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The federal debt ceiling will be raised while keeping government spending under control, according to House Speaker Kevin McCarthy (R-Calif.), who said he will meet with President Joe Biden on Wednesday.
In an appearance with CBS’s “Face the Nation,” McCarthy dismissed the notion that the United States would make a debt default.
McCarthy said that: “this won’t come to fruition until sometime in June.” Democrats were the target of his criticism because of their intentions to increase the debt ceiling.
In addition, the Republican declared that during talks with Biden, any cutbacks to Social Security and Medicare would be off the table.
McCarthy, however, asserted that Republicans are ready to “strengthen” the pricey retirement and health benefit programs for seniors, which the Biden Administration contended was simply another way of stating they intend to reduce the programs.
“I know the president said he didn’t want to have any discussions” “…I want to find a reasonable and a responsible way that we can lift the debt ceiling (and) take control of this runaway spending.” McCarthy said.
The United States reached its $31.4 trillion borrowing cap earlier this month, but McCarthy insisted that the Treasury would be able to make payments until June. This would increase the risk of default to the highest level seen since a debt ceiling impasse in 2011.
Republicans and Democrats are at a crossroads with one another, each wanting something different. Prior to reaching a borrowing limit agreement, Republicans want the White House to commit to expenditure reductions; Democrats want the debt ceiling raised unconditionally.
When asked if he would support extending the debt ceiling temporarily until September, which some politicians think would give them more time to complete budget agreements, McCarthy responded: “I don’t want to sit and negotiate here. I’d rather sit down with the president and let’s have those discussions.”
How does the debt ceiling crisis affect americans?
Every year since 2001, when tax income hasn’t been enough to pay for all of the government’s expenses, including military, social programs, and salaries, the government has had to borrow money.
However, the amount of debt the United States may take on is capped. The debt ceiling was established by Congress more than a century ago to avoid having to authorize every additional loan since, according to the U.S. Constitution, Congress must approve all borrowing. Numerous times since then, Congress have increased the debt ceiling.
The repercussions won’t be seen by Americans until June, according to Treasury Secretary Janet Yellen, but Congress has to work quickly to find a solution. It would be a historic first if the United States defaulted on its debt, but analysts warn that it would probably cause a global financial disaster.
Now that we’ve reached the limit, the Treasury will take “exceptional measures” to keep spending going while depleting its cash balance at the Fed (through fancy accounting that limits some government investments and reduces the amount of debt subject to the limit). There is a lot of uncertainty surrounding that period, but the general assumption is that the runway will last until at least June.
Congress is in charge of either suspending or raising the cap, and during the next months, it’s probable that members of both parties will seek concessions in an effort to reach an agreement.
In 2022, Social Security and Medicare received over 13% and 20%, respectively, and more than $760 billion and $1 trillion, respectively, of the federal budget, making them the two largest supported programs by the federal government. For the time being, no interruptions to these programs are anticipated.
However, payments for important programs like veterans’ benefits and SNAP food aid might be delayed if the government goes into default on its debt, in addition to Social Security and Medicare payments.
The Internal Revenue Service’s (IRS) 2022 filing season runs from January 23 to April 18. The IRS predicts that clients will get their tax refunds within 21 days after electronically completing their taxes. This is excellent news for taxpayers as any impacts from the debt ceiling debate are most likely to manifest themselves by June or later. The filing of tax returns should proceed as usual.
In October or November, the IRS regularly announces changes to the tax rates as well as new tax laws. The modifications for 2023 might be slight or big depending on inflation this autumn as these annual revisions alter taxes to stay up with the cost of living.
Also, suspending investments in federal pensions is one potential conclusion for how the government will continue to have enough money to borrow. For the roughly two million civilian federal employees, the Federal Employees Retirement System is one of the greatest retirement programs available. Following the resolution of the debt limit problem, pension investments should be fully recovered.
The federal government will be funded through September 30, 2023, when the fiscal year ends, thanks to the $1.7 trillion spending deal that Congress agreed to following extensive bipartisan negotiations. The government would then be forced to shut down until Congress passes a new budget package, which may result in thousands of government workers being placed on unpaid furloughs, similar to the more than 800,000 workers who were judged unnecessary during the 2019 closure.