McCarthy seeks to reassure Wall Street amid stalled debt-limit negotiations

NEW YORK — Speaker Kevin McCarthy took to Wall Street Monday in his latest effort to rally House Republicans around a single strategy to lift the debt limit.

“We are seeing in real time the effects of reckless government spending, record inflation and the hardship it causes,” McCarthy said inside the colonnaded walls of the New York Stock Exchange on a gloomy Monday, a smattering of protestors chanting out front. “Rising interest rates, supply chain shortages, instability in the banking system and uncertainty across the board.”

McCarthy laid out the contours of the GOP's case to the investor class in New York and the broader public, as the party argues it will not help raise the debt ceiling without any new measures to reduce the deficit. The speaker on Monday repeatedly blamed President Joe Biden and Democrats for driving higher inflation through excess spending, reiterating that any hike in the debt limit should be offset by significant spending cuts. He did not, however, offer any more specific details on which cuts House Republicans want to see.

Democrats, meanwhile, counter that Republicans should cleanly lift the borrowing limit and avoid risky negotiations with potentially dire consequences to the global economy. McCarthy sought to reassure the markets during his speech, saying defaulting on existing debt “is not an option.”

"I have full confidence that if we limit our federal spending, if we save taxpayers money, if we grow the economy, we will end our dependence on China, we will curb inflation, and we will protect Medicare and Social Security so America will be stronger,” McCarthy said, repeatedly invoking former president Ronald Reagan, a favorite among many Wall Street traders. The California Republican ripped Biden for doing “nothing” on the federal debt and annual deficits. “In my view, he’s been irresponsible.”

McCarthy added that as a senator, Biden “voted for spending reforms attached to debt limit increases four times.”

Wall Street traders and executives continue to believe that House Republicans and the White House will eventually cut a deal ahead of a deadline sometime this summer, avoiding a default. Republicans and Democrats clashed over the debt limit through much of former President Barack Obama’s tenure, including the first downgrade of U.S. debt by ratings agency Standard & Poor’s in 2011.

Still, the path to a deal remains unclear and McCarthy on Monday said that a “no-strings-attached debt limit increase cannot pass” — which happens to be exactly what Democrats have unwaveringly demanded. He added that in the next few weeks “the House will vote on a bill to lift the debt ceiling into next year, save taxpayers trillions of dollars, make us less dependent on China, and curb high inflation — all without touching Social Security or Medicare.”

But McCarthy’s opening offer on the debt limit is riddled with potential political pitfalls — including an expiration date that would tee up another high-stakes fiscal fight just months before the 2024 presidential election.