Biden faces his first major debt limit choice

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WASHINGTON — This week’s vote by Republicans in the House to tie sweeping spending cuts to a deal to raise the one-year debt limit has put President Biden on the defensive, making a series of potentially painful choices at a dangerous economic moment. must make.

Mr Biden has long maintained that he would not negotiate spending cuts or other efforts to reduce the federal debt as part of discussions about raising the country’s debt limit, which must be raised so that the United States can continue to borrow money to support its pay bills. .

But business groups, tax hawks and some congressional Democrats are calling on Mr. Biden to start negotiating in earnest for a deal that would avoid a debt default that could come as early as June or July.

Mr. Biden and his aides must now choose how fast to talk to Speaker Kevin McCarthy of California — along with New York Democrat Sen. Chuck Schumer, the majority leader; Senator Mitch McConnell of Kentucky, the minority leader; and Representative Hakeem Jeffries of New York, the House Minority Leader — and on what terms.

The president faces a series of decisions as the nation, which has already hit its $31.4 trillion debt limit, defaults. He will have to find any common grounds on austerity he has with Republicans, who do not share his preference for largely reducing the nation’s debt path by raising taxes on corporations and the wealthy. He will have to determine whether he is willing to sign a debt limit increase tied to conditions demanded by House conservatives.

Ultimately, he may have to decide how aggressively to intervene in the delicate politics of the House leadership. A potential debt limit deal could spark revolt among the most restless members of Mr. McCarthy, who laid the foundations for the current crisis when they resisted Mr.

As officials describe it, they are all complicated choices. Mr. Biden and his aides do not want to encourage Republicans to threaten economic collapse under Democratic presidents — and only Democratic presidents only — by allowing them to make concessions to raise the cap now. They also recognize that a default-induced recession would hit American families just as Biden ramps up his re-election campaign, a dangerous scenario for an unpopular incumbent, regardless of which party voters blame for the default.

Some of Mr Biden’s next steps are clear. Much to the chagrin of some conservatives in the House, there was no scenario in which the president would sign the bill that barely cleared the chamber on Wednesday. In addition to raising the cap, it included spending cuts, new support for oil and gas drilling and the near-complete reversal of Mr Biden’s signature, intended to fight climate change.

“The president has made it clear that this bill has no chance of becoming law,” White House press secretary Karine Jean-Pierre said Wednesday after the vote. “In our history, we have never defaulted on our debts or failed to pay our bills. Congressional Republicans must act immediately and unconditionally to avoid default.”

But that doesn’t mean that Mr. Biden will be able to maintain his current stance on Mr. McCarthy indefinitely. Government officials have pushed business groups to pressure Republicans to pass a non-binding increase in the debt limit. But on Wednesday, leading business lobby groups, including the U.S. Chamber of Commerce and the Business Roundtable, praised the House’s passage of the bill and called on Mr Biden to get involved.

“Failing to raise the debt limit would trigger a strong market reaction with serious economic consequences, likely including widespread job loss, decimated retirement savings and severe hardship for millions of American families,” said Joshua Bolten, president and CEO of the Business Roundtable. The group, he said, “is hopeful that today’s vote in the House will jump-start negotiations between Congress and the Biden administration on a bipartisan deal that takes bankruptcy off the table and begins the hard work.” to address our deficits and debts.”

White House officials admit that Mr. Biden will have to convene negotiations with congressional leaders on taxes, spending and debt before the government runs out of money to pay its bills. In recent days, the president has suggested being open to talking to Republicans about fiscal issues, with the winking stipulation that they have nothing to do with the borrowing limit.

“I’m happy to meet with McCarthy, but not on whether or not to extend the debt limit,” Biden told reporters at the White House on Wednesday. “That’s not negotiable.”

Mr. Biden still sees his position in all tax talks and the public debate surrounding it as a political winner. In the early months of this year, he demonized Republican plans, including cuts to safety net programs, and forced Mr. McCarthy to make Social Security and Medicare — the two biggest drivers of federal spending growth in years to come — untouchable in the Republican government. account.

More recently, officials across the administration have blasted the Republican bill for potentially cutting popular programs for veterans, students, and more. They can do that because the bill doesn’t specify where the bulk of the cuts would come from, leaving the task to future congressional appropriators.

In a White House memo obtained by The New York Times this week, officials outline what they think Republicans would need to cut to meet spending caps in their legislation while leaving military spending intact. Over a ten-year period, the cuts would include $500 billion for veterans’ health care, $300 billion for scientific and other research, and $100 billion for the Head Start early childhood education program.

Some government officials privately suggest that a more modest version of spending limits, lasting a few years at most, could likely be the centerpiece of an agreement to keep funding the government and raise the borrowing limit. Some business groups agree, though they would also like to see lawmakers make a bipartisan effort to streamline government permits for fossil fuels, clean energy and other projects they believe would boost economic growth.

But many House Republicans don’t seem in the mood to abandon the bill that passed Wednesday with just one vote left, raising the possibility that a deal with smaller cuts would need a mix of Republican and Democratic votes to pass it. House – and possibly triggered an attempt by Conservatives to impeach Mr McCarthy as speaker.

Representative Ralph Norman of South Carolina, and a member of the Freedom Caucus, emerged from a closed-door briefing on the legislation ahead of Wednesday’s vote, demanding that Republicans refuse to accept anything less than their opening bid.

“I wanted double what was in it,” said Mr. Norman. “I agreed to vote for it because that kicks off the ball and puts us in the arena to solve the debt problem. Now I’m not interested in anything coming back, anything but what we voted for.”

Catie Edmondson reporting contributed.

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