As default looms, Dems, GOP spar over spending
Economist: Higher chance of recession in Republican bill
WASHINGTON — Senate Democrats pressured Republicans on the increasingly menacing debt ceiling impasse Thursday, focusing on what they say will be painful reductions in government services if a bill the GOP recently pushed through the House becomes law.
Republicans responded that they know the legal limit on government borrowing must be raised to avert a possible default. But they’re insisting it be coupled with cuts in what they consider bloated federal spending.
No one expects that the House bill, which would importantly increase the nation’s borrowing authority as well as cut spending, will reach President Joe Biden’s desk. The Democratic Senate won’t let it.
Many Republicans admitted so when passing the measure. But they said the House action was necessary to get Biden to the negotiating table with Speaker Kevin McCarthy, R-Calif.
A meeting at the White House with congressional leaders of both parties is set for next week.
Despite the legislation’s certain demise, Democrats are eager to tie Republicans, particularly in swing districts and states, to various provisions in the bill. Those include one that would cap next year’s spending at 2022 levels and allow it to rise only 1% annually in ensuing years, much below the rate of inflation.
That spending limit, which would account for most of the Republicans’ projected $4.8 trillion in savings, could have a severe impact on programs such as Head Start and Meals on Wheels, cancer research and veterans’ health care, Democrats say.
“If Republicans won’t level with the American people about their terrible bill, Senate Democrats are going to do it for them,” Senate Majority Leader Chuck Schumer, D-N.Y., said.
It’s just the latest jousting in Congress over the debt limit, a legal limit to government borrowing that has been raised repeatedly in recent years as the nation’s debt has swelled past $31 trillion. Urgency around the issue intensified this week after the Treasury Department announced that the “extraordinary measures” being used to avoid a devastating government default could run out June 1 — giving lawmakers just a few weeks to find a solution.
Republicans described the Democratic effort as a distraction that won’t change their position: Biden must negotiate on spending reductions in exchange for increasing the debt ceiling.
Sen. Chuck Grassley, the ranking Republican on the committee, said it would be up to Congress to decide how to meet the spending caps that the House bill would put in place, and “nothing in the legislation mandates cuts to defense, veterans’ health care, border security or other activities that Republicans have already prioritized.”
The House bill would reduce deficits over 10 years by, among other things, clawing back unspent COVID-19 aid, removing the clean energy tax credits that Biden signed into law last year, and reversing Biden’s student debt forgiveness and repayment plan.
But those spending reductions could come at a cost.
Moody’s Analytics estimates the Republican bill would cause 790,000 job losses next year.
Mark Zandi, chief economist at Moody’s Analytics, said the timing of the spending cuts that would occur through the House bill would “meaningfully increase” the likelihood of a recession. Economic growth, he projects will be about 2.23% should Congress pass a clean debt ceiling, versus 1.61% if the House Republican legislation becomes law.
Republicans have argued that reduced spending is necessary to curb the inflation that has increased the cost of fuel, food and housing. They also say the House bill would put the country’s finances on a more sustainable path.
Sen. Sheldon Whitehouse, the Democratic chairman of the Senate Budget Committee, mocked that rationale. House Republicans care about the debt “sporadically,” he said, pointing to $7 trillion in debt added under President Donald Trump and $3 trillion under President George W. Bush.
Meanwhile, the White House insisted anew Thursday that the onus is on
Republicans in Congress to raise the debt limit. Budget Director Shalanda Young said, “Tomorrow, they could put a bill on the floor to make sure we won’t default. I could probably write the bill for them in five minutes. It’s pretty easy.”
But that logic works both ways, some witnesses and Republican lawmakers said.
Brian Riedl, a senior fellow at the Manhattan Institute for Policy Research, told lawmakers that Congress has a long history of attaching efforts to reduce deficits to debt ceiling lifts.
He said the nation’s debt means all legislative avenues should be open to addressing it.