By Andy Sullivan
WASHINGTON, May 4 (Reuters) - A Republican plan to cut
federal spending in exchange for lifting the federal
government's debt ceiling will come under the microscope
Thursday in the U.S. Senate, where President Joe Biden's
Democrats are expected to frame it as a damaging to the economy.
The Senate Budget Committee hearing is the first of several
planned by Democrats, who say legislation that passed the
Republican-controlled House of Representatives last week on a
party-line vote would undercut child care, education and other
government programs.
The United States could run out of money to pay its bills as
soon as June 1 if Congress does not raise its self-imposed $31.4
trillion debt ceiling, according to Treasury Secretary Janet
Yellen.
Republicans say any increase needs to be paired with
measures to slow the growth of the U.S. debt, which has jumped
sharply as Washington spent trillions on COVID-19 relief.
Biden insists that Congress should raise the limit without
conditions. He is due to meet House Speaker Kevin McCarthy and
other top lawmakers at the White House next Tuesday. The
standoff is worrying investors, who have pushed yields on as
much as $650 billion of Treasury securities maturing in the
first half of June to record highs after Yellen's announcement.
The Senate so far has not played a role in the standoff.
Republicans have lined up behind the House proposal. Democrats
say they might try to pass a "clean" debt ceiling hike, but that
would be unlikely to win enough Republican votes for passage.
Still, the hearings will provide the sort of legislative
scrutiny that did not take place in the House, where the package
was quickly passed after being assembled by its leadership
behind closed doors.
The centerpiece of the House Republican plan would scale
back a wide swath of annual government spending to last year's
levels, a cut of about 8%, and cap its growth by 1% each year
after that.
The Republican plan does not specify how individual programs
would fare. Democrats have argued that domestic spending would
take the biggest hit, as Republicans would try to protect
military and veterans programs.
The panel will hear from Mark Zandi, chief economist at
Moody's Analytics, who warned that the House Republicans' cuts
could contribute to the U.S. economy falling into a recession
next year, potentially pushing unemployment to 6%, from its
current historically low 3.5%.
The head of an environmental group and a solar-industry
trade association are also scheduled to testify, along with
Brian Riedl, a fellow at the conservative Manhattan Institute
who has advocated spending restraint.
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FACTBOX-What's in the US House Republicans' debt-ceiling
spending-cut bill? FACTBOX-U.S. debt ceiling: A 'clean' increase is not the rule How a US debt crisis standoff could cause a recession - a bad
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(Reporting by Andy Sullivan; Editing by Scott Malone)
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