Saturday, November 4, 2023

US House passes debt bill, may face Biden veto


The House of Representatives, led by Republicans, has passed a bill that would increase the federal debt ceiling of the United States by $1.5 trillion. However, the bill also includes significant spending cuts to government programmes, including those championed by Democratic President Joe Biden. The bill passed by a party-line vote of 217 to 215, with four Republicans breaking ranks. The bill now heads to the Democrat-controlled Senate, where it is unlikely to pass. Biden has already threatened to veto the bill, calling the spending cuts “irresponsible”.

White House Press Secretary Karine Jean-Pierre issued a statement following the vote, calling on congressional Republicans to raise the debt ceiling “without conditions” and ensure the “full faith and credit of the United States”. She also stated that Biden would never force middle-class and working families to bear the burden of tax cuts for the wealthiest, as the bill proposes.

The bill’s success in the lower chamber marks a significant victory for House Speaker Kevin McCarthy, who is seeking to negotiate with the Biden administration over federal spending. McCarthy stated in a press conference following the vote that “the Democrats need to do their job” and that “the president can no longer ignore by not negotiating”. He also claimed that the House had done its job by lifting the debt limit and sending it to the Senate.

The bill would cap government spending at levels set in fiscal year 2022, which critics argue would force massive cuts to federal programmes as costs rise with inflation. It would also rescind unspent COVID-19 relief money and a nearly $71bn funding increase to the Internal Revenue Service (IRS), the US’s tax-collecting body. However, the Congressional Budget Office estimates that the extra funding would allow the IRS to “increase revenues by approximately $200 billion” over the next 10 years.

The bill would also increase work requirements for recipients of government safety-net programmes like Medicaid and the Supplemental Nutrition Assistance Program (SNAP), commonly called food stamps. It would block Biden’s student loan relief initiative and repeal tax breaks for renewable energy production that Biden signed into law last year, as part of the Inflation Reduction Act.

The US has never defaulted on its debt, and raising the debt limit is a regular task. The Department of the Treasury estimates that Congress has raised, extended or revised the debt ceiling in 78 separate instances, including 49 times under Republican presidents and 29 times under Democrats. However, in recent years, debate over the debt ceiling has intensified, with Republicans pushing to chop federal spending in order to reach a balanced budget. Democrats have largely defended spending on social programmes and called for tax increases for the wealthy instead.

On Tuesday, Treasury Secretary Janet Yellen warned that a default on the US debt could spark an “economic catastrophe” for the US. Economists warn that a default could result in a lower credit rating for the country, which could increase interest rates and make borrowing more difficult. It could also send the economy into a recession and leave federal workers and Social Security recipients without pay.

Democratic Representative Jimmy Panetta stated in his speech on the House floor on Wednesday that “solutions to the debt crisis need to be serious, not partisan. But this bill brings us closer to default by demanding partisan policies that will never pass the Senate”. Texas Representative Jodey Arrington appealed to his fellow Republicans to unite behind the bill, stating that “the most vulnerable group of people in this country…is the next generation of Americans who will inherit $31 trillion in debt, the highest levels of indebtedness in our nation’s history”.

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