GOP debt limit strategy is flirting with default, top House Democrat says

WASHINGTON — The top Democrat in the House slammed Republicans’ plan to pass a bill later this month to suspend the debt ceiling for a year and impose broad federal spending cuts, rather than simply raise the $31.4 trillion limit and avoid any risk of potential U.S. debt default.

“Even the flirtation with the default is going to hurt everyday Americans,” House Minority Leader Hakeem Jeffries told CNBC’s “Squawk Box” on Tuesday.

“It risks raising car payments, it risks raising home mortgage payments, it risks raising student loan debt payments,” he said. “It will hurt everyday Americans and crash our economy at a very fragile time, particularly in the immediate aftermath of the regional banking crisis.”

The New York Democrat said refusing to raise the debt ceiling for the first time in history would have “catastrophic” consequences.

Jeffries said Democrats are open to negotiations on federal spending, but that “it should be done through a budget process and through the appropriations process, not in a hostage-taking situation.”

“The right thing to do is for us to make sure that we protect the full faith and credit of the United States of America, particularly during a fragile time in our economy,” said Jeffries.

Securities and Exchange Commission Chairman Gary Gensler echoed Jeffries’ concerns Tuesday, telling lawmakers that the debt ceiling fight has already affected the markets.

“There’s certain money market funds and other funds that are being careful about which short-term Treasury bills they buy,” Gensler, who was appointed by President Joe Biden, told the House Financial Services Committee. “It is likely that we would start to see … less liquidity in the Treasury markets, which ultimately means higher costs to the taxpayers coming into that.”

Defaulting on the nation’s debt would cause “one heck of a mess” in capital markets that would ripple into the banking system, he said.

On Monday, House Speaker Kevin McCarthy, R-Calif., said his new debt ceiling proposal will “save taxpayers trillions of dollars, make us less dependent upon China, curb our high inflation — all without touching Social Security and Medicare.”

The McCarthy plan includes a cap on non-defense discretionary spending, a “clawback” of unspent pandemic relief funds and new work requirements for Medicare recipients of a certain age.

The House Speaker told CNBC on Monday that he could “get the party behind it,” effectively admitting that his plan did not have the support of enough members of his caucus to pass in its current form.

Article source: https://www.cnbc.com/2023/04/18/hakeem-jeffries-slams-kevin-mccarthy-debt-ceiling-plan.html