McCarthy puts debt ceiling ball back in Biden’s court
Naomi Lim
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House Republicans coalescing behind a debt ceiling and budget proposal has increased pressure on President Joe Biden to deal with the GOP.
But as the White House continues to insist on a clean debt ceiling bill and House Republicans remain as adamant about Limit, Save, Grow Act provisions Democrats will never support, markets are starting to rattle as they grapple with the prospect of a default.
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The debt ceiling and budget standoff between Biden and Republicans is “really insane” and “a sign of dysfunctionality,” according to American Enterprise Institute economic senior fellow Desmond Lachman.
Although House Speaker Kevin McCarthy (R-CA) wrangling the 217 to 215 votes for the Limit, Save, Grow Act with his narrow four-member majority strengthens his negotiating position, neither party appears motivated to compromise, unless, as in 2008, economic conditions change, Lachman told the Washington Examiner.
The former Salomon Smith Barney managing director and International Monetary Fund policy deputy director cited the escalating cost of insuring against a U.S. default, known as credit default swaps, as an indication markets are becoming anxious.
“The economy is slowing, and we’ve just had a slight problem with Silicon Valley Bank and Signature Bank,” he said. “With markets unsettled and with a regional bank crisis going on, the last thing you need is to have the full faith and credit of the United States being put into question and have all foreign markets go crazy and everybody wanting to dump our securities.”
Bipartisan Policy Center Economic Policy Director Shai Akabas encouraged Biden and Republicans to begin discussions over the debt ceiling and budget, acknowledging consensus that debt is “rising too quickly” and that the budget process is “so broken.”
“The challenge is that the debt limit is not a good mechanism to have that conversation,” he said, calling for reforms such as the Responsible Budgeting Act. “It’s also the only opportunity that policymakers have to start that conversation.”
“We have been in a similar position and gotten out of it numerous times before, but I don’t think that we should be complacent because it is a very serious situation,” the former 2009 Michael Bloomberg campaign aide added. “Both sides at a minimum need a way to save face in whatever result comes out of this situation, so that means that the two sides need to get into a room and figure out a way that both of them can live with a resolution that can pass both houses of Congress and be signed by the president.”
At the same time, Republican Study Committee Chairman Kevin Hern (R-OK), who conceded the Limit, Save, Grow Act is “not perfect,” is imploring his colleagues to “safeguard the reforms in this package and memorialize its contents in law.” In a letter, the congressman additionally alleged Treasury Secretary Janet Yellen will “publish the earliest estimation” of the X-date, when extraordinary measures introduced after the $31.4 trillion debt ceiling was reached in January are projected to be exhausted, “she can fathom.”
“The next phase of this fight will play out in the Senate and the public square,” Hern wrote. “Ultimately, the leverage we hold will come from the pressure we create through a strong message.”
“It’s time to finish the job,” he went on, reclaiming Biden’s reelection campaign message.
But Lachman underscored how lower-than-expected tax collections and persistently high interest rates could contribute to a revised likely July X-date from August or September.
“So the showdown is going to occur soon,” he said despite the House scheduling recesses during the first and last week of May, as well as the last week of June.
White House press secretary Karine Jean-Pierre reiterated the statement she released after House Republicans cleared the Limit, Save, Grow Act, contending the country is “not a deadbeat nation” and that it should not default on its debt.
“[What] we have seen they put together is an agenda, an extreme MAGA wish list that basically says they’re connecting the two,” she said of the debt ceiling and budget. “They’re saying to the Senate, they’re saying to the president that we have to go with this agenda in its full form. And the president has said really, really, really clearly when it comes to the debt ceiling, they cannot allow this to happen.”
As Biden walked away from the podium after his joint press conference with South Korean President Yoon Suk-yeol, he was peppered with questions from reporters about the debt ceiling and budget.
“Are you missing in action?” one reporter shouted.
“Will [you] negotiate with them on the debt limit?” another asked.
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“Will you meet with McCarthy?” one more inquired.
“I’m happy to meet with McCarthy but not on whether or not the debt limit gets extended. That’s not negotiable,” Biden replied. “I notice they quote Reagan and they quote — they quote Reagan all the time, and they quote Trump, both of which said — it says — I’m paraphrasing — it would be an absolute crime to not extend the debt limit.”