McCarthy Calls for Spending Cuts to Raise Debt Ceiling

On Sunday, new House Speaker Kevin McCarthy (R-Calif.) said he would like to negotiate with Pres. Biden on the raising of the debt ceiling while renewing his calls to cut spending. This comes as the US Dept. of the Treasury says the government may not be able to pay its bills by the summer.

McCarthy Calls for Spending Cuts to Raise Debt Ceiling
Image credit: Reuters

Facts

  • On Sunday, new House Speaker Kevin McCarthy (R-Calif.) said he would like to negotiate with Pres. Biden on the raising of the debt ceiling while renewing his calls to cut spending. This comes as the US Dept. of the Treasury says the government may not be able to pay its bills by the summer.
  • In a Fox News interview, McCarthy said, “I want to sit down with him now so there is no problem," referring to Biden. He added that there can be spending cuts without hurting key entitlement programs.
  • Last Friday, Treasury Sec. Janet Yellen warned that the US would likely reach its $31.4T statutory limit on Jan. 19. Yellen wrote a letter to McCarthy saying the Treasury can take “extraordinary measures” to prevent defaulting on obligations but urged Congress to raise the debt ceiling.
  • Defense spending could be a source of the cuts with some GOP representatives warning against cutting $75B from the defense budget. McCarthy said the cuts would return spending close to 2022 levels of $800B and cut from the 2023 budget of $857B.
  • The last time the US hit its debt ceiling was in 2011 which resulted in sinking stock prices and the first time the US government had its credit rating downgraded. Markets currently suggest that Wall Street thinks the debt crisis will be resolved.
  • White House Press Secretary Karine Jean-Pierre responded to McCarthy’s call for negotiations by saying Congress must raise the debt limit “without conditions.” She added that “We [Biden admin.] will not be doing any negotiation over the debt ceiling.”

Sources: Wall Street Journal, Reuters, MSN, NPR Online News, and Axios.

Narratives

  • Republican narrative, as provided by Townhall. Speaker McCarthy is right when he says that the US cannot just spend into oblivion and recklessly raise its credit limit. This country wastes so much money in ways that the American people don’t even see, and the GOP was elected to its majority on a mandate to bring fiscal responsibility back to Washington.
  • Democratic narrative, as provided by MSNBC. Republicans are using the US economy as its pawn in an extortion scheme to get whatever they want. The US is risking its reputation because the Republican Party does not care if it crashes the economy. If the GOP wants to cut public spending, it can do it the legislative way.

Predictions