion or until March 31, 2024, whichever comes first. The bill comes with a series of spending cuts. The United States hit its $31.4 trillion debt ceiling limit in January.

Manchin has also asked Biden to negotiate with McCarthy to avoid a default. The American people will “pay the economic price” if Biden continues to not sit down and negotiate a “commonsense compromise,” he said.

“Only a president can prevent this from becoming a full-blown domestic crisis. For the sake of our nation that we all serve, I urge the president to put politics and partisanship aside,” Manchin said in an April 28 statement. “Speaker McCarthy did his job, and he passed a bill that would prevent default and finally begin to rein in federal spending. While I do not agree with everything proposed, it remains the only bill moving through Congress that would prevent default and that cannot be ignored.”

The Republican Bill

The GOP bill to raise the debt limit, called the “Limit, Save, Grow Act,” was passed by the House in a single day on April 27 by a 217–215 majority. Republicans intend the bill to be the basis for talks with Democrats.

The bill calls for capping spending growth to 1 percent a year, returning discretionary spending to 2022 levels, and repealing certain tax credits. It removes barriers to boosting domestic energy production, will take back unspent COVID-19 relief funds, reimposes work requirements for people on welfare, and cancels Biden’s $400 billion student loan forgiveness program.

After the passage of the bill, McCarthy renewed his calls for negotiating with the president. “It’s up to you now,” McCarthy told reporters, as if addressing Biden. “Whether the economy gets in any trouble, it’s you. Because Republicans raised the debt limit. You have not. Neither has [Senate Majority Leader Chuck] Schumer.”

Both Biden and Senate Democrats have said that the proposed spending cuts and caps are unacceptable.

At a press briefing, White House press secretary Karine Jean-Pierre blamed Republicans for “threatening a default and crashing the economy.”

When asked why the president was waiting, she stated that Republicans had put together an “extreme MAGA” agenda, saying: “We cannot allow this to happen. I don’t have anything new to say.”

Breaching Debt Ceiling

If the United States were to breach the debt ceiling, it could have serious economic consequences for the country. Economists at Goldman Sachs estimate that the event will immediately bring to a stop about a tenth of America’s economic activity.

Moody’s Analytics estimates a 4 percent reduction in GDP in case of a default lasting for four months. In addition, stock prices are expected to fall by a third, leading to companies laying off six million workers. A downturn similar to the 2007-2009 Great Recession is also a possibility.

Meanwhile, a group of 43 House Democrats have introduced a bill that would repeal the debt ceiling. Republicans insist that the debt ceiling is a useful feature as it forces lawmakers to reexamine their spending habits when deciding on the federal budget.

“If you gave your child a credit card, and they kept maxing it out to the limit, would you just blindly raise the limit? Of course not,” McCarthy said in a speech at the New York Stock Exchange on April 17.

“You would sit down and work with them to figure out how they could change their spending habits so it never happens again. That exact same thing is true for our national debt. Debt limit negotiations are an opportunity to examine our nation’s finances.”