The impending deadline for the U.S. to extend its debt ceiling continues to loom over Capitol Hill, forcing Senate and House Republicans into challenging conversations over what steps their conference is prepared to take on the issue.
This Tuesday, Federal Reserve Chairman Jerome Powell warned members of the Senate Banking Committee that the consequences “could be extraordinarily adverse and could do long-standing harm” if Congress does not agree on a deal by the Treasury Department’s estimated summer deadline.
Later that day, Senate Banking Subcommittee on Economic Policy leads Democratic Senator Elizabeth Warren of Massachusetts and Republican Senator John Neely Kennedy of Louisiana held a hearing on the issue in which Mark Zandi, chief economist at the economic research firm Moody’s Analytics, warned that it is “absolutely critical that lawmakers either increase, suspend, or verbally do away with the debt limit,” adding that not doing so “would push us into a recession.”
Warren echoed calls that have been made by Senate Democrats, saying that it is economically untenable to make cuts to current federal spending programs, and that the debt limit should not be held hostage by House Republicans eager to do so.
Although House Republicans have been adamantly against raising the debt ceiling, Senate Republican Leader Mitch McConnell has allowed Speaker Kevin McCarthy to lead negotiations with the White House on the issue. In this photo, the two appear in the Rayburn Room of the U.S. Capitol in Washington, D.C. on February 13, 2015. Photo by MANDEL NGAN/AFP via Getty Images
While Kennedy acknowledged that the debt limit provides an “opportunity to talk about our rate of growth and spending,” he also said it is “unthinkable” that Congress would not extend the debt limit, saying “if you’re gonna have a party, you got to pay the band, and it’s time for us to pay the band.”
Newsweek spoke with Warren about Kennedy’s position following the meeting and the signs of bipartisanship apparent in Congress’ upper chamber when it comes to the issue of America providing the funds necessary to pay for the spending it has authorized.
“I think that Senator Kennedy takes a position that is both smart and courageous,” Warren said. “It is important to raise the debt ceiling, no strings attached, and he’s acknowledged that.”
“It would be a disaster for the United States to even threaten to breach the debt limit,” she added.
Newsweek spoke with Kennedy after the hearing about his takeaways and Warren’s comments.
“I’m not gonna disagree with the senator,” the Louisiana Republican said, “but I’d substitute the word ‘obvious’ in place of smart. The United States of America cannot default on its debt. Now, I may not agree with how that debt was accumulated, and in fact, I voted against a lot of it. But, the spending passed, and we have to borrow the money to pay the bills.”
“In terms of ‘courageous,’ I appreciate Elizabeth’s sentiment,” he added, “but I just think at the end of the day you will find that the Congress supports raising the debt limit overwhelmingly.”
Banking Committee members Senator Elizabeth Warren and John Neely Kennedy agreed that a U.S. debt default would be catastrophic. Here, the two are shown at a Senate Banking Committee hearing on Capitol Hill on September 24, 2020 in Washington, D.C., with Warren appearing remotely. Photo by Drew Angerer/Getty Images
Senator Steve Daines of Montana, chair of the GOP senate campaign arm, told Newsweek “we cannot default.”
The sentiment that Congress is committed to paying off its debts and avoiding a catastrophic default may be shared by many Senate Republicans, but seems to be much less prevalent among their fellow conservatives in the House.
The WashingtonPost reported on Wednesday that House Republicans are drafting a proposal that would prepare the U.S. for a default. The House Way and Means Committee announced it will consider a measure that would prioritize some federal payments over others in order to protect U.S. credit if a debt limit deal is not reached and America proves unable to pay its bills.
“I don’t know why I should really care what [Senate Republicans] think about all this when we’ve got a job here in the House to do with the majority to try to get somewhere,” Republican Congressman Chip Roy of Texas, a member of the Budget Committee and policy chair of the hard-right Freedom Caucus, told Newsweek. “When the Senate does something useful, then they can come talk to us.”
“If President Joe Biden actually thinks that he’s going to be the president that chooses to default, which is what he’d be doing—OK, go ahead Joe,” Roy said. “But that’s not how it’s gonna work. There’s gonna be a whole bunch of noise, then everybody will push up the brinkmanship, then someone’s gonna blink, and I don’t intend to.”
Republican Representative Chip Roy of Texas, a member of the Freedom Caucus, has been a leading GOP voice in opposing raising the debt ceiling. Here, he speaks during a news conference with fellow members of the House Freedom Caucus, outside the Capitol Building on August 23, 2021 in Washington, D.C. Photo by Kevin Dietsch/Getty Images
Roy’s sentiment is shared by others in the Freedom Caucus, including Arizona’s Andy Biggs and Georgia’s Marjorie Taylor Greene, who said they would not accept a raising of the limit without significant cuts. However, despite their desire for cuts and an appetite on both sides of the aisle to reduce the deficit, lowering the national debt within the confines of current GOP commitments presents an uphill challenge.
House Republicans have largely expressed that they would not support cuts to Social Security and Medicare. A significant number within the Conference have also said they would not accept cuts to defense spending. The conference is also against creating additional revenue by means of a tax hike.
Given these stipulations, The New York Times reports that the government would have to cut 70% of the funding that goes toward programs such as Medicaid, food assistance, farm subsidies, military retirement, anti-poverty programs, veterans’ health, transportation, education, law enforcement, research, and foreign affairs.
During Tuesday’s Banking subcommittee hearing, Zandi addressed the findings of the March 2023 Moody’s report, which predicted that drastic spending cuts, like those estimated in the Times, would spark a “recession in 2024, costing the economy 2.6 million jobs,” while also harming the country’s “long-term” economic growth.
Senator Warren agreed.
“Republican cuts would plunge us into a recession and cost about two and a half million jobs,” she told Newsweek. “The Republicans need to back off this.”
While senators may be aligned with Warren when it comes to the importance of extending the debt ceiling, Republicans in both chambers remain intent on utilizing this moment to ensure a curbing of the national debt.
Daines spoke directly to this issue in comments to Newsweek, saying, “we also should be able to come up with a bipartisan agreement on some kind of spending reforms because the debt is out of control, not sustainable.”
Kennedy similarly said that when it comes to the debt ceiling it’s about “asking the president to do what we’ve always done, and that is to negotiate it.” He emphasized that he would like to see both parties come together and figure out how they can “reduce the rate of spending and reduce the rate of debt accumulation.”
Republican Congressman Buddy Carter of Georgia, a member of the Budget Committee, shared similar sentiments to those of his Senate colleagues. He told Newsweek that while the threats associated with a default “are true,” that doesn’t mean “we shouldn’t negotiate, and we should.”
“We pay our bills—there’s no question about that,” Carter said. “We’re not going to default on anything. We never have, and we’re not going to accept that, but we need to have some spending restrictions.”