WASHINGTON, Jan 19 (Reuters) – The U.S. government reached its $31.4 trillion debt ceiling on Thursday, which could lead to a financial crisis within months, amid a standoff between the Republican-controlled House of Representatives and President Joe Biden’s Democrats.
Treasury Secretary Janet Yellen told congressional leaders, including House Speaker Kevin McCarthy, that her department has begun using extraordinary monetary management measures that could prevent a default until June 5.
Republicans, with their newly won House majorities, aim to bide their time to appropriate spending cuts from Biden and the Democratic-led Senate until the Treasury’s emergency maneuvers are over.
Yellen warned The June date is subject to “considerable uncertainty” because payments and government revenues are months in the future.
“I respectfully urge Congress to act immediately to protect the full faith and goodwill of the United States,” Yellen told congressional leaders in Thursday’s letter.
But there’s no sign that either Republicans or Biden’s Democrats are ready to budge.
Republicans are pursuing a “debt priority” plan that seeks to avoid default by urging the Treasury to prioritize debt payments, and other priorities such as Social Security and Medicare, if the ceiling is breached during negotiations. Republicans hope to complete the legislation by the end of March.
Brian Deese, director of the White House’s National Economic Council, on Thursday stressed the risks of uncertainty about whether the United States will honor its debts to the country’s own economy and its global standing.
“It’s not that complicated. It’s not about new initiatives or new opportunities. It’s about meeting the commitments that this country has already made,” Dees said in an interview with CNN.
‘every time’
[1/5] A vendor sets up a hot dog cart in front of the U.S. Treasury Building in Washington, U.S., on January 19, 2023. REUTERS/Jonathan Ernst
The prospect of brinkmanship has raised concerns in Washington and Wall Street about a bruising fight over the debt ceiling this year that could become as disruptive as the protracted war of 2011. Domestic and military spending cuts.
“We’re not going to default on the debt. We have the ability to manage services and pay our interest. But we shouldn’t blindly increase the debt ceiling,” Representative Chip Roy, a leading conservative, told Reuters.
Roy dismissed concerns about volatile markets and the risk of recession.
“That’s what they say every time. It’s like a bellwether,” Roy said in an interview. “We’re already headed for a recession. The question is what it will look like — until a combination of monetary policy and fiscal policy saves us from our stupidity in spending so much money.”
In 1939, Congress adopted the comprehensive debt ceiling as the legal maximum amount of debt the government could issue in order to control its growth. In practice, the move did not have that effect, as Congress used the annual budget process — separate from the debt ceiling — to determine how much money to spend — in essence, to offset previously authorized spending.
Negotiations on debt priorities and spending are not expected to be in full swing until lawmakers return to Washington next week.
The Republican plan calls for balancing the federal budget in 10 years by capping discretionary spending through 2022, and using House oversight to identify federal programs that could be eliminated or scaled back in spending bills expected to emerge from the House Appropriations Committee. year.
Meanwhile, House Republicans are vowing to reject Senate Majority Leader Chuck Schumer’s government funding bills, like the $1.66 trillion bipartisan omnibus package passed by Congress late last year.
White House officials note that Republicans in Congress supported several increases to the debt ceiling during Republican Donald Trump’s presidency.
“We’re hopeful that Democrats will come to the table and negotiate in good faith,” said Republican Rep. Ben Kline, who leads a conservative task force on budget and spending. “There is a lot of room for negotiation when it comes to the steps that can be taken to solve the financial crisis that we are seeing.”
Reporting by David Morgan and David Lauder, additional reporting by Jeff Mason and Doina Chiaku; Editing by Scott Malone, Bradley Perrett and Chisu Nomiyama
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