WASHINGTON — Rep. Kevin McCarthy of California won the House speakership in a dramatic midnight vote early Saturday, but a breakdown in his party and a deal he made to win over Republicans raised the risks of continued political chaos. That would destabilize the US financial system.
Economists, Wall Street analysts and political observers are warning His concessions to fiscal conservatives Collecting votes to raise the credit limit, Mr. That could make it very difficult for McCarthy — or even to vote — for such a measure. It can prevent Congress from keeping the government open, paying the nation’s bills and doing basic jobs Trillions of dollars in US debt default.
A speakership battle that lasted more than four days and 15 rounds of votes suggested President Biden and Congress could be on a very dangerous path later this year. Debt Limit Debate Since 2011, former President Barack Obama and the new Republican majority have nearly defaulted on the nation’s debt before cutting an 11th-hour deal.
“If all we’re seeing is a sign of a completely divided House Republican convention, unable to get 218 votes on almost any issue, the odds tell you it’s going to come down to the 11th hour or the last minute. Or even higher,” Alec Phillips, chief political economist for Goldman Sachs Research, said in a note Friday. He said in an interview.
The federal government spends more money than it takes in revenue each year, creating budget deficits that will average more than $1 trillion annually over the next decade. Those deficits add to a national debt rose to $31 trillion Last year.
Federal law puts limits on how much the government can borrow. But the government does not need to balance its budget. That is, lawmakers must periodically pass laws to raise the debt ceiling to avoid a situation where the government can’t pay all its bills, jeopardizing payments including military salaries, Social Security benefits and loans to holders of government bonds. Goldman Sachs researchers estimate that Congress would need to raise the debt ceiling in August to prevent such a scenario.
Understand the US debt ceiling
What is the loan ceiling? Also known as debt ceiling Credit limit, is the ceiling on the total amount of money the federal government is authorized to borrow through U.S. Treasury securities, such as bills and savings bonds, to meet its fiscal obligations. America runs budget deficits and has to borrow huge amounts to pay its bills.
Raising the limit was once the norm but is becomes increasingly difficult Over the past few decades, Republicans have used the cap as a ploy to force spending cuts. Their leverage stems from the potential damage to the economy if the limit is not increased. Increase in credit limit not approve new expenditures; It allows the US to finance existing obligations. Unless that cap is lifted, the government will not be able to pay all its bills, including salaries for military members and social security payments.
Donald J. The four years of Trump’s presidency have been an exception to the debt ceiling drama, with Republicans largely abandoning their push to link increases in the limit to cuts in federal spending. As the deadline to raise the cap approaches in 2021, Senate Republicans are pushing Mr. clashed with Biden, but those lawmakers ultimately helped Democrats pass legislation that would increase the cap.
Some Democrats sought to avoid this scenario last year, when it became clear their party would lose at least one chamber of Congress. To avoid any chance of a shutdown before the 2024 presidential election, they hoped to raise the limit again in a lame-duck session of Congress after the November election that gave Republicans control of the House. But that effort was never fruitful.
As a result, the next round of debt-limit briefings could be the most fraught on record — as evidenced by the battle against the speakership. Conservative Republicans have already made it clear they won’t pass the debt ceiling increase without significant spending controls, including cuts to spending on the military and domestic issues unrelated to national security.
With Republicans holding the narrowest majority since the 2010 midterms, Mr. It empowered conservative holdouts who opposed McCarthy. in the middle The demands of that group Steep cuts in federal spending and a push to balance the federal budget without raising taxes within a decade.
“Would he be willing to shut down the government rather than raise the debt ceiling?” Representative Ralph Norman of South Carolina, Mr. He was one of 20 Republicans who initially voted against McCarthy. told reporters last week. “It’s a non-negotiable.”
Mr. McCarthy appeared to agree to those demands, pledging not to raise the debt ceiling without major spending cuts — including efforts to reduce spending on many mandated programs, including Social Security and Medicare — that brought several holdouts, including a deal. Mr. Norman, inside his camp.
A speaker who violates that agreement risks being ousted by the House Republican caucus. But Mr. Biden and his party’s leaders in the Democratic-controlled Senate have vowed to fight those cuts — particularly to Social Security programs. That means a long-term impasse where the government runs out of money to pay its bills.
Staunch budget hawks in Washington have long argued that the U.S. must stop spending so much — and borrowing — that the country can’t service its long-term debt. They have pushed for a variety of ways to slow long-term spending growth, including cuts to health care for poor and older Americans. Many have called for ending some tax breaks while ensuring the rich and corporations pay more.
Still, many of those fiscal hawks called the Republican spending requests irresponsible and could create deadlocks on key fiscal issues.
“Their specific demand to balance the budget over 10 years is completely unrealistic. It would take $11 trillion in savings,” said Maya Mackinas, chair of the Committee for a Responsible Federal Budget in Washington.
“I like to save more money than a lot of people,” Ms. MacGuineas said. “But what they’re asking for is unattainable.”
The move toward a deadline to raise the debt ceiling will cause chaos in financial markets, including stocks and Treasuries, Mr. Phillips said. If Congress fails to raise the debt ceiling and the government is unable to borrow more money, the U.S. could experience a sudden drop in federal spending equivalent to one-tenth of daily economic activity, Mr. Phillips said.
“It doesn’t feel like a false alarm,” he said.
In 2011, Republicans and Mr. Obama also agreed to raise the debt ceiling in a deal that also imposed future limits on domestic spending increases. Ms. Macguineas, Mr. Phillips and other researchers, Mr. Biden and House Republicans expressed doubt that negotiations would do the same this time, as this week Mr. The faction that blocked McCarthy’s ascendancy was unwilling to compromise on significantly more moderate concessions. From the Democrats.
Administration officials have given no indication that they will negotiate with Republicans on raising the debt ceiling — nor are they preparing for the possibility that a House speaker will refuse to vote on a debt ceiling increase without steep spending cuts.
White House press secretary Karine Jean-Pierre told reporters on Friday that Mr.
“We have said that the debt ceiling should not be used politically,” he said. “We’ve been very clear. If you look at what the Republicans in Congress have done three times — three times during the Trump administration — they’ve been able to deal in a responsible way, right? They’ve voted three more times to raise the debt ceiling. So Congress has to be responsible again.
Moderate lawmakers have already begun discussing possibilities for how to raise the House limit. A longer idea: A discharge petition signed by a majority of the people to force a vote on a bill. Such a move would tie a handful of Republicans to the Democratic Party vote. That would require extensive coordination on both sides of the aisle and expose Republican defectors to punishment and primary challenges.
However, Republican Representative Brian Fitzpatrick of Pennsylvania accepted the possibility of such a compromise in an interview with CNN this week. “There are many options for avoiding leadership,” he said. “Not a ton. But we have options.