Bipartisan Negotiations Consider Tying Debt Limit to GDP As White House Prepares to Meet McCarthy

Bipartisan Negotiations Consider Tying Debt Limit to GDP As White House Prepares to Meet McCarthy

Top line

Rep. Brian Fitzpatrick (R-Penn.) said he is working with Rep. Josh Gottheimer (DN.J.) on a proposal that would set the federal government’s debt ceiling at a specific ratio of the nation’s total economic output rather than on a fixed. interest, marked signs of progress after passing the debt ceiling last week and lawmakers began looking to prevent the government from defaulting on its debt.

Key facts

The deal brokered by Fitzpatrick and Gottheimer, who co-chairs the moderate House Resolution Caucus, would make spending cuts if the US debt exceeds the debt-to-gross domestic product (GDP) ratio.

Fitzpatrick emphasized the importance of raising the debt ceiling and limiting the federal deficit as part of the negotiations, telling Fox News Sunday “When you have a child with a spending problem, you do two things: you pay their bills, and you take out their credit card.”

Fitzpatrick previously said that a default on the debt – something that has never happened in US history, and which most economists believe would be catastrophic – was “off the table.”

Fitzpatrick previously said that a default on the debt – something that has never happened in US history, and which most economists believe would be catastrophic – was “off the table.”

Big Number

124%. That’s the current debt-to-GDP ratio, according to the Treasury Department. The debt-to-GDP ratio exceeded 100% for the first time in 2013, when both figures stood at around $16.7 trillion.

Background Keys

Treasury Secretary Janet Yellen said Thursday that the US had reached its $31.4 trillion federal borrowing limit, triggering “extraordinary measures” to prevent a default, including suspending investments in certain federal employee retirement funds . Yellen estimated that those “extraordinary measures” would expire on June 5, depending on how much money the government collects in spring tax receipts and unpredictable revenues. If Congress does not raise the debt ceiling by then, the federal government will be unable to meet its obligations, leading to default. Republicans have expressed plans to demand spending cuts, or even changes to the Biden Administration’s policies, in exchange for agreeing to raise the debt limit, but the White House has repeatedly said it will not negotiate on the issue. House Speaker Kevin McCarthy (R-Calif.) and President Joe Biden on Friday announced plans to meet to discuss the debt limit, among “a range of issues as part of a series of meetings with new congressional leaders to begin of the year,” said Press Secretary Karine Jean-Pierre.

Chief critic

Sen. Joe Manchin (DW.Va.) said Sunday that it would be a “mistake” for the White House to refuse to negotiate with Republicans on the debt limit, but added that any cuts to Medicare and Social Security (something Democrats fear. Republicans might suggest) “not going to happen,” he said on CNN State of the Union. Manchin also said he agreed to meet with McCarthy to discuss a “path forward” in negotiating an increase in the debt limit, he said on Fox Business. Future Sunday Morning.

Contra

Several Democrats expressed confidence in the negotiations on Sunday, including Sen. Tim Kaine (Va.), who called Biden’s planned meeting with McCarthy to discuss raising the nation’s borrowing limit “something good,” and Gottheimer said he was “optimistic” about the situation. negotiation.

Further Reading

Federal Government Officially Reaches Debt Limit, Urges ‘Extraordinary Measures’ To Prevent Default – Here’s What That Means (Forbes)

Debt Limit Interpretation: How Upcoming Negotiations Could Play Out in Congress (Forbes)

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