President Joe Biden will press House Speaker Kevin McCarthy to definitively rule out the possibility that House Republicans will let the United States default on its sovereign debt when the two leaders meet for the first time since the GOP took control of the House of Representatives.
The first sit-down between the president and the California Republican is set for Wednesday, just weeks after Mr McCarthy won the speaker’s gavel with the support of far-right extremist members of the GOP caucus, in part by committing to weaponise a century-old law capping the total amount of bonds the US can have outstanding. Republicans are attempting to use the debt limit as a way to force the Biden administration to put Democratic programs and priorities on the chopping block.
The meeting will also take place less than two weeks after Treasury Secretary Janet Yellen said the US was taking “extraordinary measures” to avoid defaulting on the country’s outstanding debt obligations.
Many Republicans, including former president Donald Trump, have demanded that the GOP use the possibility of a default on America’s soveriegn debt as leverage to extract concessions from the Democratic-controlled White House and Senate.
Prominent GOP figures frequently claim that raising the statutory debt limit to enable the US to continue meeting financial obligations — a practice that was once routine under presidents of both parties and met no objections when it was done under Mr Biden’s predecessor — is akin to authorising new spending.
That claim, however, is now how the debt limit works. Raising the debt limit does not increase or decrease the amount of money that is spent on programs that have already been authorised by Congress and have had funds allocated to them in appropriations legislation.
But experts say a failure to raise the debt limit would force the government to default on its debt and precipitate a worldwide financial crisis. The last time the US flirted with that disastrous outcome was 2011, when Republicans controlled the House and Democrats controlled the Senate and the White House. Mr Biden, then the vice president under Barack Obama, led the negotiations with congressional leaders that headed off a default, but not before the US had its credit rating decreased for the first time in history.
With that experience in mind, Mr Biden and his administration have made clear that they will not reward hostage-taking over the debt ceiling by negotiating spending cuts with Republicans outside of the normal budget process.
In a White House memorandum obtained by The Independent, National Economic Council Director Brian Deese and Office of Management and Budget Director Shalanda Young say Mr Biden will reiterate the administration’s position and ask Mr McCarthy to “commit to the bedrock principle that the United States will never default on its financial obligations” and say whether he agrees with former presidents, including Mr Trump and the late Ronald Reagan, both of whom said it’s “critical” for the US to “avoid debt limit brinksmanship”.
Mr McCarthy will also be asked when House Republicans plan to release a proposed budget for Fiscal Year 2024. Under the Congressional Budget and Impoundment Control Act of 1974, Mr Biden is required to release a proposed budget, and the White House has said he will do so on 9 March.
Mr Deese and Ms Young said it is “essential” for Mr McCarthy to follow suit “so that the American people can see how House Republicans plan to reduce the deficit – whether through Social Security cuts; cuts to Medicare, Medicaid, and Affordable Care Act (ACA) health coverage; and/or cuts to research, education, and public safety – as well as how much their Budget will add to the deficit with tax cuts for the wealthiest Americans and large corporations, as in their first bill this year”.
“As the President has said many times, the United States must never default on its financial obligations. Raising the debt ceiling is not a negotiation; it is an obligation of this country and its leaders to avoid economic chaos,” they said, adding that Mr McCarthy’s “unwillingness” to rule out a default “makes him an outlier,” even among leaders of his own party.
“Any serious conversation about economic and fiscal policy needs to start with a clear understanding of the participants’ goals and proposals. Speaker McCarthy and his Caucus need to transparently lay out to the American people their fiscal and economic proposals in the normal budget process,” they said.
