House Speaker Kevin McCarthy on Monday reiterated his call for President Joe Biden to negotiate over raising the U.S. debt limit, as the California Republican delivered a speech at the New York Stock Exchange.
“The longer President Biden waits to be sensible, to find an agreement, the more likely it becomes that this administration will bumble into the first default in our nation’s history,” McCarthy said.
For months, McCarthy and his fellow Republicans have demanded spending cuts in exchange for raising the ceiling for federal borrowing, while Biden and his fellow Democrats have said the lift should be made without conditions.
Ahead of McCarthy’s speech, analysts said the speaker is aiming to rally Wall Street to pressure the Biden administration to the negotiating table on spending, but there is a risk that he could startle investors more than he intends.
U.S. stocks SPX, -0.28% DJIA, -0.14% traded little changed on Monday.
During his speech, McCarthy emphasized that former President Ronald Reagan gave an address in 1985 at the NYSE, with Reagan saying that the federal government should get off “its present spending spree before it squanders our future prosperity.”
“Reagan’s words echo throughout these halls as a warning for all of us today,” McCarthy said.
As expected, the speaker said the House will vote in the coming weeks on a proposal that would suspend the debt limit for a year, while returning federal spending to 2022 fiscal-year levels and limiting the growth of outlays over the next 10 years to 1%.
“Our proposal will also restore work requirements that ensure able-bodied adults without dependents earn a paycheck and learn new skills,” McCarthy said.
White House deputy press secretary Andrew Bates on Monday reiterated the Biden administration’s call for the House GOP to agree to lift the debt limit without conditions.
“There is one responsible solution to the debt limit: addressing it promptly, without brinksmanship or hostage taking — as Republicans did three times in the last administration and as Presidents Trump and Reagan argued for in office. In fact, in 2019 Donald Trump said, ‘I can’t imagine anybody ever even thinking of using the debt ceiling as a negotiating wager,’” Bates said in a statement.
“Speaker McCarthy is holding the full faith and credit of the United States hostage, threatening our economy and hardworking Americans’ retirement,” the White House spokesman added.
The Treasury Department said in January that it had started to use “extraordinary measures” because the federal government was running up against its ceiling for borrowing. The Bipartisan Policy Center has estimated that the “X date” — the day when the government can’t meet all obligations — likely will arrive in the summer or early fall, with the exact timing depending heavily on 2022 tax collections that are hitting their peak this month, as Tax Day this year falls on Tuesday.
In August 2011, lawmakers approved an increase to the debt limit just hours before a potential government default. Within days, the U.S. then lost its triple-A debt rating from Standard & Poor’s for the first time in history, with the credit-rating agency saying the American political system had become less stable. Stocks plunged in August 2011 following the downgrade from S&P.
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