WASHINGTON (Reuters) – A bipartisan group of U.S. lawmakers is preparing a plan to defuse a looming crisis over the nation’s debt ceiling by changing it from a set dollar amount a percentage of national economic output, the group’s top Republican said on Sunday.
The proposal would replace Washington’s current federal debt ceiling – currently set at $31.4 trillion – with a rule that will as an alternative limit debt to a share of national economic output, said U.S. Representative Brian Fitzpatrick, the Republican co-chair of the moderate Problem Solvers Caucus.
Fitzpatrick – appearing on Fox News Sunday with Democratic Problem Solvers co-chair Josh Gottheimer – said Republican House of Representatives Speaker Kevin McCarthy can be taking the lead in negotiations with the White House over the debt ceiling. But he and Gottheimer were “putting meat” on the bones of their proposal to assist avoid a crisis.
“We’re just going to supply up … a possible bridge constructing solution,” Fitzpatrick said.
The U.S. government on Thursday got here near its statutory borrowing limit. The Treasury Department warned that its extraordinary money management measures could only allow the federal government to pay all its bills through early June, at which point the nation could possibly be vulnerable to failing to satisfy its obligations, including on its debt securities.
House Republicans need to use that critical deadline to force spending cuts, while the White House has said there ought to be no negotiations over lifting the debt limit. Republicans’ narrow House majority has given outsized influence to the party’s most hardline voices.
Washington’s debts are currently similar to about 125% of 1 12 months of production across the U.S. economy. Fitzpatrick said the proposal he’s working on with Gottheimer would force budget cuts on Washington if federal borrowing exceeded a set share of economic output. He didn’t say what that share could be.
Congress’s rules on the debt ceiling are intended to limit growth of the nation’s debt. The measure has not had that effect, as, in practice, Congress has treated the annual budget process — deciding how much money to spend — individually from the debt ceiling, in essence, agreeing to cover the prices of previously approved spending.
The USA is among the many few countries to set a legal limit on borrowing.
Democratic President Joe Biden on Friday said he would “have a discussion” on U.S. debt with McCarthy, who has said he’ll sit down with the president to debate a “responsible” debt ceiling increase.
The White House has said raising the debt ceiling shouldn’t be a negotiation. But some Democrats, including Gottheimer in addition to outstanding Democratic moderates resembling U.S. Senator Joe Manchin, have said the administration needs to interact in a debt ceiling negotiation.
A 2011 standoff over the debt ceiling lead Standard & Poor’s to chop the U.S.’s credit standing, a historic first. Failure to deal with the limit this time could roil global markets and trigger an economic downturn.
Gottheimer said: “I’ve had conversation with the White House just this weekend, and I’m optimistic that they may sit down” to debate the debt ceiling with Republicans.
Biden is hosting Democratic congressional leaders on the White House on Tuesday.
(Reporting by Jason Lange, additional reporting by Leah Douglas; Editing by Scott Malone and Chizu Nomiyama)
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