CNN —
The US reached the debt ceiling set by Congress on Thursday, forcing the Treasury Department to begin emergency measures to keep the government open and escalating pressure on Capitol Hill to avoid a catastrophic default.
The battle lines for the high-stakes battle have now been drawn. Hardline Republicans, who wield enormous influence in the House of Representatives because of the party’s thin majority, have demanded that raising the borrowing ceiling be tied to spending cuts. The White House countered that it would not offer any concessions or negotiate to raise the debt ceiling. And with the resolution of the debt-ceiling drama squarely in the hands of lawmakers, fears are growing that the party’s brinkmanship could push the nation into debt default for the first time in history — or dangerously close to it.
National Economic Council Director Brian Dees on Thursday repeatedly called on Congress to meet the obligations of the United States by raising the debt limit, warning of “economic chaos” that could ensue if Congress does not.
“This is about economic stability versus economic chaos,” Dease told Kaitlan Collins on “CNN This Morning,” calling it a “fundamental, fundamental obligation” of Congress.
He added: “Even just the specter that the United States might default is hurting the economy.”
The announcement that the U.S. has reached its debt ceiling follows Yellen’s warning last week about the approaching debt limit, urging lawmakers to “act immediately to protect the full faith and credit of the United States.” The emergency measures will buy Congress some time — Yellen said it was unlikely the government would run out of cash and emergency maneuvers before early June, though she noted there was “significant uncertainty” around that forecast.
But her message has so far failed to spark a bipartisan discussion. Instead, both Republicans and Democrats reaffirmed their hardline positions this past week.
House Speaker Kevin McCarthy should go well as any member can request a motion to vacate the speaker’s chair, one of several concessions he made to land the top job after 15 rounds of voting earlier this month.
For now, he’s leaning toward using the debt ceiling crisis to cut spending and balance the U.S. budget. On Tuesday, McCarthy rejected Democratic calls for a clean increase in the debt ceiling with no strings attached — something Congress has done time and time again, including under then-President Donald Trump. The spokesman told reporters on Capitol Hill that the Biden administration should begin negotiations before this summer, when the U.S. could default.
“Why don’t we sit down and change this behavior so we put ourselves in a stronger fiscal position?” McCarthy said.
President Joe Biden and McCarthy had not yet spoken Thursday about the debt limit, according to an official familiar with the situation.
Hard-right GOP Rep. Andy Biggs went even further in a tweet on Tuesday, writing: “We cannot raise the debt ceiling. Democrats have carelessly spent our taxpayer money and devalued our currency. They have made their bed so they have to lie in it.
The White House on Wednesday criticized the Arizona Republican’s “stunning and unacceptable position” and again rejected calls for spending cuts as part of a debt ceiling deal.
While there were no meetings with congressional leadership to be announced at this time, White House press secretary Karin Jean-Pierre told reporters that the administration had contacted “all members, on both sides of the aisle,” but “there are no and if there were negotiations on the debt ceiling – we will not do it, it is their constitutional obligation.”
The debt ceiling, which is the maximum amount the federal government can borrow to finance obligations that lawmakers and presidents have already approved, was last raised in December 2021 to $31.4 trillion. Created more than a century ago, it became a way for Congress to limit loan growth — turning it into a political football in recent decades.
Increasing the ceiling does not authorize new spending commitments.
The Treasury Department will begin using two emergency measures to allow it to temporarily continue funding the federal government’s operations, Yellen wrote on Thursday. They are basically backroom accounting maneuvers.
The agency plans to begin selling existing investments and halting reinvestments of the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefit Fund. It would also suspend the reinvestment of the Federal Employees Retirement System’s Treasury Savings Plan fund.
These funds are invested in special issues of government securities, which are counted against the debt limit. The Treasury’s actions will reduce the amount of outstanding debt subject to the limit and temporarily allow it to continue paying the government’s bills on time and in full.
No pensioners will be affected and the funds will be made whole once the impasse ends.
As part of his concessions, McCarthy promised to pass a proposal by the end of March that would tell the Treasury Department which payments should be prioritized if the debt ceiling is breached, Republican Rep. Chip Roy confirmed to CNN last week.
Roy, a Texas Republican who is one of the key players in the opposition to McCarthy’s presidency, cautioned that the contours of the proposal are still being worked out, noting that there are several different versions of a payment prioritization plan circulating in the Republican-controlled House. party.
But choosing to pay one set of obligations over another can raise legal challenges as well as political and ethical quandaries. For example, lawmakers will have to decide which to pay first — the monthly Social Security payments to tens of millions of senior citizens and disabled Americans, the wages of federal workers and the military, or the interest on U.S. debt owed to a host of investors, many of them foreign.
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