Washington (AFP) - Republican leaders in the US Congress were scrambling Wednesday to corral support for a legislative package combining drastic spending cuts with a hike in the country's borrowing limit as the potential for a ruinous credit default loomed.
The government is expecting to hit the debt ceiling within weeks, raising the possibility of the world's largest economy defaulting on repayments and igniting a firestorm in global markets.
The Limit, Save, Grow Act -- opposed by the Democrats -- has no chance of becoming law, but Republicans are trying to shoehorn it through the House of Representatives as an opening salvo in negotiations with President Joe Biden.
Lawmakers began debate in the afternoon with hopes of a floor vote before the end of the day, as House Speaker Kevin McCarthy struggled to win over a handful of Republican holdouts.
"The Senate has done nothing.The president has done nothing.The House will lift the debt ceiling and limit the growth of Washington spending," a defiant McCarthy had vowed after talks with the rebels.
The high-stakes standoff is being touted as a test of McCarthy's leadership after he secured the speaker's gavel in January by pledging to his party's hard-right wing that he would slash federal spending.
But he is short on time, with the House scheduled to break until May 9 from this weekend, when the speaker is due to lead a cross-party delegation to Israel.
'Not negotiable'
The United States is almost $32 trillion in debt -- a figure that has been accumulated under both parties over decades.
The 320-page Republican bill would raise the ceiling through March 2024 -- paving the way for another debt limit fight in the middle of the presidential election campaign -- or until the debt grows to $32.9 trillion.
But it dramatically cuts federal spending and rolls back major portions of Biden's agenda, such as his push to cancel student debt and mitigate climate change.
The independent Congressional Budget Office said the bill would save $4.8 trillion over a decade, although ratings agency Moody's Analytics estimated that it could stunt 2024 growth by 0.6 percentage points and kill 780,000 jobs.
The stakes are extraordinarily high for McCarthy, who has been able to meet just once with Biden as the president has steadfastly refused to entertain signing off on any debt limit increase involving spending cuts.
"I'm happy to meet with McCarthy but not on whether or not the debt limit gets extended.That's not negotiable," Biden told reporters at the White House as lawmakers began debate on the debt ceiling.
If the vote fails, the House could be forced to move a no-strings-attached hike -- exactly what Biden wants but a potential disaster for the speaker, who would risk losing support among his party's right flank.
The outcome is on a knife edge, with McCarthy only able to lose four Republicans to get the package through, and a handful still wavering.
Marathon meetings
McCarthy had initially vowed to put the legislation on the floor without changes but relented overnight to placate holdouts following marathon meetings that stretched into the early hours.
The tweaks include a u-turn on repealing Democratic-passed tax breaks for the ethanol industry -- a proposal that had irked Republicans from the so-called "corn belt" in the Midwest -- and accelerated implementation of tough work requirements for social welfare programs such as food stamps.
Right-wing Florida congressman Matt Gaetz told CNN late Tuesday -- before the overhaul -- that there were eight Republican holdouts, although that number appeared to dwindle through Wednesday as some lawmakers reported having been reassured by McCarthy.
US Treasury debt is considered the world's benchmark safe asset and its interest rates are the basis for the pricing of financial products and transactions across the planet.
Economists argue that failure to honor repayment obligations could panic investors, supercharge borrowing costs and torch millions of jobs.
The Treasury has been using "extraordinary measures" -- essentially moving money around and drawing on certain accounting tools -- for months to keep paying creditors who own government bonds.
The federal government has taken in less tax revenue than expected, however, raising concerns that the government could run out of cash as early as June.
