The biggest showdown expected in Washington this summer had a battle stop in New York. On Monday, Republican House Speaker Kevin McCarthy made his political pitch on the debt ceiling to the New York Stock Exchange during trading hours.
“Without exaggeration, American debt is a ticking time bomb that will detonate unless we take serious, responsible action,” McCarthy said.
After taking extraordinary measures to stretch U.S. funds in the meantime, the Treasury Department said the U.S. will officially default on its debt sometime between July and September if politicians fail to raise the $31.4 trillion debt ceiling.
“Let me be clear, there’s two things I will not do. I will not raise taxes and I will not pass a clean debt ceiling, that just won’t pass,” McCarthy said.
The White House and Democrats are pushing to raise the debt ceiling without conditions to avoid default.
“There is one responsible solution to the debt limit: addressing it promptly, without brinksmanship or hostage taking – as Republicans did three times in the last administration and as Presidents Trump and Reagan argued for in office,” White House Deputy Press Secretary Andrew Bates said in a statement.
An actual default on debt would create an “unfettered economic catastrophe,” according to economists at consulting firm RSM US. In that event, they estimate unemployment would soar above 12% in the first six months, it would trigger a deep and lasting recession and U.S. standing and the dollar would be at risk.
But so far negotiations are at an impasse. McCarthy revealed to Wall Street that he hasn’t spoken to the White House on the issue in more than two months.
“Had the president agreed to negotiate in good faith, we’d already be done. Unfortunately, I have not heard from the White House since our very first meeting,” he said.
And while he said the Democrats’ plan is a nonstarter, Republicans have yet to present their own proposal on paper to save the country from default.
“Okay, so here’s our plan,” McCarthy started. “In the coming weeks, the House will vote on a bill to lift the debt ceiling into the next year, save taxpayers trillions of dollars, make us less dependent on China, curve our high inflation, all without touching Social Security and Medicare.”
In exchange for lifting the ceiling for one more year, Republicans are expected to propose some type of cap on discretionary spending. McCarthy said Monday that out-of-control spending was to blame for inflation, which has led to the Federal Reserve’s tight monetary stance now squeezing the economy.
“It’s not a revenue problem. We’re bringing more money in percentage than anytime before, but we’re spending and there’s no curve on that,” he said. “So the Fed is their own entity, they get to make their own decisions, but they have to make decisions based on what we did to create inflation, so I have a responsibility to curve that so the Fed wouldn’t have to act.”
But two Republican bills McCarthy is behind and touted at the stock exchange would reportedly do the opposite over the next decade, according to the nonpartisan Congressional Budget Office. CBO reports that Republicans’ H.R. 1 bill to lower energy costs would increase the deficit by $2.4 billion over a 10-year period, while a vote earlier this year to repeal IRS funding would add $114 billion to the deficit by 2032.
