WASHINGTON, April 17 (Reuters) – Speaker of the U.S. House of Representatives Kevin McCarthy on Monday outlined the spending cuts he said his fellow Republicans would demand in return for voting to raise the federal government’s $31.4 trillion debt ceiling.
His proposals include cutting spending to last year’s level, capping growth at 1% a year and reversing some of President Joe Biden’s policy goals, ideas floated for weeks that have been rejected by Democrats, who control the House. The Senate and the White House.
McCarthy outlined his ideas in a speech to the New York Stock Exchange as the government nears the point where it will no longer be able to meet its fiscal obligations this summer. The inaction of a divided Congress will ultimately trigger a historic default that has rocked the U.S. and global economies.
The 2011 standoff over the debt ceiling prompted the US government’s first credit downgrade, and investors are already showing signs of concern. A market-based measure of U.S. default risk is at its highest since 2012, and has risen sharply this year as the debt ceiling debate intensifies in Washington.
“Congressional Republicans are ready to act and lead,” McCarthy said, adding that the House will vote “in the coming weeks” to cut spending and raise the debt ceiling until an unspecified date next year.
McCarthy said he is seeking to tighten eligibility requirements for some federal social safety net programs.
Democrats quickly expressed opposition to McCarthy’s framework.
“Today House Republicans made their priorities clear: keep Wall Street happy and take health and food assistance away from working Americans,” Senate Finance Committee Chairman Ron Wyden said in a statement.
The Treasury Department has warned that the federal government could hit an “X-date” when it doesn’t pay all its bills by June 5. .
Limited options
The cuts McCarthy is proposing won’t touch the main drivers of the debt that Republicans complain about — Social Security and Medicare pensions and health care programs that will nearly double over the next 10 years, according to the nonpartisan Congressional Budget Office.
Republicans have also said they don’t want to cut military spending. McCarthy said on Monday that he would not agree to raise taxes
That leaves little room to meaningfully reduce the budget deficit, the gap between what the government takes in and what it spends.
McCarthy presides over a divided caucus with a narrow 222-213 House majority, including hardline members who want significantly more drastic spending cuts and dismiss the risks of failing to act on the debt ceiling. House Republicans have not yet produced their proposed budget, which Biden argues would be a necessary starting point for negotiations on spending.
The White House last month proposed its own budget that it said would reduce the nation’s deficit by nearly $3 trillion over 10 years, though it relied on tax increases on businesses and the wealthy, rather than spending cuts.
The White House also notes that Congress raised the budget ceiling three times without conditions under Biden’s Republican predecessor, Donald Trump. Congress must raise the debt ceiling to cover the costs of previously passed legislation, including Trump’s 2017 tax cuts and trillions in aid authorized during the COVID-19 pandemic.
“Speaker McCarthy is defying the bipartisan norms pursued under Trump and engaging in dangerous economic hostage-taking that threatens the jobs and retirement savings of hard-working Americans,” White House spokesman Andrew Bates said in a statement.
Last month the CBO laid out several options for addressing the debt, showing that higher tax collections would have a more significant impact than the spending cuts under consideration.
Reporting by Richard Cowan, additional reporting by Steve Holland; Editing by Scott Malone and Chisu Nomiyama
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