WASHINGTON — President Biden will ask Speaker Kevin McCarthy, Republican of California, on Wednesday for details on what budget cuts his party is demanding in order to raise the federal debt limit and for assurances that Mr. McCarthy will not accept an economically debilitating government default, White House officials said.
The demands, outlined in a memo that the White House released on Tuesday, are an attempt by Mr. Biden to force Republicans to engage in a debate over taxes, spending and debt on terms that are more favorable to the president than to newly empowered conservatives on Capitol Hill.
Mr. Biden is seeking to force Mr. McCarthy to specify which programs he would cut — a list that most likely includes some spending that is popular with the public — and to calculate how much Republicans would add to the debt with additional tax cuts. In the memo, Brian Deese, the director of the National Economic Council, and Shalanda Young, the director of the Office of Management and Budget, said the president would release his annual budget on March 9 and asked when Mr. McCarthy would do the same.
Understand the U.S. Debt Ceiling
What is the debt ceiling? The debt ceiling, also called the debt limit, is a cap on the total amount of money that the federal government is authorized to borrow via U.S. Treasury securities, such as bills and savings bonds, to fulfill its financial obligations. Because the United States runs budget deficits, it must borrow huge sums of money to pay its bills.
The limit has been hit. What now? America hit its technical debt limit on Jan. 19. The Treasury Department will now begin using “extraordinary measures” to continue paying the government’s obligations. These measures are essentially fiscal accounting tools that curb certain government investments so that the bills continue to be paid. Those options could be exhausted by June.
What is at stake? Once the government exhausts its extraordinary measures and runs out of cash, it would be unable to issue new debt and pay its bills. The government could wind up defaulting on its debt if it is unable to make required payments to its bondholders. Such a scenario would be economically devastating and could plunge the globe into a financial crisis.
Can the government do anything to forestall disaster? There is no official playbook for what Washington can do. But options do exist. The Treasury could try to prioritize payments, such as paying bondholders first. If the United States does default on its debt, which would rattle the markets, the Federal Reserve could theoretically step in to buy some of those Treasury bonds.
Why is there a limit on U.S. borrowing? According to the Constitution, Congress must authorize borrowing. The debt limit was instituted in the early 20th century so that the Treasury would not need to ask for permission each time it had to issue debt to pay bills.
“It is essential that Speaker McCarthy likewise commit to releasing a budget, so that the American people can see how House Republicans plan to reduce the deficit — whether through Social Security cuts; cuts to Medicare, Medicaid and Affordable Care Act health coverage; and/or cuts to research, education and public safety — as well as how much their budget will add to the deficit with tax cuts for the wealthiest Americans and large corporations,” Ms. Young and Mr. Deese wrote.
Mr. McCarthy, along with Senator Mitch McConnell, Republican of Kentucky, are set to meet with Mr. Biden at the White House on Wednesday. Administration officials have said the meeting will touch on a wide range of topics, but its principle backdrop is the threat by the House speaker and his caucus not to increase the debt limit unless Mr. Biden agrees to steep cuts in federal spending.
The president has said repeatedly he will not negotiate over raising the limit, which the government reached this month. Economists warn that the country could experience financial crisis and recession if lawmakers do not raise it before the government runs out of its ability to pay its bill
But Republicans so far have not listed specific demands for raising the limit or released an official budget. Mr. McCarthy has preferred to frame the debate in more general terms, accusing Democrats and Mr. Biden of out-of-control spending.
“I know the president said he didn’t want to have any discussions, but I think it’s very important that our whole government is designed to find compromise,” Mr. McCarthy told CBS’s “Face the Nation” on Sunday. “I want to find a reasonable and a responsible way that we can lift the debt ceiling, but take control of this runaway spending.”
He added. “I don’t think there’s anyone in America who doesn’t agree that there’s some wasteful Washington spending that we can eliminate.”
In the memo, Mr. Deese and Ms. Young said Mr. Biden would demand that Mr. McCarthy “commit to the bedrock principle that the United States will never default on its financial obligations.” They also took aim at some early proposals in the House that would add to the nation’s $31 trillion debt, including a bill passed this month that seeks to undercut an initiative Mr. Biden championed for the I.R.S. to crack down on wealthy tax cheats.