Senate Democrats highlight ‘terrible choice’ of Republicans’ debt ceiling plan

Senate Democrats held a hearing on Thursday to lambaste House Republicans' proposal to raise the US government's borrowing limit in exchange for spending cuts, as economists testified that a federal default would bring disastrous and decades-long consequences.

The hearing came a week after House Republicans narrowly passed the Limit, Save, Grow Act to raise the debt ceiling until May 2024. The legislation, championed by the House speaker, Kevin McCarthy, would also roll back federal discretionary spending to 2022 levels and cap annual increases at 1%.

Mocking the bill as the "Default on America Act", Democrats warned that the legislation would result in devastating cuts to veterans' benefits, childcare access and infrastructure funding.

"Republicans' dangerous bill proposes a terrible choice: default on our financial obligations, causing widespread pain and wrecking our economy, or gut basic federal programs essential to our economic strength, causing widespread pain and wrecking our economy," said Senator Sheldon Whitehouse, the Democratic chair of the Senate budget committee. "It is a false and unnecessary choice."

Republicans on the committee countered that the House bill should be interpreted as an "opening bid" to kickstart negotiations with Joe Biden, who has repeatedly called on Congress to pass a "clean" bill raising the debt ceiling without any strings attached. Biden has invited the top four congressional leaders to a meeting at the White House next week to discuss the debt ceiling.

"I hope when the president sits down with the speaker, he will bring an open mind and a serious counteroffer," said Senator Chuck Grassley, the Republican ranking member of the budget committee. "The longer the president spends dragging his feet and putting off negotiations, the closer President Biden brings us to the first ever federal default in US history."

Three economists testified to the committee that a default would prove calamitous for the country and global markets, causing America's unemployment rate to rise and its gross domestic product (GDP) to tumble.