McCarthy calls for spending caps to raise US debt ceiling

United States House Speaker Kevin McCarthy has pledged on Monday to pass legislation to raise the nation’s debt ceiling — on the condition of capping future federal spending at one percent.

In a high-profile speech at the New York Stock Exchange, McCarthy — the Republican leader who is marking his 100th day as speaker of the US House of Representatives — lashed out at President Joe Biden for refusing to engage in budget-cutting negotiations to prevent a debt crisis.

He called the nation’s debt load a “ticking time bomb” and denounced Biden as “missing in action” as the deadline nears to raise the debt limit.

“Since the president continues to hide, House Republicans will take action,” McCarthy said.

His Wall Street address comes as Washington is heading towards a potential fiscal crisis over the need to raise the nation’s debt limit, now at $31 trillion, and avert a federal default. The Treasury Department has said it is taking “extraordinary measures” to continue paying its bills, but money will run short this summer.

McCarthy faces his own challenges. With his slim majority and less-than-strong grip on power, he has been unable to rally his troops around a budget-cutting proposal that he could offer the White House as a starting point in negotiations.

Still, McCarthy vowed to pass a bill through the House that would raise the nation’s debt limit for one year, putting the issue squarely in the midst of the 2024 presidential election. He coupled that promise with a plan to roll back federal spending to fiscal 2022 levels and cap future spending at no more than one percent.

Republicans also want to attach policy priorities, including cuts to benefit programmes in the federal safety net for poorer Americans, to the debt negotiations.

The White House said ahead of McCarthy’s address that “a speech isn’t a plan”, dismissing his overture and re-upping pressure on the Republican leader to approve a debt ceiling increase with no strings attached.

“There is one responsible solution to the debt limit: addressing it promptly, without brinksmanship or hostage taking,” said White House Deputy Press Secretary Andrew Bates.

Once a routine matter, the need for Congress to pass legislation raising the nation’s debt limit has increasingly become a political weapon, and one wielded particularly by Republicans as leverage for their policy priorities.

McCarthy is working furiously to unite the “five families” — the various caucuses including the Freedom Caucus, Republican Study Committee and others within the House Republican majority — around a plan that could be presented to Biden to kick-start negotiations.

Federal spending skyrocketed during the COVID-19 crisis, rising to $7.4 trillion in 2021, before sliding back to $6.2 trillion in fiscal 2022, according to Treasury Department data. The nation’s debt load has also climbed steadily, doubling during the administration of former President George W Bush with the 9/11-era wars overseas and spiking again during the administration of President Barack Obama as spending rose and tax revenue plummeted during the Great Recession.

The nation runs more than $1 trillion in annual deficits, and the last time the federal budget was balanced was 2001.

McCarthy noted that former President Ronald Reagan similarly warned of government spending. The cuts the House Republicans want to make are not “draconian”, McCarthy said.

Once, his speech was interrupted by applause from the executives and others at the stock exchange.

The White House and Democrats in Congress have been unwilling to engage in talks with the Republicans, saying Congress must simply raise the debt limit without conditions in order for the government to continue paying its already accrued bills.

The split screen on display in New York, though, showed the challenges ahead for McCarthy in focusing on budget matters.

As the speaker delivered his speech, his hard-charging Judiciary Committee Chairman Jim Jordan was convening a New York City field hearing focused partly on District Attorney Alvin Bragg.

The Manhattan district attorney had been under scrutiny after his office indicted former President Donald Trump on felony charges related to alleged hush money payments to adult film star Stormy Daniels and a Playboy model who both contend he had sexual relations with them.