McCarthy, Kevin (1965- )

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    What’s in the House G.O.P. Debt Limit Bill

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    Republicans revealed a proposal on Wednesday that would cut federal spending and unravel parts of the Biden administration’s policy agenda in exchange for lifting the nation’s borrowing cap.WASHINGTON — House Republicans on Wednesday unveiled a bill that would cut billions in federal spending and roll back some of President Biden’s policy priorities in exchange for lifting the debt ceiling for one year.After trying and failing to coalesce lawmakers around a budget blueprint of their own, Republican leaders have instead framed the legislation as an opening offer to Democrats and a way to get the White House to come to the negotiating table.Mr. Biden has insisted that Republicans raise the debt limit without any conditions and said that he would not meet with them to discuss spending cuts until they passed their own fiscal plan.Speaker Kevin McCarthy said he would put the new legislation, which Republicans claim would save the nation $4.5 trillion, to a vote next week.Negotiations have so far been frozen, and time is running short: The United States, which has already hit a $31.4 trillion cap on how much money it can borrow, could run out of money to pay its bills as soon as June.That could have catastrophic effects, potentially leading to a global financial crisis and a painful recession in the United States.While the two sides could soon begin talks, Mr. Biden is unlikely to accept few, if any, of Mr. McCarthy’s proposals. Here is a look at what is in the bill.Rescind unspent Covid-19 relief fundsRepublicans proposed rescinding pandemic relief funds that have not yet been spent, which they estimated would return about $50 billion to $60 billion to the government’s coffers.In 2020 and 2021, Congress approved about $4.6 trillion in stimulus funding, which was intended to help the country recover from the effects of the coronavirus pandemic. Most of that money has been spent.But there is some leftover funding for programs that provide grants to health care providers, medical care for veterans, pension benefits and aid for public transit agencies. Some of the programs have unspent money because applications are still open or their funds do not expire until next year. Others, including one devised to help aircraft manufacturers pay for compensation costs, are not expected to use all of their allotted funds.Biden administration officials have pushed back on the effort, since they expect a majority of unspent relief funds to be used before they expire.Speaker Kevin McCarthy said he would put the new legislation regarding the debt ceiling to a vote next week. Haiyun Jiang/The New York TimesCap spending to fiscal 2022 levelsHouse Republicans have long complained that federal spending is out of control, and the conference began the year with the aspiration of balancing the budget in 10 years. But that would require deep spending cuts to popular federal programs, something G.O.P. leaders have been unable to coalesce their conference around. The bill instead aims to assuage conservatives by proposing freezing spending to last year’s levels.That would effectively force budget cuts. As costs of government programs rise with inflation over time, lawmakers would have to cut some programs to stay under the cap. That would require Republicans to identify spending cuts totaling $3.6 trillion over a decade, by their own calculations, and this bill does not outline them. Instead, House Republican leaders are punting those decisions to the Appropriations Committee.One fight appropriators will have to resolve is how to balance the cuts between defense-related spending and spending on other domestic programs, like environmental protection and education. House Republicans in particular have been loathe to adopt any cuts to military spending, but leaving those budgets intact would require steeper cuts to other programs.Democrats have sought to make that part of the proposal politically toxic. They released a memo on Thursday accusing Republicans of seeking to kill manufacturing jobs by cutting government subsidies for low-emission energy technology.Karine Jean-Pierre, the White House press secretary, said in a briefing that the White House was still reviewing the plan but broadly called it unserious and harmful to Americans “who are struggling everyday to make ends meet.”Even if Republicans succeeded in imposing the caps, there is no guarantee they would produce anywhere close to the promised savings. Lawmakers in the future could simply vote to ignore them, as they did frequently with the spending caps that President Barack Obama and congressional Republicans agreed on to avoid a debt default in 2011.Roll back some of the Biden administration’s climate measuresThe bill would undo major parts of the Biden administration’s landmark health, climate and tax law, which Democrats passed last year and named the Inflation Reduction Act.Republicans proposed repealing an array of energy tax credits in the law that aim to cut greenhouse gas emissions, including those that incentivize the use of previously owned electric vehicles and the production of clean electricity and fuel. Republican lawmakers claim the move would save about $271 billion to $1.2 trillion.The Republican plan also includes proposals in a separate energy bill that House G.O.P. lawmakers passed last month to bolster domestic energy production. Although that bill has not passed the Democratic-controlled Senate, it includes provisions that would expand mining and fossil fuel production in the country and speed up the construction of necessary infrastructure by reforming a permitting process that can take up to five years.Claw back funding from the Internal Revenue ServiceRepublicans also vowed to “defund Biden’s I.R.S. army” by rescinding the bulk of new funding that the tax collection agency was given to improve customer service and crack down on tax cheats.The Inflation Reduction Act approved $80 billion in additional funding for the I.R.S., which has been struggling to deal with backlogs of tax filings and answer taxpayer calls because of declining resources over the years.The funding has come under intense scrutiny from conservatives, who claim that they will be used to increase audit rates for average taxpayers. I.R.S. officials have reiterated that they will not raise audit rates above “historical levels” for taxpayers who earn less than $400,000 a year and will focus on increasing compliance among large corporations and wealthy people.Cutting that spending would actually add to federal deficits, the Congressional Budget Office estimated. That’s because the money is projected to help the I.R.S. crack down on taxpayers who do not pay what they owe — bringing in an estimated $200 billion in new revenue over a decade. That revenue would be lost if the funding is taken away.Impose stricter work requirements for food stamp and Medicaid recipientsThe proposal would enact more stringent work requirements for recipients of food stamps and Medicaid benefits, which Republicans claim would help attract more people to the work force and save about $110 billion to $120 billion. Republican leaders backed down from pursuing more drastic requirements after lawmakers who are facing challenging re-election battles in swing districts raised concerns.The measure would make able-bodied adults without dependents who receive both federal food assistance and Medicaid benefits subject to work requirements until they are 55 years old, raising the current age from 49. It also seeks to close a loophole Republicans have claimed that states abuse, which allows officials to exempt food assistance recipients from work requirements.The legislation bill would repeal the Biden administration’s plan to forgive up to $20,000 in student loan debt.Andrew Caballero-Reynolds/Agence France-Presse — Getty ImagesBlock student loan forgivenessThe bill would repeal the Biden administration’s actions to forgive up to $20,000 in student loan debt for millions of borrowers making under $125,000 a year. The move would wipe out more than $400 billion in debt, although the Supreme Court’s conservative majority appeared to be deeply skeptical of the legality of the plan ahead of an expected ruling by June.Republicans would also block a second student-loan change the Education Department has announced, which would reduce payments for future borrowers who go on to earn relatively low incomes after college. The department has estimated that plan would cost more than $100 billion over a decade, though the University of Pennsylvania’s Penn Wharton Budget Model pegs the cost at about $350 billion.Raise the debt limit through March 2024In exchange for the spending cuts and policy changes, Republicans would raise a statutory cap on how much the United States can borrow through March 2024, or until the nation’s debt grows to $32.9 trillion.That length of extension would be much shorter than Mr. Biden would prefer, guaranteeing another economy-rattling showdown as the presidential campaign heats up next year.The United States could default on its debt if both parties fail to reach an agreement. That could potentially lead to a financial crisis, damaging economic output and causing a deep recession if the country is unable to pay all its bills on time.The country might not be able to afford salaries for federal workers or Social Security checks, among other things. A debt default could also have global repercussions and destabilize bond markets across the world, since U.S. Treasury bonds are typically seen as one of the safest investments.Christopher Cameron More

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    House G.O.P. Unveils Debt Limit Bill Lifting Borrowing Cap for One Year

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    The proposal would impose work requirements on food stamp and Medicaid recipients and repeal funding to beef up tax enforcement.WASHINGTON — House Republican leaders on Wednesday unveiled their proposal to lift the debt ceiling for one year in exchange for spending cuts and policy changes, as they scrounged for the votes to pass the fiscal blueprint in an effort to force President Biden to the negotiating table.Speaker Kevin McCarthy said in a speech on the House floor that he would put the legislation to a vote next week. He urged his conference to unite around the measure in an attempt to speed up discussions with the White House amid growing anxiety about a looming default deadline, given the United States could run out of money to pay its bills within a few months.Even if Mr. McCarthy can get his own Republican caucus behind the bill, which is not at all guaranteed, it would be dead on arrival in the Democratic-controlled Senate. Mr. McCarthy described the effort as a way to get the White House and Democrats to engage on spending cuts at a moment when the nation’s debt has grown to about $31.4 trillion.“Now that we’ve introduced a clear plan for responsible debt limit increase,” Mr. McCarthy said, Democrats “have no more excuse” not to negotiate.But Mr. Biden seemed in no mood to negotiate. He lashed out at Mr. McCarthy and Republicans in a speech at a Maryland union hall that he was giving just as the House Republicans released their proposals.The president accused the speaker and his party of seeking to slash spending in ways that will hurt Americans while protecting tax cuts for the country’s wealthiest people. Mr. Biden denounced the bill in some of his most aggressive language yet, saying it would gut critical programs and hurt the most vulnerable.“That would mean cutting the number of people who administer Social Security and Medicare, meaning longer wait times,” he said. “Higher costs for child care, significantly higher — preschool, colleges. Higher costs for housing, especially for older Americans, people with disabilities, families and children, veterans.”The legislation would suspend the debt ceiling — which caps the amount that the United States is authorized to borrow — until March 2024 or until the debt grows to $32.9 trillion, teeing up another fiscal confrontation just as the 2024 presidential campaign hits a critical period. In exchange for temporarily suspending the cap, House Republicans are demanding that total federal spending be frozen at last year’s levels and that Congress claw back unspent pandemic relief funds and enact stricter work requirements on food stamp and Medicaid recipients.In his speech, Mr. Biden angrily demanded that Mr. McCarthy agree to an increase in the debt limit without conditions, and insisted that he will not negotiate about spending under the threat of the first default of America’s financial obligations.“They say they’re going to default unless I agree to all these wacko notions they have,” Mr. Biden said, repeatedly referring to Mr. McCarthy and his party as “MAGA Republicans.” He said Mr. McCarthy’s actions mean that Congress may fail to increase the debt limit in time to prevent a default.“Let’s be clear,” Mr. Biden said. “If he fails, the American people will be devastated.”House G.O.P. leaders also added measures to the legislation at the request of the hard-right Freedom Caucus to repeal key tenets of Mr. Biden’s landmark health, climate and tax law, including tax credits incentivizing the reduction of greenhouse gas emissions and clawing back the $80 billion allocated to the Internal Revenue Service. While the Republican conference has said it wants to cut spending to reduce the deficit, eliminating the I.R.S. funding would actually reduce government revenues from tax collections, effectively costing the government money, according to congressional scorekeepers.The bill would also bar the administration from enacting its student loan forgiveness plan and includes a bill already passed by House Republicans to expand domestic mining and fossil fuel production.All told, the plan amounts to a significant watering down from some of the party’s objectives outlined earlier this year, including balancing the federal budget in 10 years. But facing mounting external pressure to avert a catastrophic default as early as June, Republicans framed the bill as a sensible solution to begin negotiations.Mr. McCarthy said on Wednesday that the legislation would save taxpayers $4.5 trillion, though no independent agencies have yet assessed the economic impact of the legislation. Analysis by the nonpartisan congressional scorekeeper for tax legislation last year found that repealing Mr. Biden’s full health, climate and tax law would actually increase the deficit.“Whatever goes to the Senate, you can never” negotiate “up,” said Representative Ralph Norman of South Carolina, a member of the Freedom Caucus who has never voted to raise the debt ceiling. “You can always negotiate down.”Mr. Biden excoriated Republicans for seeking to protect wealthy people even as they demand cuts that he said will have the biggest negative effect on lower-income Americans.“MAGA officials are separately pushing for more tax giveaways and overwhelming benefits to the wealthiest Americans and biggest corporations,” Mr. Biden said. “Folks, this time the same old trickle down, dressed up MAGA clothing is worse than ever.”President Biden lashed out at Mr. McCarthy and Republicans in a speech at a Maryland union hall.Doug Mills/The New York TimesIt was unclear whether Mr. McCarthy had yet secured the votes to pass the legislation. Republicans, plagued by internal divisions, have so far been unable to coalesce the conference around a full budget blueprint. And a small handful of hard-right Republicans, including Representatives Tim Burchett of Tennessee and Eric Burlison of Missouri, have balked at the prospect of raising the debt ceiling at all.Still, some of the conference’s most conservative lawmakers expressed cautious optimism about the plan, indicating that Mr. McCarthy is not — as of yet — facing an organized bloc of hard-right opposition to what would amount to House Republicans’ opening offer.Russell T. Vought, the former Trump administration budget director who now leads the far-right Center for Renewing America and has been advising Republicans on their debt limit strategy, praised the proposal as “an important first step towards reining in our unsustainable levels of federal spending along with the woke and weaponized bureaucracy waging war on the American people.”The proposal Mr. McCarthy unveiled on Wednesday also appeared tailored to assuage the concerns raised by Republicans facing tough re-election fights in swing districts over enacting stronger work requirements for food stamps and Medicaid.Republican leaders ultimately backed away from including harsher measures, including a move that would have substantially narrowed an exemption from work requirements for food stamp recipients in households with children under 18, excusing only those whose households include children under the age of 7.That did not stop Democrats, who are demanding that Republicans vote to raise the debt ceiling without any conditions, from crowing about the fissures in the House G.O.P. conference.“We’re getting closer and closer to when we have to act to avoid default,” said Senator Chuck Schumer of New York, the majority leader. “For all the speeches, for all the letters, for all the wish lists and meetings with this family or that family, the underlying facts haven’t changed: At this point, Speaker McCarthy does not have a plan for avoiding a catastrophic default on the debt.”Jim Tankersley More

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    As Possible Debt Limit Crisis Nears, Wall Street Shrugs

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    Few investors have focused on the possibility that Congress will not raise the nation’s borrowing limit in time to avoid an economically catastrophic default.WASHINGTON — Speaker Kevin McCarthy chose the New York Stock Exchange on Monday to deliver his most detailed comments yet on House Republicans’ demands for raising the nation’s borrowing limit. But his comments made little impression on Wall Street, where investors continue to trade stocks and Treasury bonds under the assumption that Congress and President Biden will find a way to avoid a calamitous government default.The lack of a market panic about the talks reflects a been-there, done-that attitude that investors have increasingly taken to partisan showdowns over taxes, spending and the government’s ability to pay its bills on time, which lawmakers often resolve at the last possible moment.But there are reasons to believe that this time could play out differently, starting with the chaos in Mr. McCarthy’s caucus — and new warnings that lawmakers might have less time to raise the $31.4 trillion limit than previously thought.The next few weeks will more precisely determine how quickly the government will exhaust its ability to pay bondholders, employees, Social Security recipients and everyone else it sends money to on a regular basis. That’s because data on the government’s tax receipts for the year will come into sharper focus after Tuesday’s deadline for people to file individual income tax returns for 2022.On Tuesday, Goldman Sachs economists sounded a warning that the potential default date could be much sooner than previous forecasts — which typically pegged the date in July or August — if revenue comes in soft. “While the data are still very preliminary, weak tax collections so far in April suggest an increased probability that the debt limit deadline will be reached in the first half of June,” they wrote.Republicans are refusing to raise the borrowing cap unless Mr. Biden agrees to reduce government spending and slow the growth of the national debt, a position that risks plunging the United States into recession if the Treasury Department runs out of money to pay all its bills on time. But Mr. McCarthy has struggled to unite his Republicans around specific cuts, even though he said Monday that he will put such a plan on the House floor next week.Moderates in the Republican caucus are wary of deep cuts to popular domestic programs, like education and national parks, that would be spurred by his proposal to cap domestic spending growth at a level well below the current inflation rate. Fiscal hawks, including a faction that resisted Mr. McCarthy’s appointment as speaker and could effectively force a vote to oust him at any time, have pushed for far more aggressive reductions. They include lawmakers who have never voted to raise or suspend the debt limit, even under President Donald J. Trump, who signed three suspensions of the limit into law.Mr. McCarthy detailed his plan to fellow Republicans on Tuesday. As outlined on Monday, it would raise the limit for about a year. It would also return most domestic spending to fiscal year 2022 levels and cap its growth over a decade. Mr. McCarthy also wants to add work requirements for recipients of federal food assistance and reduce federal regulations on fossil fuel development and other projects, which he says will increase economic growth.It is unclear if enough Republicans would vote for that package to ensure its passage in the House. Senate Democrats would almost certainly reject it, as would Mr. Biden, who has said repeatedly that he expects Congress to raise the borrowing limit with no strings attached.Mr. Biden has shown no indication that he will intervene to speed up discussions over raising the limit, or seek to broker any deals in Congress to do so. The president has said he will negotiate taxes and spending levels separately from the borrowing limit. But he and his aides are refusing to engage further with Mr. McCarthy on fiscal policy until Republicans rally around a budget plan.Mr. Biden slammed Mr. McCarthy’s plan in a speech on Tuesday, saying he has “proposed huge cuts to important programs that millions of Americans count on.” Mr. Biden said that Mr. McCarthy had “threatened to become the first speaker to default on our debt unless he gets the cuts he wants.”The only market thus far to reflect stress about the debt limit is the one most attuned to it: credit default swaps, which price the risk of the government failing to make scheduled payments to bondholders. Mr. McCarthy shrugged off that stress in a question-and-answer session after his speech on Monday.“Markets go up and down,” he said.Stock and bond markets were unfazed after Mr. McCarthy’s comments. They have in recent months been far more reactive to any evidence about what the Federal Reserve will do next in its campaign to tame high inflation by raising interest rates.Some White House officials privately say they expect Republicans to step up their efforts to raise the limit if and when investors begin to worry more about negotiations. That’s what happened in 2011, when a showdown between congressional Republicans and President Barack Obama nearly ended in default. Stocks plunged, and borrowing costs rose for corporations and home buyers. The damage took months to repair.Some Republicans are similarly hopeful that a wake-up on Wall Street will push Mr. Biden to change his negotiating stance, including Representative Patrick McHenry of North Carolina, the chairman of the House Financial Services Committee.“I don’t think market participants have any idea of how bad off these negotiations are right now, which should give them pause and concern, and actually should bring the president to the table,” he said.Catie Edmondson More

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    Double-Barreled Economic Threat Puts Congress on Edge

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    Republicans and Democrats disagree over how recent bank closures should impact the debt limit stalemate, and have taken divergent lessons from past economic crises.WASHINGTON — In 2008, an imminent collapse of the banking system consumed Congress before lawmakers delivered a bailout. Three years later, a debt limit crisis enveloped Washington and led to a series of spending cuts after a dangerous brush with default and a first-ever downgrade in the nation’s credit rating.Now unease about the banking system’s stability and a stalemate over raising the debt limit are engulfing the capital simultaneously, ratcheting up an already high level of financial anxiety as two economic challenges Congress has experienced before become intertwined.“The stakes are exceptionally high when you are dealing with what amounts to a one-two punch of economic peril,” said Senator Ron Wyden, Democrat of Oregon and chairman of the Senate Finance Committee. “The messages that you send to the economy and the public with respect to banking and the full faith and credit of the United States — it doesn’t get more consequential than that.”Republicans and Democrats acknowledge it is a scary case of déjà vu times two. But they diverge sharply on how recent bank failures — and uncertainty over how Congress should respond to them, if at all — will influence the debt limit fight later this summer.At their just-concluded retreat in Florida, House Republicans took the line that shakiness in the banking system should strengthen their hand in the coming showdown over the debt limit. They argued that a Democrat-led spending spree spurred inflation, forced up interest rates and led to a precarious situation for all but the largest banks. The clear answer, to them, remains deep spending cuts, and they say they will still insist on cuts before making any move to raise the debt ceiling.Treasury Secretary Janet L. Yellen said on Tuesday that the president was willing to talk federal spending with Republicans, just not under the threat of a debt default.Pete Marovich for The New York Times“That should wake everybody up,” Speaker Kevin McCarthy, Republican of California, told reporters on Tuesday when asked about the intersection of banking stability and the debt limit. “Why are we having a crisis? Because the government spent too much and created inflation.”“I believe to get to a debt ceiling limit, you have to be spending less than we spent before,” he said.But Jerome H. Powell, the Fed chair, on Wednesday disputed the notion that spending remained the chief driver of inflation.“Spending was of course tremendously high during the pandemic,” he said at a news conference announcing an increase in interest rates. “As pandemic programs rolled off, spending actually came down.”“Fiscal impulse is actually not what’s driving inflation right now,” he said. “It was at the beginning perhaps, but that’s not the story right now.”Democrats say House Republicans are doing the exact opposite of what is required at a critical moment, even as the Fed offers assurances about the soundness of the banking system. They say the fallout from any banking instability should persuade Republicans that the last thing the economy needs is the specter of a default from a failure to raise the debt limit, which is projected to be reached as early as July without action by Congress.Senator Chuck Schumer, Democrat of New York and the majority leader, on Wednesday assailed the Republican stance as “reckless and truly clueless.”.css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.“Instead of calling for calm, House Republicans are sowing chaos by threatening a default at a time when banks need stability,” he said. “The right answer is for Republicans in the House to stop saber-rattling, drop the hostage-taking and brinkmanship and work together, work in a bipartisan way, to extend the debt ceiling without strings attached.”Other Democrats shared those sentiments, dismissing calls from some Republicans to prioritize federal payments should Congress fail to agree on a debt-limit increase. They say that approach is unworkable and default by another name.“The banking crisis highlights the importance of paying our bills on time,” said Senator Chris Van Hollen, Democrat of Maryland and a member of the Banking Committee. “We don’t want to create any more uncertainty in the financial markets and the economy. Because of what happened with the banks, it is more important than ever that Republicans don’t allow us to get close to the cliff.”“Because of what happened with the banks, it is more important than ever that Republicans don’t allow us to get close to the cliff,” said Senator Chris Van Hollen, Democrat of Maryland.Pete Marovich for The New York TimesThe 2008 and 2011 economic crises were earthshaking events on Capitol Hill. In the fall of 2008, in response to warnings from Treasury and Fed officials that the nation’s banks were about go under, Congress dove into a titanic, market-rattling debate over the $700 billion Troubled Asset Relief Program, ultimately approving a historic government intervention in the economy.Three years later, a new House Republican majority and the Obama administration took their clash over spending to the brink of financial ruin, bringing the country close to a federal default before striking a last-minute deal on spending cuts cleared the way for an increase in the debt ceiling, averting disaster.Lawmakers say they drew many lessons from those painful experiences. But the two parties did not draw the same ones.For Democrats, the 2011 experience hardened their opposition to negotiating over increasing the debt limit, confirming their belief that it should be raised without conditions since it is simply making good on spending already approved by Congress, with the support of members of both political parties. Republicans, by contrast, say that same experience persuaded them that the only way to exact real spending cuts is to use the threat of a federal debt default as leverage.The clashing approaches now have the parties again dug in over increasing the debt limit. Scant progress has been made toward finding a resolution that could avoid undermining the economy, even as the banking system exhibits signs of stress.Some Republicans say that they see the high-profile failure of the Silicon Valley Bank as an isolated incident, in contrast to the widespread fear of a total banking collapse in 2008 before Congress intervened.“This is not ’08 and ’09 when the banking industry was crazy on their asset side,” said Senator Mike Braun, Republican of Indiana. “That side of the economy I think learned its lesson.”He and other Republicans said they need to continue to push for spending reductions as part of any agreement to raise the debt limit and called on Democrats and President Biden to drop their refusal to negotiate.“This is not just a one-way street,” said Senator John Cornyn, Republican of Texas. “Hopefully Biden and the administration will get real when it comes to negotiating something, rather than saying, ‘I am not going to negotiate anything.’”In an appearance on Tuesday before the American Bankers Association, Treasury Secretary Janet L. Yellen said that the president was willing to talk federal spending with Republicans, just not with the debt limit sword held at his throat.“Having this conversation needs to happen over time and in the appropriations process and not through the threat of forcing a default,” she told members of the group. “It is essential that Congress raise the debt ceiling and that they do it promptly in order not to inflict a truly catastrophic wound on our economy and our financial system.”Republicans and Democrats credit consumer confidence for holding off economic calamity and so far preventing Congress from entering the crisis atmosphere that permeated both 2008 and 2011. But there is no guarantee that confidence can be maintained, and lawmakers warn of the possibility of cascading events should the banking system become viewed as unstable or the debt limit standoff go on too long.“It has,” warned Senator Richard Blumenthal, Democrat of Connecticut, “the makings of a perfect storm.” More

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    Biden Will Release Dead-on-Arrival Budget, Picking Fight With GOP

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    The president’s plans have little in common with the budget Republicans are set to release this spring, as the nation hurtles toward a possible default on its debt.WASHINGTON — President Biden will propose a budget on Thursday that has no chance of driving tax or spending decisions in Congress this year, but instead will serve as a statement of political priorities as he clashes with Republicans over the size of the federal government.Mr. Biden’s budget proposal, the third of his presidency, is an attempt to advance a narrative that the president is committed to investing in American manufacturing, fighting corporate profiteering, reducing budget deficits and fending off conservative attacks on safety-net programs.It is expected to include what White House officials say will be nearly $3 trillion in new deficit reduction, largely from a familiar batch of tax increases on companies and high earners, along with robust spending on the military and policies to further Mr. Biden’s attempts to support high-tech factory jobs and fight climate change.Republicans are expected to offer a starkly different budget sometime this spring, one likely to be stocked with cuts to federal health programs and aid to the poor, in an effort to eliminate the budget deficit within a decade without raising taxes. Mr. Biden is certain to reject those proposals, and they may struggle to attract enough moderate Republican votes to pass the House.The competing documents will highlight the dearth of common ground for Mr. Biden and his opposition party on fiscal policy at a high-stakes moment for the government and the global economy. That is true even though both the president and congressional Republicans are embracing the politics of promising to reduce deficits and the growth of the national debt, which topped $31 trillion late last year.Republican leaders in the House have refused to raise a congressionally imposed cap on how much the federal government can borrow unless Mr. Biden agrees to steep cuts to federal spending in exchange. Given the United States borrows huge sums of money to pay its bills, that position risks plunging the economy into crisis if the government runs out of cash and defaults on its debt later this year.Mr. Biden has refused to tie any spending cuts to raising the borrowing cap, which does not authorize any new expenditures, but said he welcomes debate over how best to ease the nation’s debt burden.The parties’ entrenched positions set Washington up for several bruising months, at least, of debt-limit discussions. Economists warn the standoff will rattle investors and poses mounting threats to the global financial system.On Wednesday, Jerome H. Powell, the chair of the Federal Reserve, urged lawmakers not to play games, saying there is no way to prevent a financial meltdown without raising the borrowing cap.“Congress raising the debt ceiling is really the only alternative,” Mr. Powell told a House committee. “There are no rabbits in hats to be pulled out on this.”Jerome H. Powell, the chair of the Federal Reserve, told a House committee: “Congress raising the debt ceiling is really the only alternative.”Haiyun Jiang/The New York TimesPresidential budgets always offer visions for the nation’s fiscal policy that compete with those of their opposition — and budgets submitted by presidents to an opposition-dominated chamber of Congress rarely serve as more than messaging documents. Often, including under Mr. Biden, much of the budget fails to pass muster with the president’s own party.Mr. Biden failed to persuade a sufficient number of Democrats to pass many of the policy priorities outlined in his previous budget requests, like free community college and federally guaranteed paid leave. More than $2 trillion in tax increases from last year’s budget were never enacted despite Democrats’ control of Congress..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.Still, this year’s budget releases from Mr. Biden and House Republicans carry extra importance because of the stakes of the debt-limit fight — and the few paths to compromise on fiscal policy that the documents are expected to show.Mr. Biden’s budget will raise taxes on corporations and high earners, both to pay for his policy priorities and to reduce the growth in America’s reliance on borrowed money, including a 25 percent tax aimed at billionaires. Republicans will seek to cut taxes, including making permanent some temporary tax cuts approved under former President Donald J. Trump, and may seek to eliminate the budget deficit in 10 years by gutting huge swaths of federal spending. Mr. Biden will continue to push his vision of an expanded and empowered government hand in the economy, with new spending for child care, education and more. Republicans will seek to slash federal agencies and much of the health coverage provided by the Affordable Care Act, though it may be difficult for Speaker Kevin McCarthy of California to assemble a package of cuts that will satisfy hard-liners and centrists in his caucus alike.Leaders on both sides of the aisle are embracing the contrasts in their approach.Mr. Biden “is willing to do what Republicans are not: lower the deficit in a realistic, responsible way without cutting benefits that tens of millions of people rely on,” Senator Chuck Schumer of New York, the majority leader, said in a brief speech on Wednesday. “Unlike Republicans, the president is also asking the richest of the rich to pay a little more of their fair share in taxes,” he added.Senator Mitch McConnell of Kentucky, the Republican leader, told reporters this week that Mr. Biden’s budget was “replete with what they would do if they could.”“Thank goodness the House is Republican,” Mr. McConnell said. “Massive tax increases, more spending, all of which the American people can thank the Republican House for, will not see the light of day.”Speaker Kevin McCarthy faces a challenge in coming up with cuts that will satisfy both hard-liners and centrists in the Republican caucus.Julia Nikhinson for The New York TimesRepublicans largely ignored the growth in deficits under Mr. Trump, including approving his tax cuts, which cost the federal government $2 trillion, and when joining with Democrats to pass trillions of dollars in economic aid amid the pandemic recession. Republicans joined Democrats three times to raise or suspend the debt limit without any spending cuts when Mr. Trump was in office. But after winning control of the House in November, Republican leaders have returned to warning that America’s debt load is hurting the U.S. economy and refusing to raise the debt limit unless Mr. Biden agrees to pare back federal spending.The Congressional Budget Office projects the budget deficit will grow slightly this fiscal year, from $1.375 trillion to $1.41 trillion, then continue to rise for the course of the decade, topping $2 trillion in 2032.Those increases are being driven in part by the rising costs of Medicare and Social Security as members of the baby boom generation retire, and by the growing cost of servicing the nation’s $31.4 trillion debt following a series of rapid interest rate increases by the Fed in a bid to tame high inflation. Mr. Powell told lawmakers on Wednesday that “it isn’t that the debt today is unsustainable. It’s that the path is unsustainable.”The director of the budget office, Phillip L. Swagel, briefed lawmakers about deficit projections on Wednesday at the Capitol, warning they would eventually need to raise taxes, cut spending or both in order to mitigate rising debt. The office’s projections “suggest that, over the long term, changes in fiscal policy would need to be made to address the rising costs of interest and mitigate other adverse consequences of high and rising debt,” Mr. Swagel wrote in a slide deck presented to lawmakers.From 2024 to 2033, the budget office projects, deficits will total more than $20 trillion, driving gross federal debt to nearly $52 trillion.Mr. Biden’s proposals, if enacted in full, would reduce that growth by about 15 percent. They are not likely to be. Republicans have tried already this year to repeal tax increases and the Medicare prescription drug savings measures he signed last year.Through new laws he has signed and executive actions he has issued, Mr. Biden has approved policies that would add about $5 trillion to the national debt over a decade, according to estimates by the Committee for a Responsible Federal Budget in Washington. Those include his 2021 economic aid law and debt relief for certain student loan borrowers, which is under challenge at the Supreme Court.It is unclear how Mr. Biden settled on the ultimate figure of nearly $3 trillion for his budget’s deficit reduction, or to what extent he agrees with Republicans who claim that the nation’s current levels of debt and deficits pose a risk to the economy.Karine Jean-Pierre, the White House press secretary, did not directly answer a reporter’s questions this week on how Mr. Biden arrived at his preferred level of deficit reduction or whether the path of growth in the national debt is hurting the economy.“The president understands his fiscal responsibility. He understands how important it is to lower the deficit,” Ms. Jean-Pierre said.“He’s going to put forward a fiscal budget that is going to be responsible,” she added.Catie Edmondson More

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    President Biden Is Not Backing Off His Big-Government Agenda

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    In his first appearance before a Republican House, the president renewed calls for large new economic programs and offered no concessions on federal spending.WASHINGTON — There were no economic pivots in President Biden’s first State of the Union address to a Republican House. He did not pare back his push to raise taxes on high earners or to spend big on new government programs. He offered no olive branches to conservatives who have accused him of running the country into crisis with government borrowing.It was a shift from Mr. Biden’s two most recent Democratic predecessors in the White House, who tacked toward a more conciliatory and limited-government approach to economic policy after losing at least one chamber of Congress. But on Tuesday night, Mr. Biden barreled ahead. The president renewed his calls for trillions of dollars of new federal programs, including for child care and community college, over the sometimes raucous objections of Republicans who have centered their fight with Mr. Biden on the issue of spending and debt. He did not name a single federal spending program he was willing to cut. He said he would work to reduce budget deficits, but by raising taxes on high earners and corporations, a position anathema to Republicans.The speech was not a blueprint to pass any of those proposals, which have little chance of becoming law during his first term.Instead, it was a defiant opening bid for a high-stakes clash over raising the nation’s borrowing limit. It was a no-quarter recommitment to a campaign theme aimed squarely at blue-collar voters in 2024 swing states, centered on expanding government in pursuit of what Mr. Biden calls “middle-out” economic policy.Aides say the choice to defy Republicans’ calls for Mr. Biden to change course on economic policy was deliberate, reflecting both the president’s deeply held convictions on policy and his belief that he has found a winning political message.It was also a bet that the economy, which has so far been a drag on Mr. Biden’s popularity, will ultimately prove to be a tailwind in his widely expected re-election campaign. Rapid price gains are beginning to ease, and jobs are plentiful, with the unemployment rate at its lowest point since 1969.Biden’s State of the Union AddressChallenging the G.O.P.: In the first State of the Union address of a new era of divided government, President Biden delivered a plea to Republicans for unity but vowed not to back off his economic agenda.State of Uncertainty: Mr. Biden used his speech to portray the United States as a country in recovery. But what he did not emphasize was that America also faces a lot of uncertainty in 2023.Foreign Policy: Mr. Biden spends his days confronting Russia and China. So it was especially striking that in his address, he chose to spend relatively little time on America’s global role.A Tense Exchange: Before the speech, Senator Mitt Romney admonished Representative George Santos, a fellow Republican, telling him he “shouldn’t have been there.”To that end, Mr. Biden spent much of the speech proclaiming that the American economy is faring better on his watch than his critics — or even many of his voters — concede. He dived into details about laws he has signed to invest in water pipes, semiconductor factories, electric vehicles and more, while promising those plans would bring high-paying jobs to workers without college degrees. He promised consumer-friendly crackdowns on credit card fees, social media companies and more. On Wednesday, Mr. Biden was headed to Wisconsin to promote his economic legislation, while his cabinet secretaries fanned out across the country to do the same.“We’re building an economy where no one’s left behind,” Mr. Biden said in his speech. “Jobs are coming back, pride is coming back, because choices we made in the last several years. You know, this is, in my view, a blue-collar blueprint to rebuild America and make a real difference in your lives at home.”“Here’s my message to all of you out there,” he added later. “I have your back.”Mr. Biden’s approach underscored how he has not regarded the Republican House takeover as a rebuke of his policies..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.It defied the example set by Mr. Biden’s Democratic predecessors after they lost House control in their first midterms. President Bill Clinton promised a new era of smaller government in 1995. President Barack Obama vowed in 2011 “to take responsibility for our deficit” and proposed what he called “painful cuts” to domestic spending.Mr. Biden offered no apology for his policies. He cast himself as more fiscally responsible than his immediate predecessor, former President Donald J. Trump, in claiming credit for a $1.7 trillion decline in the federal budget deficit last year. That improvement was largely the product of expiring pandemic aid programs, but Mr. Biden suggested he would take steps to keep winnowing the shortfall between what the government spent and what it earned through taxes and other revenue. He said his next budget, which will be released on March 9, would further reduce deficits by $2 trillion over a decade.In a sharp contrast with Republicans, he called for raising taxes on corporations and the wealthy as a way to show a commitment to deficit reduction in spite of his spending plans. His proposals included an expanded tax on stock buybacks and what would effectively be a sort of wealth tax on billionaires.He baited Republicans on a pair of politically cherished programs, Social Security and Medicare, drawing sustained jeers when he said some of his opponents wanted to sunset the programs. While hundreds of Republican lawmakers have signed on to plans to reduce spending on the safety net by raising retirement ages and other reductions in future benefits, Mr. Biden’s “sunset” accusation rests on the possible effects of a plan to reauthorize spending programs every five years, advanced by Senator Rick Scott of Florida, which has gained little traction among party leaders.Republicans called the speech a departure from Mr. Biden’s previous calls for unity and a disconnect on major economic issues.“While the president is busy taking a premature and undeserved victory lap, lauding legislation that Democrats passed on a party-line basis, families in West Virginia and America are struggling at every turn because many of the policies and priorities of this administration have made the American dream harder to attain,” Senator Shelley Moore Capito, Republican of West Virginia, said in a release after the address.Mr. Biden’s allies cheered. The president “delivered a bold blueprint for an economy that, at long last, puts working people first,” Liz Shuler, the president of the powerful A.F.L.-C.I.O. labor organization, said in a news release on Tuesday evening.Mr. Biden fashions himself a congressional deal maker, and on Tuesday, he outlined a handful of smaller-scale initiatives on other issues, like curbing the flow of fentanyl and regulating big tech, that might plausibly win bipartisan support in the new Congress. But the speech was not a recipe for economic compromise.The president re-upped calls for big new federal investments in child care and assistance for the elderly, community college, prekindergarten and health insurance. But he offered no plausible road to finishing the job, as he put it, on that long list of proposals, which he was unable to include in the wide array of economic legislation he signed in his first two years because of opposition from centrist Democrats in the Senate.What he did outline was a defiant negotiating posture, as he and Republican lawmakers battle over raising the $31.4 trillion federal borrowing limit, which the United States hit last month. That cap, which limits the government’s ability to borrow funds to pay for spending that Congress has already authorized, must be suspended or lifted later this year in order for the United States to continue paying its bills and avoid a financial crisis.Republicans are refusing to raise the limit unless Mr. Biden agrees to deep spending cuts. Mr. Biden has said he will refuse to bargain over the borrowing cap and on Tuesday night reminded Republicans that they had agreed to effectively increase the debt limit three times when Mr. Trump was president. Despite what both sides called a productive meeting at the White House last week between the president and Speaker Kevin McCarthy, Republican of California, Mr. Biden did not waver in that position on Tuesday.“We’re not going to be moved into being threatened to default on the debt,” Mr. Biden said.Mr. McCarthy, seated behind him, did not look pleased. More

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    Biden and McCarthy Are Set to Discuss Debt Limit as Both Sides Trade Barbs

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    The hours leading up to the meeting have highlighted the differences between the White House and the Republicans who now control the House.WASHINGTON — President Biden will meet with Speaker Kevin McCarthy at the White House on Wednesday afternoon for a discussion that carries high stakes: the need to raise the nation’s borrowing limit in order to avoid a financial crisis.The meeting will be the first between the two leaders since Republicans assumed control of the House and conveyed the speaker title on Mr. McCarthy after a protracted fight.Republicans have refused to raise the statutory debt limit unless Mr. Biden accepts deep cuts in federal spending. The president has said repeatedly that he expects Congress to raise the borrowing cap with no strings attached — and that he will not negotiate conditions for an increase.Wednesday’s meeting will take place behind closed doors, but the hours leading up to it have highlighted the differences between the White House and the Republicans who now control the House. On Tuesday, Mr. Biden and Mr. McCarthy blamed each other for the impasse in raising the debt ceiling. The president called the speaker a “decent man” who had caved to extremists in his party to take power.He made “commitments that are just absolutely off the wall for a speaker of the House to make,” Mr. Biden told reporters on Tuesday.Understand the U.S. Debt CeilingCard 1 of 5What is the debt ceiling? More

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    Biden Demands Details on Budget Cuts From McCarthy

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    Ahead of a meeting at the White House on Wednesday, administration officials demanded that Republicans commit to avoiding a default on federal debt.WASHINGTON — President Biden will ask Speaker Kevin McCarthy, Republican of California, on Wednesday for details on what budget cuts his party is demanding in order to raise the federal debt limit and for assurances that Mr. McCarthy will not accept an economically debilitating government default, White House officials said.The demands, outlined in a memo that the White House released on Tuesday, are an attempt by Mr. Biden to force Republicans to engage in a debate over taxes, spending and debt on terms that are more favorable to the president than to newly empowered conservatives on Capitol Hill.Mr. Biden is seeking to force Mr. McCarthy to specify which programs he would cut — a list that most likely includes some spending that is popular with the public — and to calculate how much Republicans would add to the debt with additional tax cuts.In the memo, Brian Deese, the director of the National Economic Council, and Shalanda Young, the director of the Office of Management and Budget, said the president would release his annual budget on March 9 and asked when Mr. McCarthy would do the same.“It is essential that Speaker McCarthy likewise commit to releasing a budget, so that the American people can see how House Republicans plan to reduce the deficit — whether through Social Security cuts; cuts to Medicare, Medicaid and Affordable Care Act health coverage; and/or cuts to research, education and public safety — as well as how much their budget will add to the deficit with tax cuts for the wealthiest Americans and large corporations,” Ms. Young and Mr. Deese wrote.Understand the U.S. Debt CeilingCard 1 of 5What is the debt ceiling? More