The House Ways and Means Committee is convening on Thursday to consider a proposal that seeks to prioritize federal spending in the event Congress can’t resolve the debt ceiling crisis ahead of the summer deadline.[0] Titled the Default Prevention Act, Republicans state that this piece of legislation would be a safeguard to stop defaulting and, in turn, avoid disrupting the economy.[1]
The bill, introduced by Rep. Tom McClintock (R-CA), would exempt principle and interest payments on the debt and Medicare and Social Security spending from the debt ceiling once the ceiling is reached.[2] House Republicans have pushed for the measure, citing the potential catastrophic results that could occur if a debt ceiling deal can’t be reached.[3]
Moody’s Analytics released a report on Tuesday regarding the potential consequences if the Republicans are unable to come to an agreement to increase the debt ceiling before the US is unable to fund its expenses, which could be as soon as July.[3] President Biden and congressional Democrats have thus far refused to negotiate on spending cuts as part of a deal to raise the borrowing limit, something the House GOP majority has insisted on as part of a deal.[2]
Mark Zandi, chief economist at Moody’s, testified at a Senate Banking, Housing and Urban Affairs Committee hearing that the only real option is for lawmakers to increase, suspend or eliminate the debt limit.[4] Failing to do so, he said, would be chaotic for financial markets, push the country into a recession and cause the Treasury to delay payments.[5]
Warren said if Congress fails to act on the debt limit, it will be bad, but if House Republicans get their way with spending cuts, it will be a “disaster, plunging our economy into a recession and putting more than 2.5 million people out of work.”[3]
President Biden is proposing to trim the federal budget deficit by close to $3 trillion over the next 10 years.[6] He is proposing to reverse the Trump tax cut by raising the top tax rate to 39.6 percent, increasing the corporate tax to 28 percent, raising the tax on stock buybacks from 1 percent to 4 percent, and increasing the Medicare tax rate on income above $400,000 from its current rate of 3.8 percent to 5 percent.
Apart from suspending the debt limit for about four months, Congress passed a “no budget, no pay” plan, barring lawmakers from getting paychecks if they didn’t pass a budget by mid-April of that year.[7]
0. “Republicans look to advance bill to forestall default amid debt ceiling battle” Washington Examiner, 8 Mar. 2023, https://www.washingtonexaminer.com/news/house/republicans-look-advance-bill-default-debt-ceiling-battle
1. “Democrats pan GOP’s ‘Pay China First legislation’ on debt prioritization” Washington Examiner, 9 Mar. 2023, https://www.washingtonexaminer.com/news/house/democrats-pan-pay-china-first-strategy-debt-prioritization
2. “GOP, Dems clash over Republican plan to avoid debt default: ‘Economic chaos’” Fox Business, 9 Mar. 2023, https://www.foxbusiness.com/politics/gop-dems-clash-republican-plan-aoid-debt-default-economic-chaos
3. “2.6 million Americans could lose jobs in potential debt ceiling deal: report” Business Insider, 7 Mar. 2023, https://www.businessinsider.com/will-there-be-a-recession-debt-ceiling-increase-job-losses-2023-3
4. “Chief Economist Issues Dire Warning About Looming Recession” Newsweek, 7 Mar. 2023, https://www.newsweek.com/chief-economist-issues-dire-warning-looming-recession-1786131
5. “Debt limit action needed by mid-August, analysts warn” Roll Call , 7 Mar. 2023, https://www.rollcall.com/2023/03/07/debt-limit-action-needed-by-mid-august-analysts-warn/
6. “Republicans are threatening to default on the US national debt. Don’t believe them” The Guardian, 9 Mar. 2023, https://www.theguardian.com/commentisfree/2023/mar/09/republicans-debt-tax-cuts-biden
7. “House Ways and Means Committee Debates Bill to Prevent Default Over Debt Limit” The Epoch Times, 9 Mar. 2023, https://www.theepochtimes.com/house-ways-and-means-committee-debates-bill-to-prevent-default-over-debt-limit_5111461.html