The Republican plan to cut federal spending in exchange for lifting the US debt ceiling would increase unemployment, slow economic growth and “substantially increase” the chance of a recession, the chief economist at Moody’s Analytics told Thursday. a Senate committee.
Mark Zandi told the Senate Budget Committee that US Gross Domestic Product growth would be 1.61% in 2024 if the Republican plan is approved, compared to 2.23% otherwise, and 790,000 jobs would be lost.
Republicans are pressing President Joe Biden to agree to spending cuts as a condition of raising the debt ceiling above the current $31.4 trillion. Biden and the Democrats insist that Congress raise the ceiling with no strings attached.
The United States would run out of money to pay its debts as soon as June 1 if Congress does not act, according to Treasury Secretary Janet Yellen.
Zandi said the government would likely reach that point by June 8, though he noted it could happen anytime between June 1 and Aug. 8.
“We have to put an end to this drama as soon as possible, otherwise we will enter a recession and our fiscal problems will be even worse,” Zandi added to the commission.
The hearing is the first of several planned by Senate Democrats, who say the bill passed by the Republican-controlled House of Representatives last week in a party-line vote would cut child care, education and other government programs. .
Republicans argue the cuts are necessary to slow the growth of US debt, which has skyrocketed since Washington spent trillions of dollars on COVID-19 relief.
Biden is scheduled to meet with House Speaker Kevin McCarthy and other lawmakers Tuesday at the White House. The standoff is worrying investors.
The Senate has so far not played a role in the matter. Republicans have agreed with the House proposal and Democrats say they could try to pass a “clean” debt ceiling increase, but are unlikely to win enough Republican votes.
Still, the hearings will offer the kind of legislative scrutiny not seen in the House of Representatives, where the bill passed quickly after being prepared by his leadership behind closed doors.
The whole point of the Republican plan is to reduce a wide range of annual government spending to last year’s levels, a cut of about 8%, and cap their growth at 1% a year for the future.
The Republican plan does not specify what those cuts would look like. Democrats argue that household spending would suffer the most and that Republicans would try to protect military and veterans programs.
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