House Speaker says Democrats should cap spending to avoid U.S. debt default

House Speaker says Democrats should cap spending to avoid U.S. debt default

WASHINGTON, Jan 15 (Reuters) – House Speaker Kevin McCarthy said on Sunday he believes Democrats would agree to limit government spending to avoid a US default and he wants the idea with President Joe discuss Biden.

Republicans, who now control the House of Representatives, have threatened to use the debt ceiling as leverage to demand spending cuts from Biden’s Democrats, who control the US Senate.

This has raised concerns in Washington and on Wall Street about an uphill struggle that could be at least as destructive as the protracted struggle of 2011, which entailed a brief US credit rating downgrade and years of forced government and military spending cuts.

“I want to sit down with him now so there’s no problem,” McCarthy said in an interview with Fox News, referring to Biden. “I’m sure he knows there are places where we can make changes that will put America on a course where we salvage these claims rather than bankrupt them in the way they put it out.”

McCarthy cited the Trump-era US lawmakers’ agreement in 2019 to suspend the statutory debt limit on Treasury borrowing until a later date as evidence that such a compromise is possible.

“I think we can sit down with anyone who wants to work together. I think this president could be that person,” he said.

House Oversight Committee Chairman James Comer said Sunday he hoped a default could be avoided but put the onus on Democrats to approve spending cuts.

“The Republicans were elected in the midterm elections with a mandate from the American people. We championed the fact that we are serious about spending cuts,” Comer said in an interview with CNN’s State of the Union.

“So the Senate needs to recognize the fact that we won’t back down until we see meaningful spending reform.”

US Treasury Secretary Janet Yellen said on Friday that the United States is likely to reach the $31.4 trillion legal debt ceiling by Jan. 19, forcing the Treasury Department to take extraordinary cash management measures that are likely to last until be able to prevent a payment default at the beginning of June.

Congress created the debt ceiling in 1917 to give the government more flexibility in borrowing, and must approve any increase to ensure the United States meets its debt obligations and avoids a catastrophic default.

Reporting by Doina Chiacu and Katharine Jackson; Edited by Lisa Shumaker and Grant McCool

Our standards: The Thomson Reuters Trust Principles.

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