The prospect of negotiating an increase in the debt ceiling with Republicans has prompted warnings of economic ruin and chaos from the Biden White House and Democratic leaders in the House and Senate.
Democrats have for days been focusing only on what would happen if there is no agreement to raise the debt ceiling by summer, not the more likely prospect of agreeing to federal spending cuts over the next few months in exchange for an increase in the government’s borrowing limit.
The Democrats’ dire predictions began with Treasury Secretary Janet Yellen, who told House Republicans last week that an increase in the debt ceiling would be needed by June. She urged lawmakers to quickly raise the bar in order to allow the government to continue paying its obligations and to “protect the full faith and credit of the United States.”
Over the weekend, Yellen speculated at length about what would happen if Congress failed to raise the debt ceiling by June, predicting “irreparable damage to the American economy, the livelihoods of all Americans, and global financial stability.”
Democrats are rushing to remove the debt ceiling, and allow unlimited government borrowing
“If that happens, our borrowing costs will go up and every American will see their borrowing costs go up as well,” Yellen said. Moreover, failure to make payments due, whether from bondholders, to Social Security recipients, or to our military, will undoubtedly lead to a recession in the American economy and could cause a global financial crisis.
Similarly, the White House spent the past week warning of dire economic scenarios that would follow a decision not to raise the debt ceiling by June. White House press secretary Karen Jean-Pierre accused Republicans of “threatening to kill millions of jobs and 401(k) plans by trying to hold the debt limit hostage.”
Jean-Pierre has repeatedly warned that raising the debt ceiling is not open to negotiation. “There will be no debt ceiling negotiations,” she said, adding that Congress’s “commitment” is to raise the ceiling without conditions and to “avoid economic chaos.”
President Biden himself called Republicans “financially crazy” last week for seeking cuts to the federal government’s $6.3 trillion annual budget, which grew by more than 50% when the COVID pandemic hit. Today, the federal government is still spending nearly $2 trillion more than it did before the COVID pandemic that Biden declared “over.”
Conservatives are sharpening their heads in the historic fight over debt ceilings
On the Senate floor Monday, Majority Leader Chuck Schumer, D-NY, reversed those talking points by talking about the possibility of months of default down the road rather than how to use the next few months to reach a deal.
“Listen to what might happen if we default,” he said on the Senate floor. “Interest rates will go up on mortgages, on car loans, on credit cards. Pensions, the money that people put aside, will lose billions. So it’s likely that home values will drop all over the world. Interest rates are going up, and people are willing to pay less to buy.” homes.”
“Brinksmanship, hostage-taking and debt default should be on the table,” Schumer added. “The House Republicans’ approach to the debt ceiling is destabilizing, and the only thing it does is reduce the likelihood of a bipartisan solution.”
Texas Rep Roy says he will use debt-ceiling vote to extract spending reforms: ‘It’s not my job to back off’
The Democrats’ dire warnings came even though most Republicans have said they are not interested in a default and want to use the need to increase the debt ceiling to curtail what they say has been excessive federal spending over the past few years.
Rep. Jodi Arrington, R-Texas, who chairs the House Budget Committee, said Democrats are grossly overestimating the risk of negotiations.
“This appalling debt-ceiling rhetoric from my fellow Democrats is irresponsible and distracts from the real issue – the urgency to rein in our unsustainable deficit spending and prevent the catastrophic consequences of the sovereign debt crisis,” he told Fox News Digital.
He added, “We have several months to come to a bipartisan agreement, which Congress has succeeded in implementing numerous times in previous debt ceiling negotiations.” “While defaulting on our debt is an unrealistic outcome, bankrupting the country and the future of our children is a real and irreparable scenario.”
House Speaker Kevin McCarthy, R-Calif., called for talks with the White House as soon as possible to avoid default and reach an agreement early in the process.
Republican Study Committee Chairman Kevin Hearn of Oklahoma last week criticized the national press’ coverage of the debt ceiling, which he said was filled with “irrational shock and horror.” He said Republicans should ignore Democrats’ efforts to characterize the GOP’s effort to cut spending as “reckless and irresponsible,” and said the most terrifying prospect for America continues to pile on “unsustainable debt.”
Rep. Chip Roy, R-Texas, also declined to strike fear into Democrats in an interview with Reuters last week.
“That’s what they say every time. It’s like clockwork,” Roy said in an interview. “We are already approaching a recession. The question is what it will look like – unless a mixture of monetary and fiscal policy saves us from the stupidity of spending so much money.”
On Tuesday, the Heritage Foundation and Heritage Action told Fox News Digital in an exclusive statement that pressure from the debt ceiling is an “indispensable tool” for bargaining for cuts, and said they support the widely backed GOP plan to limit spending in the fiscal year. 2022 levels as a start. That year it was still near-record spending levels, and Heritage suggested drastic steps be taken to reduce non-essential spending.
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“These policies could include regulatory reforms, canceling unspent COVID funds, civil service reforms, allowing reform, and more,” Heritage said. “During this process, conservatives must reject reckless proposals to eliminate or suspend the debt limit, and ensure that any increase is a transparent dollar amount.”
Last week, Senate Minority Leader Mitch McConnell, R-Ky., said he didn’t think a debt default was on the cards as Democrats expected.
“In the end, I think the important thing to remember is that America should not default on its debt,” he said. “It hasn’t happened and it never will. But we will end up in some kind of negotiation with management about the circumstances or circumstances under which the debt ceiling is raised… No, I wouldn’t care about a financial crisis.”
Fox News’ Kelly Lacko contributed to this report.