WASHINGTON — Congress has not made any progress in preventing a debt ceiling crisis. The recent collapses of some banks are further accelerating the impasse.
On Feb. 1, President Joe Biden met with Kevin McCarthy, R.-Calif. to discuss the debt limit. They have not met since. McCarthy wants Biden to agree to spending cuts in order to increase the debt ceiling. Biden insists that the country cannot pay its bills and wants McCarthy to first indicate which spending he is willing to reduce. This he has not done.
The conflicting views of the parties have been reinforced by the recent failures at Signature Bank and Silicon Valley Bank.
Republicans claim that bank failures were due to high inflation and rises in interest rates. They describe the economic landscape as an endorsement of their demand for spending cuts in the Debt Ceiling debate.
“Why is there a banking crisis?” McCarthy said Tuesday that the government had spent too much money and caused inflation. “Shouldn’t we just do what the president says, raise the debt ceiling and create even more inflation? This should be a wake up call for everyone and a reminder to say “Oh, my god, we need to do something about the debt ceiling.”
Democrats believe that bank failures are a sign of stability and a warning to avoid triggering a crisis.
“What we don’t need is for the House Republicans to threaten chaos and absurdly link the banking crisis with default — dangerously linking it to default. We need calmness, stability and careful consideration of all the facts,” said Chuck Schumer, Senate Majority Leader. “Undermining the full faith in the U.S. and credit is not a good idea. However, in the wake of a major bank failure, it’s extremely reckless.”
He said that the House Republicans are “threatening an economic crisis worldwide over the debt limit, at the same moment we have this problem with the banking industry.”
Schumer stated, “It’s absurd, it’s reckless.”
Republicans turn up the attack
A group of conservative Republicans, including Sen. Rick Scott (R-Fla.), Sen. Mike Lee (R-Utah), and members of House Freedom Caucus, an ultraconservative, held a press conference Wednesday in which they argued that Biden would be responsible if the country defaults and causes a global economic meltdown.
Rep. Lauren Boebert (R-Colo.) said, “When moms or dads are laid off, and when unemployment doubles, and the stock market crashes, remember that Joe Biden sat in his hands while we urged, demanded action.”
The debt ceiling is not an authorization to spend more money; it allows the U.S. government pay the bills Congress has legally imposed. Both sides have contributed to the rise in debt over time.
Rep. Chip Roy (R-Texas) said that we are not going to send money to Pro-Prostitution or LGBTQ groups in Colombia.
When asked what Roy meant, his office cited a Washington Examiner report on a $16,000 State Department grant.
John Thune (Republican Senate Minority Whip) said Wednesday that McCarthy is still supported by GOP senators to find a debt limit solution for Biden. However, Thune added that “I cannot speak to the current progress of this.”
Thune stated, “It hasn’t happened yet.” “But it is possible,” Thune said. It takes sometimes a bit of pressure to get people to sit down.
Treasury Secretary Yellen’s warning
Although the Treasury Department has given Congress a June 5, date to act or risk default, the Congressional Budget Office estimates that it will be between July 1_ and September.
The Republican-led House is moving ahead with a plan that would “prioritize” payments in the event there was a breach of the debt limit — which means pay some bills but not others. It’s not clear if McCarthy will bring this to a vote in full House.
Janet Yellen, Treasury Secretary, criticized the idea at a Senate hearing last Wednesday. She called it “effectively a default under just another name.”
She said that she could not give assurances as to the technical feasibility of such plans. It would be a radical departure from the normal practice of federal agencies and it would be extremely risky, untested, and dangerous. It is essential that Congress recognizes that raising the debt limit is the responsibility of Congress to preserve the full faith, credit and sovereignty of the United States.
Sherrod Brown (D-Ohio), is the Senate Banking Committee Chair. He said that he believes Patrick McHenry (R-N.C.), the House Financial Services Committee chair, who has warned Republicans about being realistic about the debt limit can help.
Brown stated, “I have complete confidence in Patrick McHenry. He’s going to bring McCarthy along and solve the debt crisis.”
He stated that the idea of not raising the debt limit and prioritizing payments for creditors “essentially picks rich people over Social Security,… the Chinese Communist Party above Medicare.”
Brown said to reporters, “Let them attempt to defend that.” “McCarthy is not going want to place his members in that position,” Brown said to reporters.
