Speaker McCarthy Proposes $1.5T Debt-Limit Increase

Capitol Building

U.S. Speaker Kevin McCarthy proposed a bill that would raise the U.S. debt limit for about a year and cut federal spending, ahead of a planned House vote on the Republican proposal next week.

The plan would increase the debt ceiling by $1.5 trillion, enough to stave off a U.S. payments default until at the latest March 31, 2024. It also contains a host of conservative proposals that are non-starters with congressional Democrats and the White House.

The McCarthy plan would bring discretionary spending back to 2022 levels — a $130 billion cut. Future increases would be capped at a 1% annual rate for the following decade.

The reductions “are not draconian, they are responsible,” McCarthy said. “If Washington wants to spend more it will have to come together and find savings elsewhere just like every single household in America.”

The plan would also rescind unspent Covid-19 funds, impose tougher work requirements for anti-poverty benefits and ease regulations on energy projects.

Negotiation Hope

McCarthy estimated that the bill would cut budget deficits by $4.5 trillion over a decade.

The speaker hopes that, if the House can pass the proposal, President Joe Biden will then engage in talks to resolve the ongoing stalemate over raising the $31.4 trillion debt limit. Without an increase or suspension of the ceiling, the U.S. would default on payment obligations as soon as June — an event Treasury Secretary Janet Yellen has warned would cause economic and financial “collapse.”

“House Republicans have a plan. The Senate does not,” McCarthy said. “And the president is ignoring the debt crisis. 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.”

It’s unclear if McCarthy can get the support of the 218 Republicans he will need to pass the bill in the coming days, in the face of united Democrat opposition.

Challenging Vote

Republicans now control the chamber 222-213. That means McCarthy’s efforts to rally his conference behind a bill can’t succeed if more than four GOP members oppose it — if all House members vote and all Democrats oppose it.