US House Majority Leader Steve Scalise, Republican of Louisiana, speaks alongside House Republican Conference Chair Representative Elise Stefanik (L), Republican of Latest York, as they speak during a press conference on Capitol Hill in Washington, DC, January 10, 2023.
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House Republican Majority Leader Steve Scalise sidestepped thorny questions Tuesday on whether Congress would allow the U.S. to default on its debt after lawmakers adopted latest rules making it harder to lift federal limits.
The U.S. is perilously near hitting its debt ceiling of about $31.4 trillion, the legal limit set by Congress that curtails how much the federal government can borrow. It includes the whole amount of federal debt outstanding, about $24.5 trillion, in addition to the nearly $6.9 trillion the federal government has borrowed from itself. If the Congress doesn’t soon raise the debt ceiling, it might inevitably trigger a default on U.S. Treasury bonds — an unprecedented event that may plunge the nation into financial crisis.
“America over time occasionally hits the debt ceiling since it’s like a bank card limit,” Scalise, R-La., said at a press conference within the Capitol constructing. He was responding to a reporter who asked him to stipulate what lawmakers agreed to on the debt ceiling and whether he could “guarantee” the U.S. would not default.
“And if you happen to’re going to ask for a rise within the limit, sooner or later in time, you’ve to take a seat down and say why are we hitting the limit? Why are we maxing out the bank card? Because that is the nation’s bank card,” he added.
It should be far more difficult for lawmakers to lift the debt limit under the brand new Congress since House Speaker Kevin McCarthy, R-Calif., agreed to a rules package that requires any increases within the debt limit to be paired with spending cuts. It was one among several concessions he made to a win support from a gaggle of conservative Republicans that had been blocking his speakership.
The debt ceiling debate is already raising questions on Wall Street. Citing McCarthy’s hard-fought battle and 15 rounds of voting, Goldman Sachs economists cited the principles changes as cause for concern on whether Congress would lift the debt ceiling, saying it might likely be a “close call,” they warned investors in a research note Monday.
“The debt limit goes to be an issue,” the report read. “Fiscal deadlines will pose a greater risk this yr than they’ve for a decade.”
The U.S. last raised the debt ceiling in December 2021 by $2.5 trillion. The rise is anticipated to last until not less than July 2023, in accordance with the watchdog group the Committee for a Responsible Federal Budget.
Lifting the debt limit doesn’t authorize any latest spending; it allows the federal government to borrow extra money to cover existing commitments. And for the reason that federal government consistently spends greater than it takes in in tax revenue, lawmakers must periodically raise the debt ceiling. Failing to lift the debt ceiling may lead to a government default on its debt and halt each day operations, causing potential turmoil to markets and the economy.
The last major rift over the debt ceiling was in late 2011, driven by holdout from a newly-elected Republican congressional majority. Though the U.S. ultimately didn’t default on its debt, the havoc led to Standard & Poor’s issuing its first ever downgrade of the federal government’s credit standing.
A Moody’s Analytics report from September 2021 said a default on Treasury bonds could throw the U.S. economy right into a tailspin as bad because the Great Recession. Moody’s projected a 4% GDP decline and the lack of nearly 6 million jobs if the U.S. defaulted.
Within the immediate term, defaulting on the debt could delay Social Security and Medicare advantages, salaries for presidency employees, military personnel and contractors in addition to other spending already authorized by Congress.
The technique of increasing the debt limit was routine for Congress for a long time. Lawmakers have permanently raised, temporarily prolonged or in some way modified the definition of debt limit to avoid a default 78 times since 1960, in accordance with the U.S. Treasury.
More recently, some House Republicans, including McCarthy, have come to make use of it as a negotiating tactic to scale back spending. Scalise used this line of reasoning Tuesday, telling reporters the federal government needed to review how much money it was doling out.
“At the identical time you are coping with the debt limit, you are also putting mechanisms in place so that you just don’t keep maxing it out,” Scalise said, “because if the limit gets raised, you do not go to the shop the following day and just max it out again. You begin determining methods to control the spending problem. And this has been happening for way too long. And we’ll confront this and I believe the American people have called on us to confront this.”
