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    Debt Ceiling: U.S. Could Run Out of Cash by June 1, Yellen Warns

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    President Biden said he would meet with lawmakers on May 9 to discuss ways to avoid a default.WASHINGTON — Treasury Secretary Janet L. Yellen said on Monday that the United States could run out of money to pay its bills by June 1 if Congress does not raise or suspend the debt limit, putting pressure on President Biden and lawmakers to reach a swift agreement to avoid defaulting on the nation’s debt.The more precise warning over when the United States could hit the so-called X-date dramatically reduces the projected amount of time lawmakers have to reach a deal before the government runs out of money to pay all of its bills on time.The new timeline could accelerate negotiations between the House, Senate and Mr. Biden over government spending — a high-stakes standoff between the president and the House Republicans who have refused to raise the limit without deep spending cuts attached.In response to Ms. Yellen’s new timeline, Mr. Biden on Monday called the top four leaders in Congress to ask for a meeting on May 9 to discuss fiscal issues. The president reached out to Speaker Kevin McCarthy and Representative Hakeem Jeffries of New York, the minority leader, along with Senator Chuck Schumer of New York, the majority leader, and Senator Mitch McConnell of Kentucky, the minority leader.Economists have warned that failure to raise the debt limit, which caps the total amount of money the United States can borrow, threatens to rock financial markets and throw the global economy into a financial crisis.Because the United States runs a budget deficit — meaning it spends more money than it takes in — it must borrow huge sums of money to pay its bills. In addition to paying Social Security benefits, along with salaries for the military and government workers, the United States is also required to make interest and other payments to the bondholders who own its debt.The Treasury Department had previously projected that it could run out of cash sometime in early June, but the new estimate raises the alarming prospect that the United States could be unable to make some payments, including to bondholders, in a matter of weeks.“Given the current projections, it is imperative that Congress act as soon as possible to increase or suspend the debt limit in a way that provides longer-term certainty that the government will continue to make its payments,” Ms. Yellen said in a letter to Congress.The Congressional Budget Office also warned on Monday that time was running out more quickly than previously thought. The nonpartisan budget office said tax receipts from income payments that were processed in April were smaller than it had anticipated and that future tax payments were unlikely to have much impact.“That, in combination with less-than-expected receipts through April, means that the Treasury’s extraordinary measures will be exhausted sooner than we previously projected,” Phillip Swagel, the C.B.O. director, wrote in an analysis posted on the agency’s website.White House officials had not expected the date of possible default to arrive so soon, and the accelerated timetable could scramble the president’s approach to the potential crisis.Mr. Biden has continued to insist he will not negotiate directly over the limit, saying Congress must raise the cap without conditions. The newly compressed calendar leaves little time for the president and congressional leaders to find agreement on raising the limit. Mr. McCarthy is traveling in the Middle East this week. Later this month, Mr. Biden is scheduled to attend the Group of 7 nations leaders’ summit in Japan, then travel on to Australia for a summit with the leaders of Japan, India and Australia.House Republicans passed legislation in April that would raise the debt limit in exchange for deep spending cuts and roll back recent climate legislation that Democrats passed along party lines. Mr. Biden has blasted that bill, saying it would hurt working families while benefiting the oil and gas industry, and he has accused Republicans of putting America’s economy on the line.On Monday, the president called on Republicans “to make sure the threat by the Speaker of the House to default on the national debt is off the table.”“For over 200 years, America has never, ever, ever failed to pay its debt. To put in the capital — in colloquial terms, America is not a deadbeat nation. We have never, ever failed to meet the debt,” Mr. Biden said.Republican Senators reacted to the news on Monday by emphasizing the onus was now on Mr. Biden to negotiate to avoid economic calamity.“It is very scary,” Senator Joni Ernst of Iowa and a member of Republican leadership said of the looming crisis. “President Biden needs to step it up and get to the table. Kevin McCarthy and the folks in the house, they did their part.”Some expressed optimism that the approaching deadline would force action.“Washington’s at its best when it has a deadline to respond to,” Senator Thom Tillis, Republican of North Carolina, said.Mr. Schumer and Mr. Jeffries urged Republicans to lift the limit immediately with no strings attached. “We do not have the luxury of waiting until June 1 to come together, pass a clean bill to avoid a default and prevent catastrophic consequences for our economy and millions of American families,” the lawmakers wrote in a joint statement on Monday. While there is bipartisan agreement that the nation needs to find a way to reduce the gap between when it spends and what it collects, even the most ardent supporters of fiscal reform say the debt limit must be raised.“We need to raise the debt limit as soon as possible, without drama and without serious risk of default,” said Maya MacGuineas, the president of the Committee for a Responsible Federal Budget. “To threaten default or drag one’s feet is the height of irresponsibility. Lawmakers need to commence serious discussions immediately.”The possibility of a default by June 1 could compel lawmakers to agree to a short-term increase or suspension of the debt limit to provide more time for negotiations. But even that temporary salve is far from assured given competing factions within the Republican Party.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. Ms. 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.Tax receipts depend on a complicated array of factors such as the jobless rate, wages and whether taxpayers submit their returns on time. On Monday, the Treasury secretary underscored the challenges of predicting the default date, noting that the new estimate was based on currently available data that is inherently variable, such as tax payments from individuals.“The actual date that Treasury exhausts extraordinary measures could be a number of weeks later than these estimates,” Ms. Yellen said.A Treasury Department official said that, as of April 30, the government had a cash balance of about $300 billion. Ms. Yellen’s ability to delay a default will depend in part on how much tax revenue comes into the federal government this spring.Payments for the 2022 tax year are still arriving. Goldman Sachs economists projected last week that by the second week of June, the Treasury Department could have about $60 billion of cash remaining, which would allow the government to keep making its payments until late July.Some budget analysts have suggested that winter storms could complicate the Treasury Department’s ability to delay a default. Severe storms, flooding and mudslides in California, Alabama and Georgia this year prompted the Internal Revenue Service to push the April 18 filing deadline to October for dozens of counties.The I.R.S. also gave those affected areas more time to make contributions to retirement and health savings accounts, potentially affecting their taxable income.Ms. Yellen has already been taking steps to ensure that the federal government has sufficient cash on hand.Earlier this year, she 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.Ms. Yellen said on Monday that the Treasury Department was suspending the issuance of State and Local Government Series Treasury securities to help manage the risks associated with the debt limit. She lamented that the move would deprive state and local governments of an important tool to manage their finances.Brinkmanship over the debt limit has revived debates over how far the executive branch can go to avoid a default. Ms. Yellen, however, has dismissed the notion that she could prioritize certain payments or mint a platinum coin worth $1 trillion to ensure that the United States remains solvent.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, some analysts say the market reaction would need to be much more pronounced to force a fast deal.In a separate report issued by the Treasury Department on Monday about the risks facing the economy, Eric Van Nostrand, the acting assistant secretary for economic policy, laid out the dire consequences of failing to raise the debt limit.“A default by the U.S. government — including the failure to pay any of the United States’ obligations — would be an economic catastrophe, sparking a global downturn of unknown but substantial severity,” Mr. Van Nostrand said.Catie Edmondson More

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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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    Commerce Dept. Outlines Its Bid to Fund Cutting-Edge Chip Research

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    The Biden administration announced its strategy for the National Semiconductor Technology Center, a string of facilities aimed at propelling U.S. innovation.WASHINGTON — The Biden administration outlined plans on Tuesday to propel research on the type of cutting-edge microchips needed to power computers, cars and other devices, saying it would establish a new national organization with locations in various parts of the United States.The Commerce Department, which is in charge of the administration’s efforts to revitalize the American chip industry, said its new National Semiconductor Technology Center would bring together companies, universities and others to collaborate on next-generation chip technology. The organization would include a string of research centers, the locations of which have yet to be chosen, and aim to be operational by the end of this year.The organization would help “regain America’s leadership in research and development and technologies of the future, and importantly, make sure we stay there for decades to come,” Gina Raimondo, the commerce secretary, said in a briefing Monday.“It’s a place where industry and academia and start-ups and investors can come together to solve the biggest, grandest challenges and set priorities,” she added.The plans are part of the Biden administration’s effort to reinvigorate semiconductor manufacturing and ensure that the United States has a steady supply of chips necessary to feed its factories and support its national defense. The Commerce Department has been charged with doling out $50 billion to revitalize the industry, including $11 billion devoted to research and development.The technology center is expected to be central to that effort. Some of its locations would be capable of end-to-end manufacturing of new chip designs, while others would focus on experimenting with new materials and equipment, or with new ways of putting chips together to make them more powerful, Ms. Raimondo said.Laurie Giandomenico, the vice president and chief acceleration officer of MITRE, a nonprofit organization that operates federally funded research centers, called the $11 billion investment by the United States “pretty significant,” given that the semiconductor industry has in past years spent about $70 billion on research and development globally.The challenge, she said, would be to ensure that the money was spent to encourage collaborative research to solve the industry’s biggest problems, not the “siloed innovation” now carried out by chip firms that carefully guard their creations from competitors.“It should be on areas that no one company can solve alone,” she said.Companies, universities, lawmakers and local governments have been lobbying the administration to set up an outpost of the new organization in their area. Ms. Raimondo emphasized that the organization would be an independent “trusted” player, with board members appointed by a separate selection committee and strict controls for protecting intellectual property.One of the organization’s primary goals, Ms. Raimondo said, would be making it easier and less expensive for start-ups and other new entrants to develop and commercialize new chip technologies.“We want to cut in half the projected cost of moving a new chip from concept to commercialization over the next decade,” she said.Chris Miller, the author of “Chip War,” which chronicles the industry’s development, said it was comparatively easy for a researcher to develop a new idea for a chip in a laboratory. But given the high cost of producing chips, researchers can have a hard time getting their inventions manufactured.Designing an advanced chip, which may have tens of billions of transistors, can cost hundreds of millions of dollars, according to analysts. The latest systems for defining the smallest circuitry on wafers cost more than $100 million each, while the new factories called “fabs” that make advanced chips can cost $10 billion to $20 billion.“The big fabs are interested in producing 100 million chips for an iPhone, not 10 chips for a professor at M.I.T.,” Mr. Miller said.Venture capitalists also often shy away from investing in chip start-ups because they require more initial funding than other kinds of tech companies and more time to generate a return on that investment.To help address some of these issues, the government’s technology center will establish an investment fund to support start-ups, and provide manufacturing facilities for small players to experiment with new technologies.“I see a world where the U.S. can actually revitalize this microelectronics industry because we could bring down the costs of doing a chip start-up by a factor of five to a factor of ten,” said Gilman Louie, a tech investor and chief executive of a nonprofit investment organization called America’s Frontier Fund.The center’s research priorities are expected to be refined in the coming months. But the Commerce Department specified several areas it would focus on, including advancing the technology for analyzing the microscopic components of chips and setting technical standards for new kinds of chip packaging.As progress slows in squeezing ever-smaller transistors onto each piece of silicon, many companies are now breaking up big products into smaller “chiplets” that are placed side by side or stacked on top of one another.The Commerce Department said that setting new standards for these practices would pave the way for the creation of marketplaces in which companies can assemble new products using chiplets from multiple vendors. 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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    Julie Su Faces Senate Fight as Labor Dept. Nominee

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    Business groups are critical of the candidate, Julie Su, and key senators are wavering. The administration’s labor policies are central to the clash.Just over a year ago, the White House suffered an embarrassing defeat when three Democratic senators voted against advancing President Biden’s pick to run a key labor agency, dealing a blow to the administration’s pro-labor agenda.On Thursday, the administration and Senate Democrats tried to ensure that history wouldn’t repeat itself, only this time the stakes were even higher.The occasion was the Senate confirmation hearing of Julie Su, who has served as acting labor secretary since March 11 and is Mr. Biden’s choice to fill the job permanently.As with last year’s confirmation battle, over the government’s top enforcer of minimum wage and overtime laws, Ms. Su’s nomination represents a broader fight over workplace regulation, with business groups chafing against Mr. Biden’s push to strengthen unions and increase workers’ rights and benefits.And once again, there are signs that the administration may fall short, with at least two Democrats and an independent wavering over whether to support Ms. Su. A vote of the Senate Committee on Health, Education, Labor and Pensions is scheduled for next week.In her testimony before the committee on Thursday, Ms. Su largely associated herself with the record of her predecessor, Martin J. Walsh — whom some Republicans and business groups have held up as pragmatic, and whom Ms. Su served as deputy.She said she would seek employers’ advice on improving worker safety, and described the reverence she gained for small business owners after watching her immigrant parents operate a dry cleaner and a pizza franchise.Democrats argue that Ms. Su, who has strong backing from labor unions, would be a strong worker advocate and enforcer of provisions like the minimum wage, safety regulations and restrictions on child labor, as well as the right to join unions.“You need in terms of a bully pulpit a secretary of labor who makes clear that she is going to stand with working families, and she is prepared to use the powers of the office to take on corporate interests,” Senator Bernie Sanders, the Vermont independent who heads the labor committee, said in an interview on Wednesday.If confirmed, Ms. Su is also likely to lead the Biden administration’s effort to expand overtime pay for salaried workers. The administration is expected to propose a rule substantially raising the salary threshold — currently about $35,500 — below which most workers automatically qualify for overtime.Those questioning the merits of Ms. Su’s nomination have cited her record as California labor secretary and her support for the state’s labor regulations to suggest that she is a threat to certain industries.When Senator Bill Cassidy of Louisiana, the committee’s ranking Republican, pressed at the hearing for assurances that she wouldn’t pursue regulations that could harm the franchise business model, Ms. Su reminded him that her parents had been franchise owners and suggested that their businesses “were the reason my sister and I were able to go to college.”President Biden with Ms. Su and her daughters at the White House in March.Yuri Gripas for The New York TimesThe Flex Association, a trade group representing several prominent gig economy companies, has called attention to her support for a California measure that would have effectively classified gig workers as employees, requiring companies like Uber and DoorDash to pay them a minimum wage and overtime and to contribute to unemployment insurance. (The law was later scaled back through a ballot measure.)The group circulated an email on Wednesday expressing concern that Ms. Su “does not appreciate” that classifying gig workers as employees could cause many to lose access to such work.Some labor experts have disputed this claim, and a rule being finalized by the Labor Department on how to classify workers takes a different approach from the California measure. But Kristin Sharp, the Flex Association’s chief executive, said that the labor secretary would have discretion over how to carry out the new rule and that “we want to make sure that person is objective in his or her views of nontraditional work.” The group has not taken an official stand on Ms. Su’s nomination.Other business groups have cited what they say is Ms. Su’s support for a California law setting up a council to issue health and safety regulations for fast-food restaurants and create an industry-specific minimum wage.“She has supported policies that directly attack our model,” said Matthew Haller, president of the International Franchise Association, alluding to the fast-food measure. A ballot measure next year will allow voters to decide whether to nullify the law. It is unclear from a video the groups point to that she has specifically supported the law.And Republicans and a variety of business groups have highlighted accusations that California issued billions in fraudulent unemployment insurance claims while she was the state’s labor secretary in 2020. At the hearing, Mr. Cassidy recounted a report of a rapper securing hundreds of thousands of dollars in fraudulent funds in California and boasting about it on a video.Ms. Su has conceded that a large number of claims were improper. Mr. Sanders pointed out that the overpayments reflected features of a federal program that the state merely administered, and that other states paid out a far higher percentage of fraudulent claims.In recent weeks, a coalition of business groups has erected billboards and run ads critical of Ms. Su in the home states of potentially decisive senators, such as Joe Manchin of West Virginia, Kyrsten Sinema of Arizona and Jon Tester of Montana, all of whom have so far refrained from backing her nomination.The effort is reminiscent of a business-backed campaign against David Weil, whom Mr. Biden tapped to head the Labor Department’s Wage and Hour Division in 2021, and who had led the agency during the Obama administration. That nomination died on the Senate floor last year after Mr. Manchin, Ms. Sinema and a third Democratic senator, Mark Kelly of Arizona, declined to support him. (Ms. Sinema has since become an independent.)Mr. Weil and his backers lamented the muted response from progressive groups on his behalf. This time, labor unions and other supporters are making a more determined push. The A.F.L.-C.I.O. president, Liz Shuler, announced on Wednesday that a coalition of unions would make a “six-figure buy” of ads backing Ms. Su in states like Arizona and West Virginia and would urge local union members to contact their senators.The United Mine Workers of America, which is influential in Mr. Manchin’s home state and sat out the fight over Mr. Weil, endorsed Ms. Su last week.Emilie Simons, a spokeswoman for the president, said that the White House felt confident about Ms. Su’s confirmation and that it was working hard for every vote. She said that Ms. Su had offered to meet with every senator on the labor committee and that she had met with senators from both parties.At a Senate Democratic lunch on Tuesday, Senator John Hickenlooper of Colorado, regarded as one of the more moderate Democrats on the labor committee, spoke up on Ms. Su’s behalf, noting her work on expanding apprenticeships as deputy secretary.Mr. Hickenlooper said in an interview that he had watched Mr. Tester, his undecided colleague from Montana, as he delivered his remarks and that he was “hopeful that we’ll get him.”But Mr. Manchin and Ms. Sinema may be harder to wrangle, according to veterans of such nomination fights. Mr. Manchin, who is up for re-election next year in a Republican-leaning state, has yet to meet with Ms. Su. Ms. Sinema is likely to face a challenge from a labor-backed candidate in her re-election bid, giving her little incentive to accommodate unions.Larry Cohen, a former president of the Communications Workers of America who advises multiple unions and has helped secure the nomination of many pro-labor officials over the years, said that generating popular support for Ms. Su in Arizona and West Virginia might help her cause with Mr. Manchin and Ms. Sinema.But, he added, “I think there is good reason to be worried about both of them.”Jonathan Weisman 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