Tell Congress: Act Immediately To Avoid A Debt Default Crisis
Congress needs to act urgently and pass a clean debt limit increase before June 1st.
If Congress fails to raise the debt limit, the U.S. government will default on it's debt with catastrophic impacts for our economy, for working people, for retirement savings, and for essential government services.
This crisis is entirely avoidable. Unfortunately, House of Representatives Speaker Kevin McCarthy (R-CA) is refusing to consider increasing the U.S. debt limit -- something Congress has done 78 times since 1960 -- unless President Biden and Democrats agree to long-term budget spending caps that will deepen economic inequality and starve our economy of necessary investments, impacting Americans in every state and Congressional District.
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Congress -- Republicans, Democrats, and Independents alike -- needs to act immediately and pass a debt ceiling increase, and get back to work on passing a government funding bill for fiscal year 2024.
House Republicans have passed the so-called "Limit, Save, Grow Act," H.R. 2811, a partisan lose-lose deal that holds hostage the U.S. Treasury's ability to pay its bills on spending that Congress has already authorized. This bill proposes to pass a debt limit increase in exchange for a 10-year budget cap that would result in drastic and unsustainable cuts to VA health services that veterans count on, worsening service delivery and wait times for Social Security and Medicare, furloughs and layoffs of federal employees, reduction of the number rail inspectors and air traffic controllers, and cuts to Head Start for preschool children and food security benefits for low-income Americans.
Tell your Senators and your Congressional Representative to 1) pass a clean debt limit increase, 2) refuse any deal that cuts federal funding for programs that Americans count on.
What is the debt ceiling and what happens if Congress doesn't increase the debt ceiling?
The debt ceiling, or debt limit, is an artificial legislative limit set by Congress that restricts the U.S. Treasury Department from paying for expenditures that Congress has already approved.
The U.S. did not have a debt ceiling until 1917 when Congress passed the Liberty Loan Act of 1917. Denmark and the U.S. are the only two countries that have a debt ceiling.
If Congress fails to increase the debt ceiling, the U.S. will default on its debt and its obligation to pay its bill.
A U.S. debt default is an unprecedented and entirely avoidable situation. The economic impact of a debt default would cause severe economic harm, possibly triggering a deep recession in the U.S. and have a spillover effect that results in a global economic downturn.
During the 2011 debt ceiling crisis, when Congress waited until two days before the August 2 debt ceiling deadline, Treasury had a contingency plan to pay interest on its debt and postpone payments to federal agencies, Social Security beneficiaries and disabled veterans, Medicare providers and states’ Medicaid programs, and other obligations. This means federal employees, armed service members, and agencies, and government contractors that provide essential services and national security would not be paid on time. (See: How Worried Should we be if the Debt Ceiling is Not Lifted, Brookings Inst., 4/24/23; Default Would Have a Catastrophic Impact on the Economy, Center for American Progress, 5/11/23)
What cuts are House Republicans proposing in the "Limit, Save, Grow Act," the House-passed legislation that raises the debt limit by $1.5 trillion or through March 31, 2024?
This legislation caps the fiscal year 2024 federal budget at 2022 levels (cutting $130 billion from all federal agencies) and then caps annual budget growth at 1% for the next ten years.
Were the budget cuts in this deal enacted across the federal government (in both defense and non-defense discretionary spending accounts), federal agencies would have to cut 13% in 2024, with a projected 24% cut by 2033.
If there are no cuts to defense spending, as House Republican leadership has pledged, federal agencies would have to cut 27% in 2024, with a projected 49% cut by 2033.
Federal agencies would make significant cuts to veterans' health services and other VA benefits, Social Security and Medicare customer services, food safety, environmental protection, public safety, enforcing labor protections and worker rights, food and housing assistance, support for K-12 education and Pell grants, community health services, and more.
Congresswoman Rosa DeLauro, Ranking Member of the House Appropriations Committee, as requested information from federal agency leadership on the impact of a 22% decrease in discretionary spending. Read responses from 23 agency heads on the impact of the budget cuts proposed by House Republicans.
The legislation also repeals many clean energy tax incentives that were passed last year in the Inflation Reduction Act (IRA) for nuclear energy, renewable energy, hydrogen production, and mining of critical minerals to support clean energy. The majority of those incentives are expected will go to energy projects in Congressional districts represented by Republicans.
This legislation blocks President Biden's student loan forgiveness of up to $20,000 per borrower, ends the income-driven repayment plan, and blocks the administration from issuing education-related executive actions.
Pulls back new IRS funding for enforcement and improved taxpayer services, which will result in a loss of $200 billion in tax revenue over 10 years.
These budget cuts are projected to result in an immediate economic impact, lowering economic growth and resulting 780,000 fewer jobs in the economy according to Moody’s Analytics (See: McCarthy Bill Uses Debt Ceiling to Force Harmful Policies, Deep Cuts, Center for Budget and Policy Priorities, 4/24/23; Debt Limit Drama Heats Up [PDF], Moody’s Analytics 4/23; Speaker McCarthy’s Debt Ceiling Proposal Would Undo Benefits of Inflation Reduction Act, Center for American Progress, 4/26/23 )