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    House Democrats Move to Force a Debt-Limit Increase as Default Date Looms

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    House Democratic leaders who have been quietly planning a strategy to force a debt ceiling increase to avert default began taking steps on Tuesday to deploy their secret weapon.The only clue to the gambit was in the title of the otherwise obscure hodgepodge of a bill: “The Breaking the Gridlock Act.”But the 45-page legislation, introduced without fanfare in January by a little-known Democrat, Representative Mark DeSaulnier of California, is part of a confidential, previously unreported, strategy Democrats have been plotting for months to quietly smooth the way for action by Congress to avert a devastating federal default if debt ceiling talks remain deadlocked.With a possible default now projected as soon as June 1, Democrats on Tuesday began taking steps to deploy the secret weapon they have been holding in reserve. They started the process of trying to force a debt-limit increase bill to the floor through a so-called discharge petition that could bypass Republican leaders who have refused to raise the ceiling unless President Biden agrees to spending cuts and policy changes.“House Democrats are working to make sure we have all options at our disposal to avoid a default,” Representative Hakeem Jeffries, Democrat of New York and the minority leader, wrote in a letter he sent to colleagues on Tuesday. “The filing of a debt ceiling measure to be brought up on the discharge calendar preserves an important option. It is now time for MAGA Republicans to act in a bipartisan manner to pay America’s bills without extreme conditions.”An emergency rule Democrats introduced on Tuesday, during a pro forma session held while the House is in recess, would start the clock on a process that would allow them to begin collecting signatures as soon as May 16 on such a petition, which can force action on a bill if a majority of members sign on. The open-ended rule would provide a vehicle to bring Mr. DeSaulnier’s bill to the floor and amend it with a Democratic proposal — which has yet to be written — to resolve the debt limit crisis.The strategy is no silver bullet, and Democrats concede it is a long shot. Gathering enough signatures to force a bill to the floor would take at least five Republicans willing to cross party lines if all Democrats signed on, a threshold that Democrats concede will be difficult to reach. They have yet to settle on the debt ceiling proposal itself, and for the strategy to succeed, Democrats would likely need to negotiate with a handful of mainstream Republicans to settle on a measure they could accept.A handful of hard-right Republicans explicitly warned their colleagues on Tuesday not to go down that path. “House Republicans: don’t defect!” Senator Mike Lee of Utah wrote on Twitter.Still, Democrats argue that the prospect of a successful effort could force House Republicans into a more acceptable deal. And Treasury Secretary Janet L. Yellen’s announcement on Monday that a potential default was only weeks away spurred Democratic leaders to act.House Democratic leaders have for months played down the possibility of initiating a discharge petition as a way out of the stalemate. They are hesitant to budge from the party position, which Mr. Biden has articulated repeatedly, that Republicans should agree to raise the debt limit with no conditions or concessions on spending cuts.But behind the scenes, they were simultaneously taking steps to make sure a vehicle was available if needed.There were no signs on Tuesday of any momentum toward even a temporary resolution. Senator Chuck Schumer, Democrat of New York and the majority leader, brushed aside the idea of putting off a confrontation by passing a short-term debt limit increase, telling reporters: “We should not kick the can down the road.”And Senator Mitch McConnell, Republican of Kentucky and the minority leader, reiterated that he intended to leave the negotiations to Mr. Biden and Speaker Kevin McCarthy, again dashing the private hopes of some Democrats that the veteran Republican would ultimately cut a deal with them to allow the debt ceiling to be lifted, as he has done in the past.“There is no solution in the Senate,” Mr. McConnell said.The White House had no public comment on the discharge effort, according to Karine Jean-Pierre, the press secretary. Mr. Biden is scheduled next week to host Mr. McCarthy and other congressional leaders at the White House to discuss raising the debt limit. His goal at that meeting, a senior administration official said, will be to stress the importance of averting default and creating a separate negotiation to address other budget issues.The discharge petition process can be time-consuming and complicated, so House Democrats who devised the strategy started early and carefully crafted their legislative vehicle. Insiders privately refer to the measure as a “Swiss Army knife” bill — one intended to be referred to every single House committee in order to keep open as many opportunities as possible for forcing it to the floor.It would create a task force to help grandparents raising grandchildren, create a federal strategy for reducing earthquake risks, change the name of a law that governs stock trading by members of Congress, extend small business loans, protect veterans from the I.R.S., authorize a new Pentagon grant program to protect nonprofit organizations against terrorist attacks and more. The legislation was so broad and eclectic that it was referred to 20 committees, where it has sat idle for months. That was the point.Mr. DeSaulnier’s intent was never to pass the elements of the bill, though he favors them all. It was to create what is known on Capitol Hill as a shell of a bill that would ultimately serve as the basis for a discharge petition — and a way out of the debt limit standoff.“I wrote it in a way to be prepared,” said Mr. DeSaulnier, a former member of the Rules Committee who worked with Democratic procedural experts to craft legislation that could provide a debt-limit escape hatch. “I anticipated there would be these problems with the Republican caucus, whether it was abortion or the debt limit. I think it was the responsible thing as a legislator to do.”Democrats say the beauty of Mr. DeSaulnier’s bill — which Republicans have ignored — is that it long ago passed the threshold of being held in committee for at least 30 days, the minimum length of time to initiate a discharge petition to force action on legislation. Even so, in a memo sent to members on Tuesday, a U.S. Chamber of Commerce analysis projected that even if Democrats were able to draw enough support for their plan and advance it without further delay, the measure could take until June 12 or 13 to clear Congress — many days beyond the earliest date Ms. Yellen has warned the debt limit could be reached.Democrats said the fact that their bill would fall under the jurisdiction of so many committees gave them several options for moving forward.Mr. DeSaulnier was picked to sponsor the measure because his low profile meant there was likely to be little attention to his bill. In contrast, any legislation introduced by Representative Jim McGovern of Massachusetts, the ranking Democrat on the Rules Committee, would have drawn attention immediately, and Republicans might have been able to take action to derail it.Discharge petitions have spurred action in the past by prompting House leaders to move on issues rather than lose control of the floor through a guerrilla legislative effort. But the procedure is rarely successful and has produced a law in only a handful of cases, including the approval of major bipartisan campaign finance legislation in 2002. Congressional leaders of both parties have been disdainful of such efforts, since they effectively wrest control of the House floor from the majority.Democrats say that the current situation, with a default looming, showed that they were taking prudent precautions with Mr. DeSaulnier’s bill. Besides thwarting gridlock, the legislation says its purpose is also “to advance common-sense policy priorities.”Catie Edmondson More

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    Is the Debt Limit Constitutional? Biden Aides Are Debating It.

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    As the government heads toward a possible default on its debt as soon as next month, officials are entertaining a legal theory that previous administrations ruled out.A standoff between House Republicans and President Biden over raising the nation’s borrowing limit has administration officials debating what to do if the government runs out of cash to pay its bills, including one option that previous administrations had deemed unthinkable.That option is effectively a constitutional challenge to the debt limit. Under the theory, the government would be required by the 14th Amendment to continue issuing new debt to pay bondholders, Social Security recipients, government employees and others, even if Congress fails to lift the limit before the so-called X-date.That theory rests on the 14th Amendment clause stating that “the validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”Some legal scholars contend that language overrides the statutory borrowing limit, which currently caps federal debt at $31.4 trillion and requires congressional approval to raise or lift.Top economic and legal officials at the White House, the Treasury Department and the Justice Department have made that theory a subject of intense and unresolved debate in recent months, according to several people familiar with the discussions.It is unclear whether President Biden would support such a move, which would have serious ramifications for the economy and almost undoubtedly elicit legal challenges from Republicans. Continuing to issue debt in that situation would avoid an immediate disruption in consumer demand by maintaining government payments, but borrowing costs are likely to soar, at least temporarily.Still, the debate is taking on new urgency as the United States inches closer to default. Treasury Secretary Janet L. Yellen warned on Monday that the government could run out of cash as soon as June 1 if the borrowing cap is not lifted.Mr. Biden is set to meet with Speaker Kevin McCarthy of California at the White House on May 9 to discuss fiscal policy, along with other top congressional leaders from both parties. The president’s invitation was spurred by the accelerated warning of the arrival of the X-date.But it remains unclear what type of compromise may be reached in time to avoid a default. House Republicans have refused to raise or suspend the debt ceiling unless Mr. Biden accepts spending cuts, fossil fuel supports and a repeal of Democratic climate policies, contained in a bill that narrowly cleared the chamber last week.Mr. Biden has said Congress must raise the limit without conditions, though he has also said he is open to separate discussions about the nation’s fiscal path.A White House spokesman declined to comment on Tuesday.A group of legal scholars and some liberal activists have pushed the constitutional challenge to the borrowing limit for more than a decade. No previous administration has taken it up. Lawyers at the White House and the Justice and Treasury Departments have never issued formal opinions on the question. And legal scholars disagree about the constitutionality of such a move.“The Constitution’s text bars the federal government from defaulting on the debt — even a little, even for a short while,” Garrett Epps, a constitutional scholar at the University of Oregon’s law school, wrote in November. “There’s a case to be made that if Congress decides to default on the debt, the president has the power and the obligation to pay it without congressional permission, even if that requires borrowing more money to do so.”Other legal scholars say the limit is constitutional. “The statute is a necessary component of Congress’s power to borrow and has proved capable of serving as a useful catalyst for budgetary reform aimed at debt reduction,” Anita S. Krishnakumar, a Georgetown University law professor, wrote in a 2005 law review article.The president has repeatedly said it is the job of Congress to raise the limit to avoid an economically catastrophic default.Top officials, including Ms. Yellen and the White House press secretary, Karine Jean-Pierre, have sidestepped questions about whether they believe the Constitution would compel the government to continue borrowing to pay its bills after the X-date.ABC News asked Ms. Yellen amid a debt-ceiling standoff in 2021 if she would invoke the 14th Amendment to resolve it.“It’s Congress’s responsibility to show that they have the determination to pay the bills that the government amasses,” she said. “We shouldn’t be in a position where we need to consider whether or not the 14th Amendment applies. That’s a disastrous situation that the country shouldn’t be in.”The government reached the borrowing limit on Jan. 19, but Treasury officials deployed what are known as extraordinary measures to continue paying bills on time. The measures, which are essentially accounting maneuvers, are set to run out sometime in the next few months, possibly as soon as June 1. The government would default on its debt if Treasury stopped paying all bills. Economists have warned that could lead to financial crisis and recession.Progressive groups have encouraged Mr. Biden to take actions meant to circumvent Congress on the debt limit and continue uninterrupted spending, like minting a $1 trillion coin to deposit with the Federal Reserve. Internally, administration officials have rejected most of them. Publicly, Biden aides have said the only way to avert a crisis is for Congress to act.“I know you probably get tired of me saying this from here over and over again, but it is true,” Ms. Jean-Pierre said on Thursday, after referring a question about the 14th Amendment to the Treasury Department. “It is their constitutional duty to get this done.”But inside the administration, it remains an open question what Treasury would do if Congress does not raise the limit in time — because, many officials say, the law is unclear and so is the Constitution, which gives Congress the power to tax and spend.Officials who support invoking the 14th Amendment and continuing to issue new debt contend the government would be exposed to lawsuits either way. If it fails to continue paying its bills after the X-date, it could be sued by anyone who is not paid on time in the event of a default.Other officials have argued that the statutory borrowing limit is binding, and that an attempt to ignore it would draw an immediate legal challenge that would most likely rise quickly to the Supreme Court.There is a broad consensus on both sides of the debate that the move risks roiling financial markets. It is likely to cause a surge in short-term borrowing costs because investors would demand a premium to buy debt that could be invalidated by a court.The Moody’s Analytics economist Mark Zandi modeled such a situation this year and found it would create short-term economic damage but long-term gains if courts upheld the constitutional interpretation — by removing the threat of future brinkmanship over the limit.“The extraordinary uncertainty created by the constitutional crisis leads to a sell-off in financial markets until the Supreme Court rules,” Mr. Zandi wrote in March. Economic growth and job creation would be dampened briefly, he added, “but the economy avoids a recession and quickly rebounds.”Obama administration officials considered — and quickly discarded — the constitutional theory when Republicans refused to raise the limit in 2011 unless the president agreed to spending cuts. Treasury lawyers never issued a formal opinion on the question, and they have not yet this year, department officials said this week.But in a letter to the editor of The New York Times in 2011, George W. Madison, who was Treasury’s general counsel at the time, suggested that department officials did not subscribe to the theory. He was directly challenging an assertion by the constitutional law professor Laurence H. Tribe, who wrote in an opinion essay in The Times that Treasury Secretary Timothy F. Geithner had pushed to embrace the 14th Amendment interpretation, which Mr. Tribe opposed.“Like every previous secretary of the Treasury who has confronted the question,” Mr. Madison wrote, “Secretary Geithner has always viewed the debt limit as a binding legal constraint that can only be raised by Congress.” 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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    House G.O.P. Eyes Rescinding Unspent Covid Money as Part of Its Fiscal Plan

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    Estimates put the amount of leftover money between $50 billion and $70 billion. But even if Republicans could claw it back, it would not make much of a dent in the deficit.WASHINGTON — House Republicans demanding spending cuts in exchange for raising the nation’s debt limit have rallied around a seemingly straightforward proposal: recalling billions of dollars in coronavirus relief funds that Congress approved but have not been spent.Top Republicans regard the idea of rescinding unspent pandemic emergency money — an amount estimated to be between $50 billion and $70 billion — as an easy way to save money while avoiding more politically perilous options like cutting funding for popular federal programs. Their focus on the idea reflects how, after toiling unsuccessfully for months to unite their rank and file around a fiscal blueprint, G.O.P. leaders have become acutely aware that they have few options for doing so that could actually pass the House.On Wednesday, Speaker Kevin McCarthy highlighted the measure when he finally unveiled House Republicans’ proposal to raise the debt limit for one year in exchange for a series of spending cuts and policy changes. The party plans to vote on the legislation next week.“The American people are tired of politicians who use Covid as an excuse for more extreme inflationary spending,” Mr. McCarthy said in a speech on the House floor. “If the money was authorized to fight the pandemic, what was not spent during the pandemic should not be spent after the pandemic is over.”But going after the leftover money scattered across the patchwork of government programs used to dole out the relief funding — dozens of different accounts — is easier said than done.And even if House Republicans can find a way to identify and get their hands on the comparatively small sums of leftover money, it would do little to shrink the nation’s $1.4 trillion deficit. Additionally, the federal budget analysts who calculate the deficit have already accounted for the fact that some of the money Congress allocated for pandemic relief programs will likely never be spent.House Republicans have identified the move as just one way to rein in federal spending, which they say must be done in exchange for their votes to raise the debt ceiling, which is expected to be breached as early as June.But the challenges around what has widely been considered one of the simplest options underscore how difficult it will be for the party to meet the lofty goals Republican leaders laid out at the beginning of the year. They have already abandoned their aspiration of balancing the federal budget in 10 years and have been unable to reach consensus on freezing spending levels and other cuts that would shave down the deficit without touching Medicare or Social Security.Jeenah Moon for The New York TimesOver the span of two years and six laws, Congress approved about $4.6 trillion in federal spending to help the nation respond to and recover from the coronavirus pandemic. While most of that money has already been spent, either by federal agencies or state or local governments, tens of billions of dollars have yet to be earmarked for specific use.An internal document circulated by House Republican leaders laying out a draft of their fiscal demands in exchange for raising the debt limit until May 2024 estimated that there is $50 to $70 billion in leftover federal coronavirus relief funds scattered across federal agencies and programs. The Government Accountability Office reported in February that there was about $90 billion remaining.That money is spread across dozens of programs, and many agencies are still doling out money, including the Health and Human Services Department, the Department of Veterans Affairs and the Transportation Department.The bulk of it is intended for grants to health care providers, medical care for veterans, pension benefits and aid for public transit agencies that saw ridership levels plummet during the pandemic. Although Biden administration officials expect much of the remaining funds to be spent eventually, officials believe some programs with leftover money are largely over, including one designed to help aircraft manufacturers pay for compensation costs during the pandemic, which had about $2.3 billion left as of January.The funds could be unspent for various reasons. Transit agencies could already be using some to fund operations, but may not have submitted reimbursement requests to the federal government because they have more than a year left to spend the money. Funds for public health have been set aside for research, vaccine distribution and refilling stockpiles of personal protective equipment. A program that provides assistance to financially troubled pension plans is accepting applications through 2026 because of its extensive review process.Economists and policy researchers said rescinding the unspent funding would help trim the deficit — but only by a relatively small amount.Even if lawmakers were able to rescind, for example, $70 billion in relief funds, it likely would not result in a $70 billion reduction of the deficit, according to economic researchers. That is because researchers at Congress’s nonpartisan Congressional Budget Office who project the deficit have already assumed that not all pandemic relief funds would be spent and factored that into their calculations.Douglas Holtz-Eakin, the president of the conservative American Action Forum and a former C.B.O. director, said it would “make good sense” to rescind unspent relief funds if there were a substantial amount left and they were not needed, but the total savings would be relatively scant. He argued that it would be more effective for lawmakers to instead focus on slowing the growth of benefit programs such as Social Security or Medicare.“If you’re genuinely worried about the fiscal future and the unsustainable nature of the federal budget, good, but this won’t solve any of those problems,” Mr. Holtz-Eakin said. “This is a one-time reduction in spending that looks backward, not forward, and the real issues are in front of us.”Marc Goldwein, the senior vice president at the Committee for a Responsible Federal Budget, a nonpartisan fiscal watchdog group, said the federal government should pursue some of the relief money that is not being used and try to recoup funds by investigating cases of potential fraud, though it would be a “little too late” now.“We shouldn’t have a bunch of money sitting out there that’s not being used if it’s not needed, but we just shouldn’t expect much budget savings from it,” Mr. Goldwein said.The White House has pushed back on the proposal and signaled that it would not support a move to rescind a significant amount of the funds.Gene Sperling, a senior White House adviser, said that about 98 percent of the funding in the $1.9 trillion American Rescue Plan has already been spent or is “on the train to go out to people and places as it was specifically intended to by the law.”Rescinding the unspent funds, he said, would “lead to significant pain for veterans, retirees [and] small businesses.”“This is a one-time reduction in spending that looks backward, not forward, and the real issues are in front of us,” said Dr. Douglas Holtz-Eakin, the president of the conservative American Action Forum and a former C.B.O. director.Stefani Reynolds for The New York TimesCongressional negotiators have previously attempted to offset the costs of other bills by rescinding unspent Covid money provided to state and local governments, including last year, when Democrats tried to cover the cost of a $15 billion pandemic relief bill in part by rescinding funding earmarked for state and local relief funds.But a revolt from Midwestern House Democrats — whose states would have been disproportionately affected by the clawbacks and whose governors yowled at the idea of being stripped of money they had already planned to use — ultimately led party leaders to drop the measure altogether.The episode served as a warning to state and local leaders, and ahead of the debt limit fight, some prominent mayors began publicly warning their peers to spend down the federal funds available to them quickly.Lawmakers last year also sought to offset the costs of the stand-alone pandemic aid bill by raiding the $2.3 billion in unspent money from the Transportation Department’s program to help aircraft manufacturers cover the costs of their employees’ wages during the pandemic. The idea was ultimately scuttled after the revolt around rescinding state and local funds. 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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    Republican Economists Line Up Behind Biden Nominee

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    Jared Bernstein, the president’s choice for chair of the Council of Economic Advisers, won praise for his work that led to a provision in the Trump tax cuts in 2017.WASHINGTON — Nearly every living economist who led the White House Council of Economic Advisers in a Republican administration — including the three chairs under President Donald J. Trump — signed a letter urging Congress to confirm President Biden’s new nominee to lead the council, Jared Bernstein.The letter, obtained by The New York Times, praises Mr. Bernstein for engaging with economists across ideological lines and for his work drafting the original proposal for the opportunity zones program that was included in the 2017 tax package that Mr. Trump signed into law.The Senate Banking Committee is scheduled to hold a hearing on Mr. Bernstein’s nomination on Tuesday. Democrats had worried about his chances of clearing a committee vote after Senator John Fetterman, Democrat of Pennsylvania, was hospitalized in February for treatment of depression. They had stepped up efforts to court Republican senators to support Mr. Bernstein. Mr. Fetterman has since returned to work in the Senate.Mr. Bernstein has been a member of the council since the start of Mr. Biden’s administration. The president tapped him to succeed Cecilia Rouse, who stepped down at the end of last month to return to her post at Princeton University. Before then, Mr. Bernstein was an adviser to Mr. Biden when he was the vice president, a longtime fixture at liberal think tanks in Washington and a frequent sparring partner with conservative economists on cable news.He also worked with Kevin Hassett, a conservative economist who went on to head the council under Mr. Trump, to draft a white paper for the Economic Innovation Group think tank about a novel effort meant to steer investment to impoverished parts of the United States. Those were the so-called opportunity zones, which were included in the 2017 tax law.The program designates areas in every state where investors in real estate, operating businesses or other projects are eligible for significant tax advantages, including potentially not having to pay capital gains taxes on profits from their investments in those areas.Republicans have championed the zones since the law was passed. Some critics, including in Washington think tanks, have criticized them for delivering investments to some areas that were already gentrifying rapidly. Recent research has shown a widening share of zones attracting investment in the years since they were established.Mr. Hassett, who spearheaded the letter to members of the Banking Committee on Mr. Bernstein’s behalf, and his fellow former heads of the council cited the idea for the zones as one example of Mr. Bernstein’s outside-the-box thinking on economics.Mr. Bernstein has “established a reputation for producing informative, data-driven analysis and developing creative policy ideas,” the former heads of the council wrote.Along with Mr. Hassett, two other acting heads of the council under Mr. Trump signed the letter: Tomas Phillipson and Tyler Goodspeed. Other signatories included Michael J. Boskin, who led the council under President George H.W. Bush, and three chairs under President George W. Bush: Ben S. Bernanke, N. Gregory Mankiw and R. Glenn Hubbard.Mr. Hassett said he had been unable to reach the only other living past chair of the council under a Republican, Alan Greenspan, to ask him to sign the letter.In an interview, Mr. Hassett praised Mr. Bernstein’s collegiality and suggested that he would continue a bipartisan tradition of council chairs seeking advice from their predecessors from both political parties.“I disagree with Jared about a lot, and Jared and I have been disagreeing about things for 20 years,” Mr. Hassett said. “But he really is a fundamentally good person who tries to figure things out with an open mind, and who changes his mind.” More