(Bloomberg) -- Speaker Kevin McCarthy urged President Joe Biden to enter negotiations with Republicans on a “responsible” debt limit increase that avoids any US payments default while addressing the nation’s longer-term fiscal challenges.
“We need a different approach — no drawing lines in the sand and saying ‘it’s my way or the highway,’” McCarthy said in remarks at the Capitol on Monday evening. “But most of all, no blank checks for runaway spending.”
The comments come a day before Biden delivers his annual State of the Union address, when he’s expected to raise the alarm on a debt-ceiling clash that has the potential to rattle financial markets this summer.
McCarthy said “Mr. President, congressional Republicans are ready to act to save America and make our country stronger. I hope that you will join us.”
He called the national debt the “greatest threat” facing the US and blamed it for rising prices, such as for eggs.
Less than an hour later, McCarthy made clear in answer to a reporter’s question that he was drawing at least one line in the sand — ruling out tax increases to address the deficit. Biden in the State of the Union address will call for a tax increase on billionaires.
The White House struck back at McCarthy in a statement charging Republicans with seeking deficit-worsening tax reductions and the president as presiding over responsible fiscal policy that had already reduced the deficit.
And Representative Brendan Boyle of Pennsylvania, the top Democrat on the Budget Committee, said McCarthy should raise the debt ceiling without demanding concessions.
“As long as Republicans choose reckless brinkmanship over responsible governance, our economy and Americans’ livelihoods will remain in grave danger,” he said in a statement.
The US government is currently unable to borrow net new money after reaching a statutory $31.4 trillion ceiling last month. The Treasury Department has told Congress that it can use special accounting maneuvers until at least early June to avoid a default on payment obligations.
Two-Year Cap
Congress deadlocked over raising the limit, with House Republicans insisting on spending cuts being attached to any bill to increase it and Democrats demanding a “clean” increase without conditions.
McCarthy and Biden met last Wednesday to discuss the debt ceiling, and emerged with upbeat sentiment. McCarthy said he was hopeful of reaching a two-year budget cap agreement with the president based on the conversation, even though the two leaders didn’t delve deeply into policy during the meeting. He said the next step would be for Biden to call him to set up another meeting.
The White House said that while raising the debt ceiling isn’t negotiable, Biden is willing to engage in a “separate” discussion on budget deficits.
White House Budget Director Shalanda Young has said she expects such deficit talks to be a “marathon.”
Monday was the legal deadline for the White House to release its fiscal 2024 budget proposal, but that document is now slated to come out on March 9. House Republicans intend to produce their own budget resolution by April, with the leadership aiming for balancing the budget in 10 years.
It is unclear what spending cuts the GOP will propose, and whether the party can unite around a single plan once the reductions become public. If entitlement programs and defense are shielded, and tax increases remain off the table, the plan would likely have to cut non-defense discretionary programs — areas like medical research, national parks and public housing — by some 85% or more.
McCarthy has said he does not plan to discuss reductions to Social Security and Medicare as part of deficit talks with the White House, but many of his own members are eager to put those programs on table.
--With assistance from Laura Litvan.
(Updates with McCarthy on taxes, Boyle statement, starting in sixth paragraph.)
©2023 Bloomberg L.P.
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