Kevin McCarthy’s Speaker Drama Raises New Fears on Debt Limit

Staunch budget hawks in Washington have long argued that the United States needs to stop spending — and borrowing — so much money and that nation cannot afford its long-term debt. They have pushed for a variety of ways to reduce the growth in long-term spending, including cuts to health care for the poor and for older Americans. And many have called for ending some tax breaks while ensuring that the wealthiest and corporations pay more.

Yet many of those fiscal hawks have called the Republican spending demands reckless and likely to produce stalemates on key fiscal issues.

“Their specific ask of balancing the budget in 10 years is just totally unrealistic. It would take $11 trillion in savings,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget in Washington, which has long pushed lawmakers to reduce future deficits through spending cuts and tax increases.

“I want to save more money than a lot of people,” Ms. MacGuineas said. “But what they’re demanding is just not achievable.”

Hurtling toward a deadline for raising the debt limit would sow chaos in financial markets, including for stocks and Treasury bonds, Mr. Phillips said. If Congress failed to raise the debt limit and the government became unable to borrow more money, Mr. Phillips said, America would suffer a sudden decrease in federal spending equivalent to as much as one-tenth of all daily economic activity.

“This does not feel like a false alarm,” he said.

In 2011, Republicans and Mr. Obama agreed on a deal to raise the debt limit that also imposed future limits on domestic spending increases. Ms. MacGuineas, Mr. Phillips and other analysts expressed skepticism that negotiations between Mr. Biden and House Republicans would do the same this time, in part because the faction that had blocked Mr. McCarthy’s ascent appeared unwilling to compromise for significantly more modest concessions from Democrats.

Administration officials have given no indication that they would negotiate with Republicans over a debt-limit increase at all — nor that they were preparing for the possibility of a House speaker refusing to put a debt-limit increase to a vote without steep spending cuts.

Article source: https://www.nytimes.com/2023/01/07/us/politics/speaker-election-debt-limit-republicans.html