US lawmakers were set to embark on a 10-day break Thursday, despite failing to agree on raising the nation’s borrowing limit to avert a looming default that could blow up the economy while they are away.
There are seven days until June 1 — the earliest possible point when the government estimates it could run out of money to service its debts — and missed loan repayments would likely spark a recession, roiling world markets.
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But members of the House of Representatives began hitting the road for the Memorial Day recess after their final vote Thursday morning and are not due to return until June 4.
Senators are due back two days before the so-called “x date” but their role would likely be limited to rubber-stamping any deal hammered out between the Republican-led House and Democratic President Joe Biden.
House Speaker Kevin McCarthy said lawmakers would get 24 hours’ notice if they were required to return for a vote, with negotiators representing the Republicans and the White House reportedly closing the gap on their differences.
Republicans are demanding cuts of up to $130 billion with spending next year capped to 2022 levels and have laid out three further pillars for a deal: reform of approval for energy projects, tightened work requirements for benefits claimants, and a clawback of unspent pandemic aid dollars.
– ‘Blowing up the deficit’ –
Democrats reject the proposed cuts and want the Republicans to sign off on a no-strings-attached hike, as they have dozens of times in the past.
Speaking on Fox News Thursday, McCarthy rejected demands for a “clean” bill and added that he would not agree to tax increases on corporations or the rich as an alternative to cuts for reducing the nation’s $31 trillion-plus debt burden.
He pointed to a CNN poll out this week in which 60 percent of respondents said a debt ceiling hike should be accompanied by cuts, although 51 percent of respondents in a new Monmouth University survey said they want the two issues to be de-linked.
“We know where our differences are, and we will continue to be at the table to try to solve this problem,” McCarthy said.
White House chief of staff Jeff Zients suggested Republican protestations over out-of-control government spending were disingenuous, pointing to their plan to extend Donald Trump-era tax cuts, which Democrats say would add $3.5 trillion to the debt.
“Apparently no concerns about blowing up the deficit as long as it’s for the top 0.1% of households in America,” he tweeted.
Raising the permitted national debt level — which is the job of bureaucrats rather than politicians in many countries — has no implications for future spending; it simply enables the government to make repayments on loans that have already been approved and carried out.
– ‘Manufactured crisis’ –
Deputy Treasury Secretary Wally Adeyemo told investors at a conference in Washington the default threat was a “manufactured crisis” that was already making borrowing more expensive and costing Americans money.
Without efforts to speed up the normal process, any agreement would require at least 10 days to be formalized into legislative language, pass the House and Senate and get to Biden’s desk.
A batch of Social Security payments worth about $25 billion is scheduled to go out on June 2 and those payments could be halted if the Treasury Department is unable to cover loan repayments.
An estimated 27 million Americans would fall into poverty without Social Security.
House Democratic Whip Katherine Clark announced on Wednesday that all 213 of her members had endorsed a “discharge petition” that would force a vote on a debt ceiling hike without involving Republican leadership.
Democrats — who have nine fewer seats in the House than the Republicans — would need a handful of moderates from the other side to break ranks for the petition to move forward, however, and the support doesn’t appear to be there.
Meanwhile a federal judge in Boston has set a May 31 hearing for a lawsuit contending that the 14th Amendment requires Biden to borrow funds to pay US obligations regardless of what Congress allows.