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WASHINGTON — The U.S. government is hitting its statutory debt limit on Thursday, requiring the Treasury Department to begin resorting to “extraordinary measures” to pay the bills.
In a recent letter to congressional leaders, Treasury Secretary Janet Yellen said those special financial tools can extend until “early June” and that Congress will need to act to prevent default.
“Yet the use of extraordinary measures enables the government to meet its obligations for only a limited amount of time. It is therefore critical that Congress act in a timely manner to increase or suspend the debt limit,” Yellen wrote.
“Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability,” she said. “Indeed, in the past, even threats that the U.S. government might fail to meet its obligations have caused real harms, including the only credit rating downgrade in the history of our nation in 2011.”
Yellen’s warning comes as the new Republican House majority, led by Speaker Kevin McCarthy of California, demands conservative policy concessions in the form of spending cuts to lift the debt ceiling.
“Let’s change our behavior now. Let’s sit down. He’s the president. We’re the majority in the House. The Democrats are the majority in the Senate. And that’s exactly the way the founders designed Congress to work, find the compromise and find the commonsense compromise that puts us back onto a balanced budget,” McCarthy told reporters Tuesday on Capitol Hill.
McCarthy, R-Calif., said a debt limit increase with no strings attached was “totally off the table,” adding that federal retirement spending should be curtailed to save those programs from bankruptcy. “Let’s sit down and find a place that we can protect Medicare and Social Security for the future generations. Let’s put our house in order.”
“I’d like to sit down with all the leaders, especially with the president, start having discussions. I think it’s a sign of arrogance, if you would say, he wouldn’t even discuss it,” McCarthy said.
But the White House has made clear what President Joe Biden’s offer to lift the debt ceiling is: nothing.
“We should be dealing with the debt ceiling without — without conditions. It is important. We’re not going to negotiate on this,” White House press secretary Karine Jean-Pierre told reporters.
“This is just another attempt by congressional Republicans to force unpopular cuts on programs critical to seniors, the middle class and working families. Congress needs to act and do so quickly. There is no excuse for political brinkmanship,” she said on Tuesday, dismissing the idea that the federal government can breach the debt limit and decide which bills to pay.
McCarthy hasn’t specified a list of demands to attach to a debt limit hike. He would need a majority of the House to pass such a measure and put pressure on the Senate and White House to negotiate.
Democrats seized on McCarthy’s remarks, along with those of House conservatives who say retirement spending should be curtailed.
Former Speaker Nancy Pelosi, D-Calif., called it a “nonstarter.”
“It’s almost silliness for Republicans in the House to be putting Medicare and Social Security on the table as a condition for lifting the debt ceiling,” she said. “Hopefully, there will be agreement that we reach in a responsible way to lift the debt ceiling.”
Still, any legislation to raise the debt ceiling would have to pass the Senate, which Democrats control with 51 votes, and where 60 votes are needed to break a filibuster.
“America pays its debts. Period. There should be no political brinkmanship with the debt limit. It’s reckless for Speaker McCarthy and MAGA Republicans to try and use the full faith and credit of the United States as a political bargaining chip,” Senate Majority Leader Chuck Schumer, D-N.Y., said in a statement Tuesday. “A default would be catastrophic for America’s working families and lead to higher costs.”
Some GOP hard-liners say the borrowing limit should not be raised at all.
“We cannot raise the debt ceiling,” Rep. Andy Biggs, R-Ariz., said Tuesday on Twitter. “Democrats have carelessly spent our taxpayer money and devalued our currency. They’ve made their bed, so they must lie in it.”
The White House took aim at Biggs’ tweet on Wednesday.
“Rep. Biggs is dead wrong to actively support the ruin of millions of American livelihoods, 401k plans, and small businesses, all in the name of scorched earth partisanship,” White House spokesperson Andrew Bates said. “Default would needlessly plunge the country into economic chaos, collapse, and catastrophe while giving our competitors like China an historic boost against us.”
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