WASHINGTON — Congress is stalling on how to avoid a debt ceiling crisis, and the recent collapse of some banks is deepening the stalemate.
President Joe Biden and House Speaker Kevin McCarthy, R-Calif., met on February 1 to discuss the debt limit, but have not met since. McCarthy wants Biden to agree to spending cuts as a condition of raising the debt ceiling. Biden argues that paying the country’s bills is non-negotiable and demands that McCarthy first specify what spending he wants to cut, which he hasn’t.
And the recent bankruptcies of Silicon Valley Bank and Signature Bank, which have created jitters in the financial sector, have only entrenched the conflicting views between the parties.
Republicans say the bank failures were caused by high inflation and rising interest rates, painting the economic outlook as validation of their demands for spending cuts in the debt ceiling debate.
“Why are we having a banking crisis? Because the government spent too much and it created inflation,” McCarthy told reporters Tuesday at the House Republican retreat in Orlando. “Should we do exactly what the president says, just raise the debt ceiling and create more inflation and more banking problems? I mean, this should be a wake-up call to everyone and say, ‘Oh my gosh, we better do something about this debt limit.’”
Democrats say bank failures emphasize the need for stability and serve as a warning against unleashing a self-inflicted crisis.
“What we don’t need is for our House Republicans to threaten chaos and absurdly link the banking crisis to default, dangerously linking the banking crisis to default. Instead, what we need is calm, stability, careful consideration of the facts,» Senate Majority Leader Chuck Schumer said Wednesday. “Undermining the full faith and credit of the US is never a good idea, but after the collapse of a major bank, it is extremely reckless.”
House Republicans, he said, are «threatening a global economic crisis over the debt limit at the same time that we have this problem in the banking industry.»
«It’s ridiculous, it’s reckless,» Schumer said.
Republicans intensify attacks
A group of conservative Republicans, including Sen. Rick Scott, R-Fla., Sen. Mike Lee, R-Utah, and members of the ultra-conservative House Freedom Caucus held a news conference Wednesday to insist that Biden would be to blame if the country does not pay. in its debt and triggers a global economic collapse.
“When moms and dads get laid off and when unemployment doubles and the stock market crashes, remember that Joe Biden stood by as we urged and demanded action,” said Rep. Lauren Boebert, a Colo Republican.
Raising the debt ceiling does not authorize new spending; it allows the US government to pay the bills that Congress has legally imposed. Both parties have contributed to the increase in debt over the years.
«We’re not going to send money to LGBTQ pro-prostitution groups in Colombia, because that’s what they’re doing with their tax dollars right now,» said Rep. Chip Roy, R-Texas.
When asked what Roy was referring to, his office quoted a Washington Examiner report a $16,000 State Department grant.
Senate Minority Whip John Thune, RS.C., said Wednesday that Republican senators still back McCarthy in finding a debt-limit solution with Biden, but added: «I can’t speak to the current progress of that».
«It hasn’t happened yet,» Thune said. “But I am hopeful that it will be so. As is often the case around here, sometimes it takes a bit of pressure to get people to the table.»
Warning from Treasury Secretary Yellen
The Treasury Department has set June 5 as the date for Congress to act or risk default, though the Congressional Budget Office estimates it will be between July and September.
Meanwhile, the Republican-led House is moving forward with a plan to «prioritize» payments in the event of a debt limit default, which means paying some bills and not others. But it’s unclear if McCarthy will take that to a vote in the House of Representatives.
Treasury Secretary Janet Yellen slammed that idea at a Senate hearing last week, calling it «effectively a default by another name.»
«I cannot give any guarantees about the technical feasibility of such a plan,» he said. “It would be an exceptionally risky, untested, and radical departure from normal agency practices across the federal government. And I believe it is essential that Congress come together to recognize that raising the debt ceiling is its responsibility to protect the full faith and credit of the United States.»
Senate Banking Committee Chairman Sherrod Brown, D-Ohio, said he believes Rep. Patrick McHenry, RN.C., the House Financial Services Committee chairman who warned Republicans to be realistic about the debt limit, can help.
«I have confidence in Patrick McHenry that he will step up and bring McCarthy to solve this debt crisis,» Brown said.
He said the idea of not raising the debt limit and prioritizing payments to creditors «essentially elects rich people over Social Security and … the Chinese Communist Party over Medicare.»
«Let them try to defend that,» Brown told reporters. «McCarthy, in the end, is not going to want to put his members in that situation.»