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Monday, January 30, 2023

Bipartisan Negotiators Propose Tying Debt Limit To GDP As White House Prepares To Meet With McCarthy

Top line

Rep. Brian Fitzpatrick (R-Penn.) said he is working with Rep. Josh Gottheimer (D-N.J.) on a proposal that would set the federal government’s debt ceiling at the national level. A specific percentage of total economic output, rather than a fixed sum, marks a sign of progress as lawmakers seek to prevent the government from defaulting after exceeding the debt ceiling last week.

key facts

The deal, brokered by moderate House Problem Solvers Caucus co-chairs Fitzpatrick and Gottheimer, would trigger spending cuts when U.S. debt exceeds a certain debt-to-gross domestic product ratio.

Fitzpatrick expressed the importance of raising the debt ceiling and limiting the federal deficit as part of negotiations, he told fox news sunday “When your kids have spending problems, you do two things: pay their bills and take their credit card.”

Fitzpatrick previously said a default on the debt — which has never happened in U.S. history and which most economists believe would be catastrophic — is “impossible.”

Fitzpatrick previously said a default on the debt — which has never happened in U.S. history and which most economists believe would be catastrophic — is “impossible.”

large number

124%. This is the current debt-to-GDP ratio, according to the Ministry of Finance. The debt-to-GDP ratio surpassed 100% for the first time in 2013, when both figures were around $16.7 trillion.

key background

Treasury Secretary Janet Yellen said on Thursday that the U.S. had reached its $31.4 trillion federal borrowing limit, initiating “extraordinary measures” to prevent a default, including suspending investments in certain federal employee retirement funds. Yellen estimated that these “extraordinary measures” will expire on June 5, depending on how much the government raises from spring tax revenues and other 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 said they plan to demand cuts or even changes in the Biden administration’s policies in exchange for agreeing to raise the debt ceiling, but the White House has repeatedly said it will not negotiate on the issue. House Speaker Kevin McCarthy (R-Calif.) and President Joe Biden announced plans Friday to meet to discuss the debt ceiling, which would include “a range of issues as part of a series of meetings with all new congressional leaders beginning this year,” Press Secretary Karine Jean-Pierre said.

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, which some Democrats fear, would be a “mistake.” things) that Republicans could propose) “wouldn’t happen,” he said CNN Union states. Manchin also said he had agreed to meet with McCarthy to discuss a “path forward” in negotiating a debt ceiling increase, he said on Fox Business Sunday morning futures.

Contra

Several Democrats expressed confidence in Sunday’s talks, including Sen. Tim Kaine (D-Va.), who said Biden planned to meet with McCarthy to discuss raising the state’s borrowing limit. “a good thing,” And Gottheimer said he was “optimistic” about the talks.

further reading

Feds Officially Hit Debt Ceiling, Triggering ‘Extraordinary Measures’ to Prevent Default — Here’s What It Means (Forbes)

Debt limit showdown: How upcoming talks will play out in Congress (Forbes)

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