Speaker Kevin McCarthy seeks $1.5T debt limit boost

Alex Wong/Getty Images News

House Speaker Kevin McCarthy introduced a bill on Wednesday proposing raising the $31.4T debt ceiling by $1.5T along with limiting federal spending. That would be enough to avert a default until March 31, 2024, at the latest.

The Limit, Save, Grow Act, which is set to undergo a House vote next week, is estimated to cut budget deficits by $4.5T over the next 10 years, he said in a speech on the U.S. House floor.

The legislation would reduce discretionary spending by $130B, bringing it back to 2022 levels, and future spending growth would be capped at 1% a year for the next decade. In addition, unspent Covid-19 funds would be pulled back, President Joe Biden's student loan forgiveness program would come to an end, and regulations on energy projects would ease.

“If Washington wants to spend more it will have to come together and find savings elsewhere just like every single household in America,” said McCarthy, who needs the support of 218 Republicans to pass the bill. Without increasing or suspending the debt limit, the U.S. would default on its payment obligations in the summer.

"President Biden has a choice: come to the table and stop playing partisan political games, or cover his ears, refuse to negotiate and risk bumbling his way into the first default in our nation’s history,” he said.

Dear readers: We recognize that politics often intersects with the financial news of the day, so we invite you to click here to click here to join the separate political discussion.

More on the Debt Ceiling Drama

• Speaker McCarthy says House Republicans will vote on debt limit, spending cuts
• Politics, Deficits, And The Debt Limit
• U.S. Treasury watching 'a few banks': Yellen repeats call for debt limit action
• Treasury's extraordinary measures on debt limit could hasten Fed's QT

Comments

[DeereDan]

Since Musk took over Twitter, he reduced head count by 80% with no affect on on operations.
Maybe we should let him run the Government....

[ANG Traders]

@DeereDan "...reduced head count by 80% with no affect on on operations."

That is hilarious!. A $42B investment is now basically worthless (who would buy it?). Ad revenue is down 80%. "...no effect on operations", thanks for that. Made my day.

[vxmike]

@ANG Traders Twitter revenue is not down because Musk cut the headcount.

[ANG Traders]

@vxmike No business could keep up revenue after a mass firing of 80% of its employees.

[Concernedabout]

It will be the first default in America’s history and many more to come! China will overtake US as number 1 economy

[PanicFirst]

@Concernedabout Pretty much defaulted in 1971... There was also 1933 and 1968.

[Nelson2020]

It will hurt US taxpayers, no one is going to buy the debt. More selling of US treasuries, maybe Japan will be forced to buy but their economy is on a downwards...

[jllachan]

Congress would not have to raise the debt limit if the Republican congress under Trumps had not cut taxes by $2T. The constitution says congress has the right to raise tax to pay the debt. It does not say congress should cut services.

[House Poor]

@jllachan Those tax cuts expire in 2 years so start planning now. Don't forget the new taxes this administration is adding. Gosh knows we need another $14 billion for the IRS, $68 billion to Ukraine and a mere $20 million to DOT Buttigieg to develop female crash dummies, to name a few.

[jsantmyer]

@jllachan What are you talking about? Have you ever heard about living within your means? The size of the Federal government needs to be cut along with the salaries of all the worthless politicians in Congress that are getting rich after about 5 years in Congress. That is how you pay down debt not by increasing taxes...

[ANG Traders]

@jsantmyer
Government deficits = private sector surpluses

When you say you want to cut Government spending, keep in mind that a balanced budget means every dollar the Government spends gets taxed back and cancelled, i.e. nothing left in the economy for private savings and investment.

[raym61]

Never believe a politician saying a budget deficit is reduced.

Also, one of these days, the debt is going to screw the US economy and the global economy. I don't know how. It's unprecedented. The road must end as the politicians kick the can down the road.

[jsantmyer]

@raym61 This is the reason the Leftist economist morons came up with the new "Modern Monetary Theory" that all the politicians have bought into.

Modern monetary theory (MMT) is a macroeconomic supposition that asserts that monetarily sovereign countries (such as the U.S., U.K., Japan, and Canada) which spend, tax, and borrow in a fiat currency that they fully control, are not operationally constrained by revenues when it comes to federal government spending.

Put simply, modern monetary theory decrees that such governments do not rely on taxes or borrowing for spending since they can print as much money as they need and are the monopoly issuers of the currency. Since their budgets aren’t like a regular household’s, their policies should not be shaped by fears of a rising national debt.

This is the biggest pile of economic trash I have ever heard of and all of the politiians have bought into it, since it makes their job much easier if they don't have to worry about how large the annual deficits are. It is the Roarding 20's all over again.

They will come to regret their ignorance and foolhardy approach to economics as we move into the next Recession/Depression that is moving towards us at a very fast rate of speed...

[Phil Dumfee]

@jsantmyer when the meteor strikes in 2046 it won't make a difference

[Tom Bone]

Kevin McCarthy talking tough. He will get his hand greased and fold like a cheap lawn chair. Both political parties sux.

[Dividend Pro]

"House Speaker Kevin McCarthy introduced a bill on Wednesday proposing raising the $31.4T debt ceiling by $1.5T along with limiting federal spending."

This is a very stupid game played by stupid people. Every year. It ALWAYS gets raised. If it did not, the government would bankrupt, and it won't. And they NEVER reduce spending.

It is all posturing, and then it gets approved.

They do what most American individuals do. Spend too much and get into financial trouble. It is the American way.

Hey, I have a suggestion! Why don't you just cut back on spending? Balance your budget? Better yet, why don't you actually spend less than you take in, so you can reduce your debt and reduce paying China interest on the US paper they hold?

Oh, I know why. It just makes too much sense. And that is not how we do things around here. Got it.

And if you think I am wrong, you can't MATH. Divide that $31.4T by the number of adults int he USA, and you will see how much every person in the USA actually owes. Now, take a minute to simmer down, and visualize life in America if the interest paid on that $31.4T was put to good use every year in improving Americans' lives instead of being paid out the the likes of China. So much good could be done. What a wonderful country that would be, right?

Same can be said of Canada, who is also under huge Sovereign debt due to our irresponsible leader. Do you know what many young relatives who received $Thousands in free govt. money during Covid did with it, including my rich relatives? They went on international trips. They blew it on fun, and now the country is in greater debt for it. The govt. just threw money at everyone, including those who had no business or hardship receiving it. Foolish.

I think smart people avoid getting into politics. Why? They make way too much $$ to bother. They can MATH. Politicians can't MATH, and they do that with YOUR money. And you are OK with it.

[ANG Traders]

@Dividend Pro The budget of a monetary-sovereign is not like a household budget.

Government spending = currency creation that is deposited in private bank accounts.

Taxation = currency cancellation (money is removed from private bank accounts)

Government spending more than it taxes back = Government deficits = private sector surpluses.

If you want a balanced Government budget, then what you want is for the Government to take back, through taxation, every dollar it had spent, thereby, leaving nothing in private bank accounts. How does an economy grow under that scenario?

Every recession starts with a reduction in the deficit, and every depression has started with Government surpluses (taxing more than spending).

[Dividend Pro]

@ANG Traders You make some interesting points.

But what is missing is your proposed solution to erasing sovereign debt. Interested in hearing what that would be.

[ANG Traders]

@Dividend Pro What is called sovereign “debt”, is in reality nothing of the sort. The currency-creator does not need to “borrow “ what it creates. The “debt” is simply the stock of Treasuries, which themselves are risk-free savings accounts that the system chooses to match with the deficit.

It is an unnecessary, vestigial leftover from the gold-standard which we continue to use.

Where do you think the US$ came from that are deposited in T-bonds? It is not borrowing by the government. It is a safe (risk-free ) place to hold private (and international) savings, and serves to encourage the use of the US$ and maintain confidence in it.

Think about what would have to happen in order to “pay back the ‘debt’”….$31T would have to be taken out of private bank accounts ( and mattresses) and given back to the Government. Is that what you want?

[hawkeyec]

Even members of his own party don't pay attention to the Speaker. Our government is designed to be led by Congress (all of it) and the actions desired by the Congress presented to the President. Very simple. The Speaker needs a proper civics lesson. When I was a kid we used to teach about this miraculous system in school, fourth grade in my school.

[LK106218]

@hawkeyec

The attached source describes the US federal government budget process.

www.cbpp.org/...

Simply it is a collaborative process that begins with budgeting request from the executive branch. The House is responsible for creating a budget bill. The Senate then expresses their will. Differences are resolved in conference between representatives of the two chambers. The revised bill then goes for a vote of both chambers. The passed bill goes to the President who can sign, veto or disregard.

[crowgeo]

@LK106218 Raising the debt ceiling is not part of the budget process. It is a procedure to ensure that obligations already agreed to are met.

[hawkeyec]

@LK106218

Thanks. Actually, I know how it works. I wrote my thesis on it. My process description was then included verbatim in a Public Finance textbook. In my 78 year lifetime the President's budget "request" has been mostly meaningless.

[Bruce1899]

Congress controls spending. This whole standoff on deficit ceiling is just another ploy by Congress to avoid accepting their responsibility for controling spending, which includes the difficult (and politically dangerous) job of reducing spending. Congress is impotent.

[rhurry]

President Bumble, Mumble, Fumble, Stumble, Grumble, Crumble!

[Office Rat]

@rhurry You're referring to Trumpolini, right? Covfefe.

[rhurry]

@Office Rat If that makes you feel better, sure.

[Kyle54]

Adding $1.5 TRILLION more to taxpayers liability "isn't enough for Alzheimer Joe and Democrats."

[wboz]

1 collect more taxes
2 spend less
3 don't waste what you DO spend

there I fixed it for you, speaker. I'd focus on #3, which will be completely unpalatable for you because it will require actual thinking.

[wanster]

@wboz #3 is a great thought, but Government is only capable of wasting $, as they produce nothing, adding zero value to the overall economy. If 'the people' could figure this out, then we'd all be much better off.

[wboz]

@wanster erm .. wut. I was referring to the fact that dollars are allocated down to various agencies, some of whom spend the money towards goals efficiently as theycan. But little to no effort is made by Congress to understand why a dollar of defense spending gets them only a fraction of a bullet, while china can get the whole one. Why we spend more and more on health care yet Americans die earlier each year. So much of the spending just filters down into an endless supply of industry grifters, using ineffieicnt subsupliers to spread the wealth to their buds. Congress SHOULD care where the money goes after they make it, but they don't.

If you are going to have the point of view that the general concepts of defense, establishing laws, enforcing them and holding people to account, and maintaining common resources so that individual actors don't take it all to the detriment of everyone else (eg: unpolluted water) .. things like that .. have no added value, we are not on the same page.

[dynx]

@wboz wait just a minute….more taxes and less spending? So everyone chips in to fix this problem? AND you want congress to work hard and figure out how to avoid waste?!?!? Absolutely no way that happens!!!!

[Xanadu1492]

there are consequences when money is thrown away. our current government is great at doing this - we need to reduce what is being thrown away and become responsible for our actions -

[tgr65]

@Xanadu1492 People from your camp always talk about cutting waste but when you have to detail the cuts you either suggest something so small to be meaningless or something that will hurt downtrodden people. What a great bunch of guys and gals!

[jhon3338]

When the GOP accuses someone of something it's usually the GOP that is doing it and trying to deflect/distract away from its' duplicitous actions.
Only the GOP controlled House of Representatives has the authority to raise the Debt Limit, so trying to hold Biden and the country hostage is dereliction of duty.

[LK106218]

@jhon3338

Largely correct except the Constitution directs that spending related bills start in the House. The bills subsequently must be passed in the Senate and signed by the President to become law. The Senate and President wait for the House to act.

[ANG Traders]

The US is monetarily-sovereign because it is the issuer of US$. It is not like a household (or a teenager with a credit card) that needs to find dollars or borrow dollars before it spends; the US creates dollars through Congressional spending laws…and cancels dollars through tax laws.

No one in Congress seems to understand this. They keep thinking it works like a household budget. The US cannot run out of US dollars… unless they CHOOSE to.

The “debt” ( it is NOT debt) ceiling is economic suicide. Insane!

[Beep Boop]

@ANG Traders it’s just a way for the GOP to “explain” things to their simpleton followers

[ANG Traders]

@Beep Boop I have to keep reminding myself that as stupid as the average person is, half of people are even stupider.

[RBots]

@ANG Traders That's ridiculous. Ask how well that mindset ('Monopoly Money Mentality') worked for Argentina, Nazi Germany, and no-growth Japan. You can't be this in-debt relative to GDP and not have inflation (by dollar-printing to 'buy' one's own debt as the Feds been doing for years, a Ponzi scheme), and zero REAL growth. You wonder why Brazil, India, the Saudis no longer respect the dollar, and China is taking advantage of this? It's the USA debt-to-equity ratio from 1.00 (Bad enough) to --> > 1.20 under Biden in less than two-years. Stupid out-of-control spending. If it were a stock, the USA is currently, un-investable.

[Bbone]

Disappointed that people don't agree this is a good thing "estimated to cut budget deficits by $4.5T over the next 10 years"

[GHFISHER]

@Bbone EXCEPT raising the debt ceiling has nothing to do with the already Congress passed - President signed spending/taxation laws that established that debt.

Don't like the debt then pass laws - stop the fairy tale that raising the debt ceiling is the cause.

By broad consensus the American people want some specific goods and services - so either pay for them, cut them or accept the new created debt that results.

[Magellan1502]

This whole debt ceiling nonsense accomplishes nothing. There needs to he a convention of states to address this. DC has not been accountable to the people for years. I trust none of them.

[LK106218]

The President is correct that the debt limit increase is its own issue, and the limit should be raised. McCarthy is correct that the deficit is too large, and everyone should work to close the gap. Changes in both revenue and spending should be considered.

If you look at the federal budget overall, most discretionary spending is on security matters through Department of Defense, Homeland Security and Justice. Much less is spent on social welfare through Department of Agriculture and Housing.

I agree with McCarthy that there should be a citizen service requirement to obtain social welfare and would go further that there should be a lifetime citizen's account much like SS wages and deductions are tracked.

These matters should be settled soon to avoid a severe impact to the economy in the US and beyond.

[GHFISHER]

@LK106218 "I agree with McCarthy that there should be a citizen service requirement to obtain social welfare ...." with the caveat that the person is physically and mentally capable and that the citizen service required does not have a negative impact on others.

[LK106218]

@GHFISHER

Agree. I've thought that citizen service would be something like a parent assisting at a public childcare service or school for a few hours per week.

[GHFISHER]

@LK106218 I am 86 - a military brat. 20 year Vet and 80% VA rated. Bring back the draft.

My wish would be for a 3 year universal [meaning EVERY man and woman (no rich/political deferments - no, nada, none) based on mental/physical abilities] service obligation at about 18. First 6 months in the military (learn personal discipline/physical health - get rid of the flab) and 2 1/2 in local/national service (think blend of local Peace Corps and CCC).

At the end of service obligation all would be eligible for 2 years of education - academic or technical.

[anon_cowrd]

TLSGA - what does it mean

[thirdcamper]

@anon_cowrd It's the acronym for this bill McCarthy is advancing. Full name stated in the article.

[jnbsan007]

Health insurance, Social Security, and Defense account for about 60% of Federal spending. Until that's part of the solution, this political nonsense will continue. BOTH PARTIES need to put some real skin into the game. Otherwise, this collective helplessness will never end. Yeah, we can always hope.

[ttims2]

@jnbsan007 That’s all fine, and that’s what budget negotiations are for, this isn’t a budget negotiation, this is just paying to service our debts.
If, you or I told the banks that we owed we are only going to pay this much if you do this what would happen?

[GHFISHER]

@jnbsan007 From your comment I am guessing that your proposed solution is some form of reduction in these areas. Suggest that there is also a revenue side.