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Close to hitting the debt ceiling, the government must win over House Republicans

SCOTT SIMON, HOST:

Financial markets have long assumed the U.S. government can always be counted on to pay its bills. That faith could soon be tested. The federal government's about to bump up against its $31 trillion borrowing limit. House Republicans say they won't vote to raise the debt ceiling unless they get spending cuts or other concessions. NPR's Scott Horsley joins us. Scott, thanks so much for being with us.

SCOTT HORSLEY, BYLINE: Good morning, Scott.

SIMON: When is this coming to a head?

HORSLEY: The exact deadline is uncertain, but it's not too far off in the distance. Treasury Secretary Janet Yellen sent a letter to congressional leaders yesterday saying she expects to hit the debt ceiling on Thursday when the government is holding a big Treasury auction. Now, she can buy some time by raiding retirement funds. That's kind of like digging under the couch cushions to find cash for the pizza guy. But that only works for so long. So sometime around the middle of this year, possibly as early as June, lawmakers will either have to raise the debt limit or else the government won't be able to pay all the bills that Congress has run up. And a default like that could be really destabilizing. If markets can't depend on the U.S. government to pay its bills, all bets are off.

SIMON: Yeah. Raising the debt ceiling is something lawmakers have to do every year or two. It's more challenging this time, though, isn't it?

HORSLEY: It is. I mean, this is always a fraught vote. Nobody likes to vote to OK more government debt. And there's been plenty of posturing by lawmakers in both parties under the guise of fiscal responsibility. But what makes people particularly nervous this time around is you have a small faction of Republicans in the House who have shown they're not afraid to blow things up to get what they want. That's why it took 15 rounds of voting just to elect Kevin McCarthy as speaker. McCarthy told Sean Hannity on Fox House Republicans plan to use the debt ceiling vote as a bargaining chip to extract some concessions on things like spending cuts.

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KEVIN MCCARTHY: We think if you had a child, and you gave them a credit card, and they kept hitting the limit - do you just increase the limit, or do you change their behavior? This is our moment to change the behavior, to make sure that hardworking taxpayer - that we're not wasting their money.

HORSLEY: Now, significantly, House Republicans did not take that position when President Trump was in office. They raised the debt limit three times during that period without much fuss, even as the government was adding about $8 trillion in debt. As Democratic Senator Ron Wyden complained yesterday, deficits are only a problem when a Democrat's in the White House.

SIMON: Do we know what President Biden plans to do about the debt limit?

HORSLEY: Biden argues that it's Congress's responsibility to pay these bills. The president's had some pretty good economic news lately - the job market's strong, inflation eased up a bit last month. And White House spokeswoman Karine Jean-Pierre says the president doesn't plan to jeopardize any of that by negotiating over the debt ceiling.

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KARINE JEAN-PIERRE: It's not and should not be a political football. This is not political gamesmanship. This should be done without conditions.

HORSLEY: Now, if Congress wants to cut spending in the future, lawmakers could obviously do so. But the White House says it's wrong to walk away from the bills that the government has already incurred. That's not putting yourself on a fiscal diet. That's just ducking out on the dinner tab.

SIMON: Scott, what's this mean for us?

HORSLEY: So far, markets are assuming this is going to get worked out, and historically it does. But, you know, even if the government manages to avoid a default, cutting it close can carry a price tag. The last time this came down the wire back in 2011, the stock market tumbled. That hit people's retirement savings. And the federal government saw its credit rating downgraded for the first time in history. So this kind of brinkmanship can actually result in higher borrowing costs, which only adds to the government's debt.

SIMON: NPR's Scott Horsley, thanks so much.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.

Scott Simon is one of America's most admired writers and broadcasters. He is the host of Weekend Edition Saturday and is one of the hosts of NPR's morning news podcast Up First. He has reported from all fifty states, five continents, and ten wars, from El Salvador to Sarajevo to Afghanistan and Iraq. His books have chronicled character and characters, in war and peace, sports and art, tragedy and comedy.
Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.