McCarthy Proposed An Increase in a One -Year Loan Limit Related to Spending Cuts

Speaker Kevin McCarthy said House Republicans would vote "in the coming weeks" on a measure that would lift the debt ceiling.

WASHINGTON - In a speech from the New York Stock Exchange, Mr. McCarthy said House Republicans would vote "in the coming weeks" on a measure that would cap next year's debt ceiling in exchange for freezing spending at last year's level while enacting tougher legislation. Will increase Work requirements and multiple regulatory rollbacks for social programs. The plan, which would be dead on arrival in the Senate, would set the stage for yet another financial confrontation as the presidential campaign enters a critical period.

“I am not predetermining what has to happen,” Mr. McCarthy said in a speech that repeatedly called for a debt-limit increase, with President Biden as the man standing in the way. “I want a responsible, sensible debt limit that keeps us on an economic path to make America stronger. It works for every American. But that can't happen if the president continues to ignore the problem.

Understand the US Debt Limit

What is the loan limit? 

The debt ceiling, also called the credit limit, is a limit on the total amount that the federal government is authorized to borrow through U.S. Treasury securities, such as bills and savings bonds, to meet its financial obligations. Because the United States runs a budget deficit, it must borrow large sums of money to pay its bills.

The limit has been reached. What Now? 

The US exceeded its technical debt limit on 19 January. The Treasury Department will now begin using "extraordinary measures" to continue paying the government's obligations. These measures are essentially fiscal accounting tools that curtail certain government investments so that the bills can continue to be paid. Those options could expire by June.

What's at stake?

Once the government exhausts its extraordinary measures and runs out of cash, it becomes unable to issue new debt and pay its bills. A government can default on its debt if it is unable to make required payments to its bondholders. Such a scenario would be economically disastrous and could plunge the world into a financial crisis.

Can the government do anything to prevent the disaster? 

There is no official workbook for what Washington can do. But alternatives do exist. The Treasury may try to prioritize payments, such as paying bondholders first. If the United States defaults on its debt, which would spook the markets, the Federal Reserve could theoretically step in to buy some of those Treasury bonds.

Why is there a limit on borrowing from the US? 

According to the Constitution, Congress must authorize the borrowing. Debt limits were established in the early 20th century so that the Treasury would not need to ask permission every time it issued loans to pay bills. {alertSuccess}

"There will be no increase in the debt limit linked to the bond," he added.

Unless Congress acts to raise it, the debt limit is expected to be breached in early July.

The speech came as Republicans, plagued by internal divisions, were working hard to agree on a fiscal blueprint to meet their demand that any such increase be paired with substantial spending cuts. It was not clear whether the resolution Mr McCarthy introduced on Monday could garner enough support to pass with a reduced majority. The outline was much narrower than the party's stated objectives earlier this year, which included balancing the budget over 10 years.

Mr. McCarthy's decision to present it publicly on Wall Street suggested that the GOP is devising a plan to calm nervousness among investors about a serious approach to a deal to prevent a catastrophic default this summer. under pressure to do so. Yet he dismissed such concerns during a question-and-answer session following his speech on Monday, saying "markets go up and down."

"Markets are reacting to the work we have done," he said in response to a question whether he was monitoring market conditions. “So I shouldn't be watching you; I need to keep an eye on what we're doing.

Over Credit Limit

A federal showdown: The United States government is engaged in a high-stakes political battle to pay off its debts – again. How did we get here?

The solution to the impasse?: Some Democrats are eyeing a mysterious procedural move as a way to bypass Republicans and stave off a disastrous default. Will it work?

Minimizing a Debt Crisis: As Speaker Kevin McCarthy works to unify the shaky Republican majority and avert disaster, he has little faith in the man tasked with delivering the budget framework.

Risks to the Economy: If Congress fails to raise the government's borrowing limit in time, it could cripple the US economy and jolt financial markets. Here are some possible effects. {alertSuccess}

Bill Mr. McCarthy says he plans to freeze spending at last fiscal year's level, save tens of billions of dollars in pandemic relief, impose stricter work requirements on food stamp and Medicaid recipients, domestic mining and fossil fuels Will expand fuel production, and roll back federal regulations Republicans see as overly burdensome.

The Democratic-controlled Senate would refuse to take up the plan, but it would serve as the House Republican marker for talks with the White House.

Mr. Biden and his allies insist that Congress must raise the debt ceiling without conditions, but they say the president is open to separate discussions on the federal budget - once Mr. McCarthy presents a formal budget proposal. Are. While they wait for Mr. McCarthy's proposal, White House officials have criticized the budget cuts, which include Republicans' proposed limits on work requirements and domestic spending programs.

"A speech is not a plan, but it's clear that the overarching MEGA Republican wish list will make devastating cuts on hardworking families, send manufacturing overseas, take away health care and food aid from millions of people and increase energy costs — Adding to it all, a White House spokesman, Andrew Bates, said on Monday that "trillions in debt with tax cuts are skewed to the super-wealthy and corporations."