WASHINGTON (AP) — The federal government is on track to max out on its $31.4 trillion borrowing authority as soon as this month, starting the clock on an expected standoff between President Joe Biden and the new House Republican majority that will test both parties’ ability to navigate a divided Washington, with the fragile global economy at stake.
Once the government bumps up against the cap — it could happen any time in the next few weeks or longer — the Treasury Department will be unable to issue new debt without congressional action. The department plans to deploy what are known as “extraordinary measures” to keep the government operating. But once those measures run out, probably mid-summer, the government could be at risk of defaulting unless lawmakers and the president agree to lift the limit on the U.S. government’s ability to borrow.
The expected showdown over the debt limit would be a stark display of the new reality for Biden and his fellow Democrats, who enjoyed one-party control of Washington for the past two years. It would presage the challenges to come in achieving even the modest ambitions that Democrats are bringing to the task of legislating in a divided Capitol.
The White House has insisted that it won’t allow the nation’s credit to be held captive to the demands of newly empowered GOP lawmakers. But the concessions made by new House Speaker Kevin McCarthy in his arduous path to securing the job raise questions about whether he has the ability to cut any kind of deal to resolve a standoff.
McCarthy, who secured his post after 15 rounds of voting and major compromises with conservative members of his caucus, has said that his fellow Republicans will only agree to increase the debt ceiling in return for spending cuts of unspecified magnitude. And a new rule that allows any lawmaker to trigger a vote for McCarthy’s removal could make even the most urgent of votes a dicey matter.
McCarthy said he’s spoken with Biden about the coming debt ceiling and told the president “it doesn’t have to come to that” — meaning a federal government shutdown over spending levels.
“This is our moment to change the behavior,” McCarthy said Tuesday on Fox News Channel’s “Hannity.”
But the new speaker stopped short of saying Republicans now in charge of the House would go so far as to refuse to pass the annual spending bills needed to fund the government, as happened more than a decade ago during an earlier debt ceiling showdown in Congress.
“We’re going to look at every single dollar spent,” McCarthy said.
The stakes are treacherous. Past forecasts suggest a default could instantly bury the country in a deep recession, right at a moment of slowing global growth as the U.S. and much of the world face high inflation because of the coronavirus pandemic and Russia’s invasion of Ukraine.
The White House has ruled out executive action to stave off a default.