On Monday, U.S. Treasury Secretary Janet Yellen met with a group of influential American businesspeople to discuss the financial dangers posed by the ongoing battle over raising the debt ceiling.
The “debt ceiling,” a regulation enacted by Congress, caps total federal spending at $31.4 trillion. Earlier this year, we hit that ceiling. Yellen warned last week that if the debt ceiling isn’t increased or prevented, a default could occur as soon as June 1.
An experienced economist has reportedly had private conversations with many executives over the last few days, warning them of the “dangerous consequences of the current brinkmanship,” as one of two anonymous sources told Reuters. The sources did not identify the authorities with whom Yellen discussed the issue.
Biden administration officials have repeatedly claimed that Republicans are endangering the global economy by insisting that any increase in the debt ceiling be accompanied by expenditure cutbacks or future spending caps. On Sunday, Yellen remarked in an interview that the Republicans are “holding a gun to the head of the American people” by doing this. She said that the likelihood of a recession makes it “simply unacceptable” to try to establish a “agreement on budget priorities” before extending the debt ceiling.
In early February, President Joe Biden met with House Speaker Kevin McCarthy (R-CA) to discuss strategies for increasing or eliminating the debt ceiling and reevaluating fiscal priorities. The chief executive, however, postponed further meetings for a period of months. The two leaders will have their second meeting on Tuesday, and this time they’ll be joined by additional MPs.
Biden will want to keep discussions of budget cutbacks and the debt ceiling separate, according to White House press secretary Karine Jean-Pierre, who spoke during a meeting on Monday. “Remember, that’s the regular order,” she reminded the media. The debt ceiling shouldn’t be tied into budget negotiations, as you suggest.
Some conservative Republicans in the House Freedom Caucus have indicated they would be willing to support a debt ceiling increase in exchange for a plan that would restore spending levels to those of FY2022, raise the debt ceiling for only the coming year, and cap spending growth over the next decade at 1% annually. Two weeks ago, the House of Representatives approved a budget plan proposed by McCarthy that was quite similar to the framework. Since the Republicans only have a slim majority in the House, the votes of the House Freedom Caucus are crucial to the passage of legislation.
Jean-Pierre stated last week that “the only practical way to avoid default is for Congress to suspend the debt limit without conditions” due to “limited time” before the impending default. In an earlier interview with The Daily Wire, House Freedom Caucus Chairman Scott Perry (R-PA) had described the remarks as “like a pyromaniac who starts a fire and watches it burn for months and then says it needs to be put out while pouring more gas on it.”
A group of 43 Republican senators recently wrote a letter declaring they would not support a “clean” debt ceiling package that did not contain any spending cuts or other policy reforms. The Democratic leader in the Senate, Chuck Schumer of New York, has promised hearings on the measure in order to “show the true impact of this reckless legislation on everyday Americans.”