The Battle Over the US Debt Ceiling: House Speaker Kevin McCarthy Unveils a Bill to Raise It, but Democrats and Republicans Are at Odds Over Spending Cuts and Compromise Proposals.
House Speaker Kevin McCarthy has unveiled a bill to raise the debt ceiling, which would also include federal spending cuts of around $130 billion. The bill, dubbed the Limit, Save, Grow Act, would raise the debt ceiling by $1.5 trillion or suspend it until March 31, 2024, whichever comes first. The proposed spending cuts include strengthened work requirements on welfare programs, rescinding unspent pandemic funds, and banning student loan forgiveness. However, it is unlikely that Democrats and President Joe Biden will go along with the proposal, and if the debt ceiling is not raised by June, the US government faces a risk of defaulting on its debt obligations.
The national debt ceiling is a numerical limit, set by law, on total US government borrowing. Before the 1917 congressional act, the Treasury was required to obtain congressional permission for each new debt issuance. Due to the complications caused by World War I, Congress opted for a cap on total borrowing, which has been increased several times since then. However, the debt ceiling has become a point of leverage in recent years for Republicans to try to force through spending cuts.
In exchange for raising the debt ceiling, House Republicans have proposed implementing the Lower Energy Costs Act or the REINS Act. Trading the debt ceiling for the REINS act is a compromise that would appease both sides of the political aisle, and it would be advantageous for Democrats to consider this proposal. The House Freedom Caucus, a conservative Republican group, has pushed for linking a debt-limit hike to repealing parts of the Inflation Reduction Act, such as its green tax credits and its funding boost for the IRS.
The bipartisan House Problem Solvers Caucus has released a separate proposal for avoiding a default on US debt if the White House and congressional leadership fail to reach an agreement. The plan would suspend the debt ceiling for six months and establish an independent fiscal commission to determine ways to reduce the debt. However, Democrats and Republicans have differing opinions on who is to blame for the rise in national debt. Republicans want to limit budget growth to 1% annually, while Democrats claim that Republican presidents have added more debt than Democrats, while their own chief executives have demonstrated a more responsible approach to the budget.
The US government faces a potential economic crisis if Congress does not increase the debt ceiling by the summer. If lawmakers do not raise the nation's borrowing limit by June, the federal government runs the risk of defaulting on its debt obligations, which could be catastrophic for the economy and put millions of jobs in jeopardy. Meanwhile, House Republicans are seeking to use the threat of a default on federal debt to enact spending cuts, while the White House and its Democratic allies are demanding a “clean” debt ceiling increase.
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