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    Trickling Tax Revenue Complicates Debt Limit Talks

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    The Treasury Department’s ability to delay a default, the so-called X-date, hinges on how fast the money is coming in.WASHINGTON — A vote by House Republicans last week to lift the nation’s debt limit in exchange for deep spending cuts was the first step in what is likely to be a protracted battle over raising or suspending the borrowing cap to avoid defaulting on United States debt.But while Republicans and President Biden and his fellow Democrats are gearing up for a fight, a key question is beginning to sow unease in Washington and on Wall Street: How much time is there to strike a deal?The United States technically hit its $31.4 trillion debt limit in January, forcing the Treasury Department to employ accounting maneuvers known as extraordinary measures to allow the government to keep paying its bills, including payments to bondholders who own government debt. Treasury Secretary Janet L. Yellen said at the time that her powers to delay a default — in which the United States fails to make its payments on time — could be exhausted by early June. She cautioned, however, that the estimate came with considerable uncertainty.With June now just a few weeks away, uncertainty around the timing of when the United States will run out of cash — what’s known as the X-date — remains, and determining the true deadline could have huge consequences for the country.Tax receipts will be key to the X-date.Determining the X-date depends on a complex set of factors, but ultimately what matters most is how much money the government spends and how much it takes in through taxes and other revenue.The Bipartisan Policy Center, which tracks federal revenues, projected in February that lawmakers would need to raise or suspend the debt limit sometime between summer and early fall to avoid a default. The specific date would largely depend on how quickly tax revenues are coming into the government’s coffers.There are signs that 2022 tax receipts are trickling in too slowly for comfort. Economists at Wells Fargo wrote in a note to clients last week that because tax collections appear to be weaker than expected, there is a chance the X-date could be as soon as early June. However, they continue to believe early August is the most likely default deadline.“A low but not insignificant probability of a U.S. default is still very concerning, and we would think the last thing Treasury officials want is an X-date that sneaks up on Congress,” they wrote.Tax day payments are still arriving. Goldman Sachs economists projected last week that by the second week of June, the Treasury Department could have around $60 billion of cash remaining, which would allow the government to keep making its payments until late July.Natural disasters could fuel a debt disaster.There is a surprising factor that could cause the X-date to arrive sooner: the weather. Severe storms, flooding and mudslides in California, Alabama and Georgia this year prompted the Internal Revenue Service to push the April 18 filing deadlines in dozens of counties to October.The I.R.S. said this year that, because of the storms, individuals and businesses in the affected areas could file their returns late. They were also given more time to make contributions to retirement and health savings accounts.Farmers, who often file their tax returns by March 1, also have received a reprieve until Oct. 16, and estimated payments that normally would have been made in January were allowed to be pushed back to that date.It is not clear how much tax revenue has been delayed by the storms, but the extensions have given the Treasury Department less wiggle room to keep paying the bills.An update could come this week.The Treasury Department is expected to send a letter to Congress in the coming days with a more precise estimate of when it could start running out of cash. It could also lay out new measures intended to stave off a default. This year, Ms. Yellen announced that she would redeem some existing investments and suspend new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund.In a speech last week, Ms. Yellen warned that a default would have real consequences for the economy.“Household payments on mortgages, auto loans and credit cards would rise,” Ms. Yellen said in remarks to the Sacramento Metropolitan Chamber of Commerce. “And American businesses would see credit markets deteriorate.”She added, “On top of that, it is unlikely that the federal government would be able to issue payments to millions of Americans, including our military families and seniors who rely on Social Security.”Here’s what the X-date means for negotiations.As the X-date approaches, it will put more pressure on lawmakers to take action.Analysts at Beacon Policy Advisors predicted that if a default could really happen as soon as June, that would increase the likelihood that Congress will pass a short-term suspension of the debt limit through October. If the X-date is expected to hit in July, that might compel lawmakers to file legislation by early May so they have sufficient time to deal with procedural obstacles in Congress.Although markets have broadly remained calm about the prospect of a default, there are some signs that investors are becoming nervous.They have sold government bonds that mature in three months — around the time policymakers have said the United States could run out of cash — and snapped up bonds with just one month until they are repaid.The cost of insuring existing bond holdings against the possibility that the United States will default on its debts has also risen sharply. Still, analysts say the market reaction would need to be much more pronounced to force a fast deal.“This has caused some heartburn among policymakers but not enough to move the negotiating needle in a meaningful way,” the Beacon analysts wrote. “There needs to be a bigger market response and a more definitive X-date to get negotiations going in full.”That has yet to happen, however. While Mr. Biden has indicated he is open to talking with Speaker Kevin McCarthy about ways to get the nation’s fiscal situation on a better track, the two have yet to schedule a meeting after the House passage last week. More

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    Biden Faces His First Big Choice on Debt Limit

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    After Republicans passed a bill that pairs spending cuts and fossil fuel support with raising the nation’s borrowing cap, the president must decide when and how to negotiateWASHINGTON — This week’s vote by House Republicans to couple deep spending cuts with an agreement to raise the debt limit for one year has put President Biden on the defensive, forcing him to confront a series of potentially painful choices at a perilous economic moment.Mr. Biden has long maintained that he would not negotiate spending cuts or other efforts to reduce the federal debt as part of discussions over raising the nation’s debt limit, which must be raised in order for the United States to keep borrowing money to pay its bills.But business groups, fiscal hawks and some congressional Democrats are calling on Mr. Biden to begin negotiating in earnest toward a deal that would avoid a default on the debt, which could come as soon as June or July.Mr. Biden and his aides now must choose how quickly to engage with Speaker Kevin McCarthy of California — along with Senator Chuck Schumer, Democrat of New York, the majority leader; Senator Mitch McConnell of Kentucky, the minority leader; and Representative Hakeem Jeffries of New York, the House minority leader — and on what terms.The president faces a cascading set of decisions as the nation, which has already bumped up against its $31.4 trillion debt limit, barrels toward default. He will need to find what, if any, common ground on spending cuts he has with Republicans, who do not share his preference for reducing the nation’s debt path largely by raising taxes on corporations and the rich. He will need to determine if he is prepared to sign any debt limit increase that is attached to conditions demanded by House conservatives.Ultimately, he may need to decide how aggressively to intervene in the delicate politics of House leadership. A potential debt-limit agreement could spur revolt by Mr. McCarthy’s most restless members, who laid the groundwork for the current brinkmanship when they held out against Mr. McCarthy’s ascension to the speaker’s gavel and retain the power to try to push him out.As administration officials describe it, they are all complicated choices. Mr. Biden and his aides do not want to encourage Republicans to habitually threaten economic collapse under Democratic presidents — and only under Democratic presidents — by allowing them to extract concessions to raise the limit now. They also recognize that a recession set off by default would hammer American families just as Mr. Biden is ramping up his re-election campaign, a dangerous scenario for an unpopular incumbent no matter which party voters blame for the default.House Speaker Kevin McCarthy after the House passed the debt limit bill.Kenny Holston/The New York TimesSome of Mr. Biden’s next steps are clear. To the chagrin of some House conservatives, there was no scenario in which the president would sign the bill that barely cleared the chamber on Wednesday. Along with raising the limit, it included spending cuts, new supports for oil and gas drilling and the near-total reversal of Mr. Biden’s signature law meant to fight climate change.“The president has made clear this bill has no chance of becoming law,” Karine Jean-Pierre, the White House press secretary, said on Wednesday after the vote. “In our history, we have never defaulted on our debt or failed to pay our bills. Congressional Republicans must act immediately and without conditions to avoid default.”But that does not mean Mr. Biden will be able to maintain his current posture toward Mr. McCarthy indefinitely. Administration officials have pushed business groups to pressure Republicans to pass a no-strings debt limit increase. But on Wednesday, leading business lobby groups, including the U.S. Chamber of Commerce and the Business Roundtable, lauded the House passage of the bill and called on Mr. Biden to engage.“Failing to raise the debt limit would trigger a strong market reaction with severe economic consequences, likely including widespread job losses, decimated retirement savings and serious hardship for millions of American families,” said Joshua Bolten, president and chief executive of the Business Roundtable. The group, he said, “is hopeful that today’s vote in the House will jump-start negotiations between Congress and the Biden administration on a bipartisan deal that takes default off the table and begins the hard work of dealing with our deficits and debt.”White House officials concede that Mr. Biden will have to convene negotiations with congressional leaders over taxes, spending and debt before the government runs out of money to pay its bills. In recent days, the president has suggested an openness to talk fiscal issues with Republicans, with the wink-nod stipulation that they have nothing to do with the borrowing limit.“I’m happy to meet with McCarthy, but not on whether or not the debt limit gets extended,” Mr. Biden told reporters at the White House on Wednesday. “That’s not negotiable.”Mr. Biden still sees his position in any fiscal talks, and the public debate around them, as a political winner. In the early months of this year, he demonized Republican plans that included cuts to safety-net programs and forced Mr. McCarthy to make Social Security and Medicare — the two largest drivers of federal spending growth in the years to come — untouchable in the Republican bill.More recently, officials across the administration have blasted the Republican bill for potentially cutting spending on popular programs for veterans, students and more. They are able to do that because the bill does not specify where the bulk of its spending reductions would come from, leaving the task to future congressional appropriators.In a White House memo obtained this week by The New York Times, officials sketch out what they believe Republicans would have to cut in order to satisfy the spending caps in their legislation, while keeping military spending intact. Over a decade, the reductions would include $500 billion for veterans’ health care, $300 billion from scientific and other research and $100 billion from the early childhood education program Head Start.Some administration officials privately suggest that a more modest version of spending caps, lasting for a few years at most, could plausibly form the centerpiece of an agreement to continue funding the government and raise the borrowing limit. Some business groups agree, though they would also like to see lawmakers add in a bipartisan effort to streamline government permitting for fossil fuels, clean energy and other projects, which they say would enhance economic growth.But many House Republicans appear in no mood to move from the bill that passed with only one vote to spare on Wednesday, raising the possibility that a deal with smaller spending cuts would need a combination of Republican and Democratic votes to pass the House — and potentially set off an effort by conservatives to depose Mr. McCarthy as speaker.Representative Ralph Norman of South Carolina, and a member of the Freedom Caucus, emerged from a closed-door briefing on the legislation ahead of the vote on Wednesday demanding that Republicans refuse to take anything less than their opening offer.“I wanted double what was in there,” Mr. Norman said. “I agreed to vote for it because that starts the ball and gets us in the arena to solve the debt problem. Now I’m not interested in anything coming back, anything but what we voted on.”Catie Edmondson More

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    The Debt Ceiling Debate Is About More Than Debt

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    Republicans’ opening bid to avert economic catastrophe by raising the nation’s borrowing limit focuses more on energy policy than reducing debt.WASHINGTON — Speaker Kevin McCarthy of California has repeatedly said that he and his fellow House Republicans are refusing to raise the nation’s borrowing limit, and risking economic catastrophe, to force a reckoning on America’s $31 trillion national debt.“Without exaggeration, America’s debt is a ticking time bomb that will detonate unless we take serious, responsible action,” he said this week.But the bill Mr. McCarthy introduced on Wednesday would only modestly change the nation’s debt trajectory. It also carries a second big objective that has little to do with debt: undercutting President Biden’s climate and clean energy agenda and increasing American production of fossil fuels.The legislation, which Republicans plan to vote on next week, is meant to force Mr. Biden to negotiate over raising the debt limit, which is currently capped at $31.4 trillion. Unless the cap is lifted, the federal government — which borrows huge sums of money to pay its bills — is expected to run out of cash as early as June. The House Rules Committee said on Friday that it will meet on Tuesday to consider the bill and possibly advance it to a floor vote.More than half the 320 pages of legislative text are a rehash of an energy bill that Republicans passed this year and that aimed to speed up leasing and permitting for oil and gas drilling. Republicans claim the bill would boost economic growth and bring in more revenue for the federal government, though the Congressional Budget Office projected it would slightly lose revenue.The Republican plan also gives priority to removing clean energy incentives that were included in Mr. Biden’s signature climate, health and tax law. That legislation, known as the Inflation Reduction Act, included tax credits and other provisions meant to encourage electric vehicle sales, advanced battery production, utility upgrades and a variety of energy efficiency efforts.The proposal does include provisions that would meaningfully reduce government spending and deficits, most notably by limiting total growth in certain types of federal spending from 2022 levels.The bill would claw back some unspent Covid relief money and impose new work requirements that could reduce federal spending on Medicaid and food assistance. It would block Mr. Biden’s proposal to forgive hundreds of billions of dollars in student loan debt and a related plan to reduce loan payments for low-income college graduates.As a result, it would reduce deficits by as much as $4.5 trillion over those 10 years, according to calculations by the Committee for a Responsible Federal Budget in Washington. The actual number could be much smaller; lawmakers could vote in the future to ignore spending caps, as they have in the past.Even if the entire estimated savings from the plan came to pass, it would still leave the nation a decade from now with total debt that was larger than the annual output of the economy — a level that Mr. McCarthy and other Republicans have frequently labeled a crisis.The Republican plan is estimated to reduce that ratio — known as debt-to-G.D.P. — in 2033 by about nine percentage points if fully enacted. By contrast, Mr. Biden’s latest budget, which raises trillions of dollars in new taxes from corporations and high earners and includes new spending on child care and education, would reduce the ratio by about six percentage points.Those reductions are a far cry from Republicans’ promises, after they won control of the House in November, to balance the budget in 10 years. That lowering of ambitions is partly the product of Republican leaders’ ruling out any cuts to the fast-rising costs of Social Security or Medicare, bowing to an onslaught of political attacks from Mr. Biden.The lower ambitions are also the result of party leaders’ unwillingness or inability to repeal most of the new spending programs Mr. Biden signed into law over the first two years of his presidency, often with bipartisan support.At the New York Stock Exchange on Monday, Mr. McCarthy accused the president and his party of already adding “$6 trillion to our nation’s debt burden,” ignoring the bipartisan support enjoyed by most of the spending Mr. Biden has signed into law.The speaker’s plan would effectively roll back one big bipartisan spending bill, which Mr. Biden signed at the end of 2022 to fund the government through this year. But the other big drivers of debt approved under Mr. Biden that are not singled out for repeal in the Republican bill include trillions in new spending on semiconductor manufacturing, health care for veterans exposed to toxic burn pits, and upgrades to critical infrastructure like bridges, water pipes and broadband.Some of that spending could potentially be reduced by congressional appropriators working under the proposed spending caps, but much of it is exempt from the cap or already out the door. Most of the $1.9 trillion economic aid plan Mr. Biden signed in March 2021, which Republicans blame for fueling high inflation, is already spent as well.The plan squarely targets the climate, health and tax bill that Democrats passed along party lines last summer by cutting that bill’s energy subsidies. It would also rescind additional enforcement dollars that the law sent to the Internal Revenue Service to crack down on wealthy tax cheats. The Congressional Budget Office says that change would cost the government about $100 billion in tax revenue.Taken together, those efforts reduce deficits by a bit over $100 billion, suggesting debt levels are not the primary consideration in targeting those provisions. The bill’s next 200 pages show what actually is: a sustained push to tilt federal support away from low-emission energy and further toward fossil fuels, including mandating new oil and gas leasing on federal lands and reducing barriers to the construction of new pipelines.Republicans say those efforts would save consumers money by reducing gasoline and heating costs. Democrats say they would halt progress on Mr. Biden’s efforts to galvanize domestic manufacturing growth and fight climate change.The plan “would cost Americans trillions in climate harm,” said Senator Sheldon Whitehouse of Rhode Island, the Democratic chairman of the Budget Committee. “And it would shrink our economy by disinvesting in the technologies of tomorrow.”Republicans have positioned their fossil fuel efforts as a solution to a supposed production crisis in the United States. “I have spent the last two years working with the other side of the aisle, watching them systematically take this country apart when it comes to our natural resources,” Representative Jerry Carl of Alabama said last month before voting to pass the energy bill now embedded in the debt ceiling bill.Government statistics show a rosier picture for the industry. Oil production in the United States has nearly returned to record highs under Mr. Biden. The Energy Department projects it will smash records next year, led by output increases from Texas and New Mexico. Natural gas production has never been higher.White House officials warn that Republicans are risking a catastrophic default with their demands attached to raising the borrowing cap. “The way to have a real negotiation on the budget is for House Republicans to take threats of default, when it comes to the economy and what it could potentially do to the economy, off the table,” Karine Jean-Pierre, the White House press secretary, told reporters on Thursday.Mr. McCarthy has defended his entire set of demands as a complete package to reorient economic policy. But he mentioned energy only in passing in his speech to Wall Street.The issue he called a crisis — and the basis he cited for refusing to raise the borrowing limit without conditions — was fiscal policy and debt. Debt limit negotiations, he said, “are an opportunity to examine our nation’s finances.” More

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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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    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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    Can Congress Use an Archaic Process to Get Around the Debt Stalemate?

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    Some Democrats are urging their colleagues to lay the groundwork for using an arcane procedural process to bypass Republicans and stave off economic peril.WASHINGTON — Call it an escape valve, an off-ramp or a break-glass-in-case-of-emergency option.From Pennsylvania Avenue to Wall Street to Main Street, those anxious about the political impasse over raising the federal debt limit are eying an arcane, seldom successful congressional process known as a discharge petition as a possible solution to ward off a disastrous default.The petition is just what its name implies: a signed demand, in this case bearing the signatures of a majority of the House, that can force consideration on the floor of a certain piece of legislation. The demand would be an increase in the federal debt limit — a way of staving off disaster if House Republicans refuse to agree to raise it before the Treasury Department exhausts its legal authority to borrow to pay its creditors this summer.But the process is exceedingly difficult, time-consuming and easily derailed. It has been successful only rarely in recent decades, most notably with passage of a campaign finance overhaul in 2002.That high degree of difficulty — and the economic threat posed by a federal default — has some Democrats urging their colleagues in the House to, at minimum, begin the process soon. They see it as a safeguard in the event that dormant debt talks between President Biden and Speaker Kevin McCarthy deteriorate further and the country finds itself on the brink of economic peril with no end in sight this year.Even if Congress does not ultimately need the discharge petition, they argue, lawmakers should get the ball rolling just in case — and soon.“I do think it is important to lay the groundwork for a discharge petition because it is a complicated process, so you need to plan ahead — meaning now,” said Senator Chris Van Hollen of Maryland, the former top Democrat on the House Budget Committee. “Having a backup would be a good strategy and, if necessary, would put pressure on House Republicans.”Executing a discharge petition is convoluted and politically dicey. It is a deliberately arduous exercise because it is intended to wrest control of the House floor from the majority leadership — an outcome that neither party wants to encourage on a regular basis. Since it is typically a tool of the minority, it requires wooing some members of the majority to defy their leadership and cross party lines to sign on. To force a debt limit vote, Democrats would need the support of all their members, as well as at least five Republican defectors.It is also a drawn-out process. The legislation at issue must sit in committee at least 30 legislative days — days the House is in session — before a petition to push it forward can be submitted. Then it can be brought to the floor only on specially designated days if its sponsors have the required 218 signatures.Mr. Van Hollen estimates that legislation introduced when Congress returns from recess on April 17 would not reach the point where its backers could even begin collecting signatures on a petition until June 21. It would still have a long way to go after that. The most recent prediction of when the debt ceiling will be breached is sometime between July and September.Lawmakers also noted that the House speaker can erect many procedural obstacles. For a discharge petition to succeed, they say, it is best if the speaker — in this case, Mr. McCarthy — tacitly wants the legislation to pass or is at least not adamantly opposed. In a crisis situation, as the debt limit endgame is likely to be, a discharge petition might be too cumbersome if the House leaders dug in against it.Speaker Kevin McCarthy insists Republicans will raise the debt ceiling only if President Biden and Democrats agree to spending cuts and other conditions.Al Drago for The New York Times“Look, I wouldn’t rule it out,” Representative Brendan F. Boyle of Pennsylvania, the top Democrat on the Budget Committee, said in a recent interview. But he warned that “it is really hard to do.”“Basically, in real time it works out to about two-and-a-half to three months,” said Mr. Boyle, who in the coming weeks plans to introduce legislation overhauling the debt limit process, allowing the president to raise it unless overridden by Congress. That measure could conceivably provide a basis for a discharge petition, as could other bills.Yet Democratic leaders in the House and Senate have been publicly resistant to the idea so far, mainly because they want to keep pressure on Republicans to raise the debt ceiling without conditions, as they did several times during the Trump administration without any upheaval.Mr. McCarthy and other Republican leaders insist they will raise the cap only if Mr. Biden and Democrats agree to spending cuts and other conditions — a demand that they have so far refused.Representative Hakeem Jeffries of New York, the Democratic leader, has steered clear of discharge petition discussions. Senator Chuck Schumer, Democrat of New York and the majority leader, said recently that he had no problem with readying a discharge petition but that he anticipates it will not be necessary because Democrats are succeeding in their push to box in Republicans on the issue, forcing a resolution.Other Democrats privately worry that embracing a discharge petition could backfire politically next year, allowing Republicans to paint them as employing a legislative trick to raise the debt limit over the objections of most Republicans.The concept of a discharge petition originated in the early 20th century as a way to circumvent the powerful Republican speaker at the time, Joseph Cannon. The rules have been revised multiple times, including in 1993, to make public a running tally of those who have signed.While petitions are not often successful, the prospect of one gaining enough support has forced action on major issues such as civil rights, immigration and gun rights.While Democrats have held back on initiating a petition, the possibility of one has helped calm nerves on Wall Street as bankers survey the potential outcomes of the debt limit struggle.Many economists at banks and consultancies acknowledged from the start that it was a long shot; Deutsche Bank pointed out that it was “rarely used,” and Morgan Stanley warned that it “may not be viable.”Still, it was regularly painted as an avenue out of the crisis, if an unlikely one: A discharge petition was “hardly a panacea, but it is in play,” Chris Krueger at the research group TD Cowen wrote in a research note in early January.But the possibility that it could be at all practical as a workaround is rapidly waning.“I’ve never thought the discharge petition was nearly as elegant a solution as made out by some,” Mr. Krueger said in an interview. He said he thought at this stage Congress would let negotiations get down to the wire and come to an agreement only when backlash in the news media or the financial markets became severe.“I don’t think we get into technical default scenarios,” he said, “but I think it’s going to get very uncomfortable.”Mr. Boyle said the real solution was not a discharge petition but the plan that he and other Democrats supported to remove the regular clashes over the debt limit from the congressional arena.“We have to structurally change this once and for all, because this is too dangerous a weapon to keep alive in our political system,” he said.“The future of the Republican Party is more Marjorie Taylor Greene than Mitt Romney,” Mr. Boyle added, naming the far-right congresswoman from Georgia and the more mainstream senator from Utah. “And so if we don’t permanently fix this process now, we’re going to be right back in this in a couple of years — and it might even be worse.” More

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    Top Economist Leaves White House, and an Economy Not Yet ‘Normal’

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    Cecilia Rouse says lingering effects of the coronavirus pandemic continue to haunt the recovery from recession — and drag on Americans’ optimism for the economy.WASHINGTON — Cecilia Rouse, the chair of the White House Council of Economic Advisers, stepped down on Friday to return to teaching at Princeton University. As a going-away present fit for an economist, her staff presented her with a chart showing every previous chair of the council, ranked by the number of jobs created during their tenure.Dr. Rouse’s name tops the list. In the two years since she was confirmed to be President Biden’s top economist, becoming the first Black chair of the council, the U.S. economy has created more than 11 million jobs. While that is a record for any presidential administration, it is also a direct result of the unusual circumstances of the fast-moving pandemic recession, which temporarily kicked millions of people out of the labor force before a swift recovery added back most of those jobs.As Dr. Rouse acknowledged in an interview this week, all that job growth has yet to restore a full sense of economic normality. Inflation remains much higher than normal. Consumers are pessimistic. The economy and the people who live and work in it, she said, are still to some degree stuck in the grip of the coronavirus pandemic.That phenomenon has scrambled markets like commercial real estate, Dr. Rouse said, exacerbated price growth and most likely hurt productivity across the economy by encouraging remote work. She said she believed in-person work was more likely to produce innovation that stokes economic growth.The effects have lingered longer than she initially expected.“We still have Covid with us,” Dr. Rouse said in her office at the Eisenhower Executive Office Building. “It is still impacting decisions that we’re making, whether it’s on our personal side, economic decisions.”She later added, “Sometimes I, in this course of the last few years, I wished my Ph.D. was in psychology.”In a wide-ranging interview reflecting on her time at the council, Dr. Rouse defended the Biden administration’s policy choices in responding to the pandemic and to deeper problems in the economy. She also repeatedly emphasized the need for “humility” in evaluating decisions that had been made in response to a wide range of possible risks.She did not directly answer questions about whether she agreed with previous chairs of the council who have argued that direct payments to lower-income Americans included in that legislation helped to inflame an inflation rate that hit a 40-year high last summer.But Dr. Rouse said the plan was an appropriate “insurance policy” in 2021 against the possibility of a double-dip recession. At the time, job growth had slowed and new waves of the coronavirus were colliding with a vaccine rollout that officials hoped would stabilize the economy but were unsure of.She also said that American workers were better off in their current situation — with low unemployment and strong job growth but higher-than-normal price growth — than they would have been if the economy had fallen back into recession and millions of people had been thrown out of work, potentially hurting their ability to find jobs in the future..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.“I believe workers are better off today than they would have been had the federal government not intervened,” Dr. Rouse said. “But you know, some of this will depend on how long we have inflation with us. Because inflation is costly.” Asked when she expected it to return to more normal levels, she replied, “Hopefully by the end of the year.”Fiscal hawks have criticized Mr. Biden for signing a rescue plan that was not offset by spending cuts or tax increases and thus added to the national debt. Dr. Rouse said the plan “may well have” paid for itself in fiscal terms. She explained that possibility in terms of the debt the government incurred to finance the plan, offset by the consumer and business activity generated by the plan’s provisions that sent money to people, which increased gross domestic product.“If we hadn’t really provided that kind of support, G.D.P. would have been much smaller,” she said. “So the federal government might have spent less and so the debt might have been smaller, but G.D.P. might have been much smaller as well.”Previous administrations have claimed their policies will “pay for themselves” by spurring economic growth and higher tax revenues. Those include the tax cuts signed by President Donald J. Trump in 2017, which his administration said would pay for themselves, but which independent evidence showed added trillions to the national debt.Dr. Rouse repeatedly said in the interview that future researchers would have the final say on the impact of Mr. Biden’s policies — particularly on inflation. She and her staff were part of a modeling effort in early 2021 that concluded that even with Mr. Biden’s $1.9 trillion injection into the economy, there was little chance of prices rising so quickly that the Federal Reserve would not be able to control inflation.“I would say that we were all working under uncertainty,” she said on Thursday, when asked about those models. “I think time will tell as to whether that was the right move.”A labor economist at Princeton, Dr. Rouse pledged in the White House to advance Mr. Biden’s efforts to promote racial equity in the economy and American society. That included improving the data the federal government collects on economic outcomes by race and ethnicity.Asked about that work, Dr. Rouse pointed to new data from the Bureau of Labor Statistics that breaks out monthly job figures for Native Americans, along with a handful of other new efforts. “It’s a slow process,” she said.Mr. Biden praised Dr. Rouse and her role in helping to navigate the economic challenges of his administration in a statement issued by the White House on Friday. “No matter the challenge, Cecilia provided insightful analysis, assessed problems in a new way and insisted that we examine the accumulation of evidence in drawing conclusions,” he said. More

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    Biden Highlights Economic Investments Ahead of Expected 2024 Announcement

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    The president has warned that a strong economy could be weakened under Republican leadership, a point he and a host of advisers will make at 20 events across the country in the coming weeks.DURHAM, N.C. — President Biden visited North Carolina on Tuesday and said Republicans would undermine his administration’s gains on American manufacturing, as the president began to sharpen his political message ahead of an expected re-election announcement.Mr. Biden spoke at Wolfspeed, a semiconductor manufacturer that recently announced a $5 billion investment to expand operations in the state, a move that would create about 1,800 jobs, according to the White House. The company, based in North Carolina, has deals to supply the material to General Motors, among other buyers.But Mr. Biden’s visit was less about semiconductors than it was about making an argument that he sees as key to a re-election bid — essentially, that the American economy has recovered since the coronavirus pandemic, his administration has helped keep it strong and Republican policies would undo that progress.“I’ve got news for you and for MAGA Republicans in Congress: Not on my watch,” Mr. Biden said, referring to the far-right wing of the party that is loyal to former President Donald J. Trump.The White House has argued for months that Mr. Biden has presided over a steady economy and strong job growth, but the data presents a more complicated reality: The high pace of job creation is undercut by a continued deceleration in wage increases, and there are growing concerns that the Federal Reserve may move to raise interest rates. The Biden administration has also tried to assuage fears of instability after the collapse of Silicon Valley Bank this month.Mr. Biden’s visit to North Carolina was the start of three weeks of related events to be held across the country by the president and Vice President Kamala Harris, plus their spouses and a host of cabinet officials. The group plans to visit 20 states and will highlight investments in American manufacturing, supply chains and job-creation efforts, according to a summary of efforts sent by the White House.During his trip to Durham, Mr. Biden highlighted legislation passed last year, including the CHIPS and Science Act, which contains $52 billion in subsidies and tax credits for companies that manufacture chips in the United States. More than half of the amount is dedicated to helping companies build facilities for making, assembling and packaging some of the world’s more advanced chips. In his remarks, the president said that over $435 billion had been invested in American companies since he took office.“America’s coming back,” Mr. Biden said, standing beside Gina Raimondo, the commerce secretary, who traveled with him to Durham. “We are determined to lead the world in manufacturing semiconductors.”Ms. Raimondo, who is expected to participate in the tour over the coming weeks, told a crowd gathered at Wolfspeed that the pandemic had “opened all of our eyes” to the importance of maintaining the global supply chain and protecting competitive advantages in technology.“The truth of it is the United States was for a long time a manufacturing powerhouse,” she said. “Still is, but for a long time we took our eye off the ball, and we watched manufacturing leave our shores in search of cheap labor in Asia.”.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.The president spoke directly to people he said might feel “left behind” by technological changes, but said his administration would focus on programs that could train workers to produce technological projects without a college degree. Mr. Biden said the “vast majority” of jobs created by Wolfspeed would not require college degrees and could pay around $80,000.Events like the one held on Tuesday will provide Mr. Biden and his surrogates with an opportunity to hone his argument against Republicans.At the same time, a collision course looms in Washington over the debt ceiling.On Tuesday, Speaker Kevin McCarthy, Republican of California, wrote a letter urging the president to negotiate on the federal debt limit. “With each passing day,” Mr. McCarthy wrote, “I am incredibly concerned that you are putting an already fragile economy in jeopardy by insisting upon your extreme position of refusing to negotiate any meaningful changes to out-of-control government spending.”Mr. Biden has said he will refuse to negotiate on the debt limit, pointing out that Republicans voted to raise the ceiling several times under his predecessor, Mr. Trump.“It’s time for Republicans to stop playing games, pass a clean debt ceiling bill and quit threatening our economic recovery,” Karine Jean-Pierre said in a statement responding to Mr. McCarthy’s letter.In his own letter sent on Tuesday evening, Mr. Biden urged Mr. McCarthy and congressional Republicans to present a full budget proposal before Congress leaves for Easter recess.The president and his advisers have signaled that the situation would be worse under Republican leadership, a point he underscored in North Carolina. The White House says that companies have made $16 billion in private sector investment commitments since Mr. Biden took office, a development they have attributed to corporations taking advantage of tax breaks and federal funding that bolsters innovation.Mr. Biden has argued that the flow of money would be at stake if Republicans tried to repeal policies passed under his administration, including the Inflation Reduction Act. He has also said that individual Americans are at risk of losing access to lower health care, energy and internet costs that are provided for in the bills that were passed by a Democratic-majority Congress.“We’re not going to let them undo all the progress,” Mr. Biden said. More