West Virginia’s senators say negotiations over the nation’s debt ceiling are likely to be resolved with concessions, potentially averting economic turmoil.
“We will not miss paying our bills. We will not have a default, That’s my prediction,” Senator Joe Manchin, D-W.Va., said on a call with state reporters.
“How much games will be played and how much damage can be done, I’d like to avoid that completely. But default’s not in the cards for anything.”
U.S. Treasury Secretary Janet Yellen has warned that the United States could be unable to meet its debt obligations by June 1, just a few weeks away, if Congress doesn’t act sooner. The Congressional Budget Office also revised its estimate to say the Treasury seems likely to run out of funds by early June.
The debt limit is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations. If the United States defaults on its debt, economists warn of dire effects on the economy.
Last week, House Republicans narrowly passed a bill that raises the debt limit while also sharply curtailing future spending growth. The Biden administration has pushed for legislation that focuses only on already-obligated debt, setting aside the question of future spending.
President Biden has invited House Speaker Kevin McCarthy and other congressional leaders of both parties to meet Tuesday on the debt ceiling.
Manchin said he is open to spending limits in the coming years, noting that federal budgeting grew, in part, in response to the covid-19 pandemic. Manchin said it’s now time to get federal spending in line.
The House proposal would return 2024 discretionary federal spending to fiscal 2022 levels while capping spending growth at 1 percent a year for the next decade. The Congressional Budget Office has estimated the bill would curtail spending by more than $3 trillion a year over a decade, resulting in more than $4.5 trillion in federal savings once other factors such as interest are considered.
Manchin said he’s receptive to that kind of financial belt tightening.
“I’m not supporting cuts; I’m supporting controlled spending,” he said.
The Senate Budget Committee discussed the House proposal Thursday in a hearing called “The Default on America Act.”
Expert witness Mark Zandi, chief economist for Moody’s Analytics, told senators that defaulting on the nation’s debt would produce disastrous financial effects. He said the negotiations to fund the federal government in 2024 while also increasing the debt limit “will surely be messy and painful to watch and will generate significant volatility in financial markets.”
Lawmakers will not be sufficiently motivated to find a political path forward and act until they recognize the severe economic and political costs of not doing so, Zandi said.
“But when all is said and done, the legislation that lawmakers ultimately pass will likely be anticlimactic, allowing both House Republicans and President Biden to declare political victory,” Zandi suggested.
For House Republicans, he said, the legislation may include some restraint on the future growth in discretionary spending, a clawback of unused covid-19 relief funds, and a streamlining of permits for energy development to allow House Republicans to declare victory.
Meanwhile, the president can argue that concessions were modest and simply part of the typical budget process and not a quid pro quo for a debt limit increase, Zandi said, “a happy enough outcome to ensure the government is funded and the economy avoids financial calamity and recession.”
Senator Shelley Moore Capito, R-W.Va., agreed that seems like a possible outcome.
“I think Speaker McCarthy has made it pretty clear that a clean debt ceiling cannot pass the House, which means there has to be some concessions,” she said, “and while the president might want to go to tax increases or something, I don’t think the House would go with that. So I think those are probably the two confining pieces,” Capito said.
So, she said, potential areas of a deal might include curbing future spending, clawing back unused covid funds and energy permitting policy.
Capito said the challenge would be for McCarthy to get enough votes to pass that bundle of policies in a narrowly divided House.
“And then the president’s position, in my view, the way he declares victory is ‘We didn’t default, I negotiated, I’m the leader of the country, you need me to be there to be Joe Biden who negotiates’ because that’s how he sold himself originally.”
Additional elements of the House bill would impose restrictions on income support programs, including work requirements on Medicaid recipients who do not have children, an increase in the age limit for work rules for the Supplemental Nutrition Assistance Program and a requirement that states report on work outcomes under the Temporary for Needy Families program.
West Virginians for Affordable Healthcare is urging the state’s congressional delegation to oppose the work requirements for Medicaid recipients. The organization said the provision could affect more than 200,000 Medicaid enrollees in West Virginia.
“This proposal is a clear attack on access to quality, affordable health care with particularly devastating consequences for patients with serious, acute and chronic illnesses,” said Dr. Jessica Ice, executive director of West Virginians for Affordable Health Care.
Wrapping work requirements into the debt limit package is unlikely to result in increased labor participation, she said in a telephone interview. More than 50 percent of Medicare enrollees already work, she said.
“What it’s going to do is create a paperwork burden for folks, and they’ll lose their health insurance coverage.”