Senate Republicans criticise Biden budget amid banking, market strains

By David Morgan

WASHINGTON (Reuters) – U.S. Senate Republicans accused Democratic President Joe Biden of misleading Americans about his $6.8 trillion budget plan to reduce deficits and shore up Medicare in a debate that reinforced an increasingly risky standoff over spending and the country’s debt ceiling.

At a Senate Budget Committee hearing on Wednesday with White House budget director Shalanda Young, Republicans dismissed the budget plan’s aim of reducing deficits by nearly $3 trillion over the next decade and instead claimed the proposal would kill jobs, grow the federal deficit and add to the debt.

Republicans, who control the House of Representatives, have yet to produce their own budget or to offer concrete deficit-reduction plans, making Biden’s proposal an early step in negotiations over fiscal 2024 spending. Republicans have refused to raise the nation’s $31.4 trillion debt ceiling unless Democrats agree to sharp spending cuts.

“We have to use this debt ceiling issue to pry the nation’s maxed-out credit card from Joe Biden’s hands,” Republican Senator Roger Marshall said.

Democrats also showed no sign of budging from their own refusal to negotiate over the borrowing limit.

“We need to drop the politics, address the debt ceiling without any strings attached, and soon,” said Democratic Senator Patty Murray, who chairs the Senate Appropriations Committee.

Failure to address the debt ceiling could lead to an unprecedented default by the federal government that would rattle the global economy and financial markets, which have been volatile following the collapse of Silicon Valley Bank and Signature Bank.

New financial strains at Credit Suisse threatened to raise the stakes even further.

Young insisted that Biden’s budget would reduce deficits without imposing a penalty on working families, through nearly $5 trillion in tax increases on the wealthy and large corporations to help offset spending and shore up Medicare.

But Republican Senator Mitt Romney suggested that the president’s deficit reduction forecast was based on federal spending for the COVID-19 pandemic from previous budgets.

“To say somehow that he’s been cutting the deficit is just not realistic,” Mitt Romney told Young.

Added Senator Chuck Grassley, the panel’s top Republican: “It seems to me, the administration misleads the American people on real deficit reduction.”

Even as they disagree on spending, leaders of both parties say they will not cut Social Security and Medicare, which currently account for about a third of the federal budget. Not touching those, or failing to cut defense spending, leaves little chance of addressing the government’s budget deficit.

The only heated exchange in the proceedings occurred when Romney accused Young of being “dishonest” for saying that Republican lawmakers have proposed benefit cuts for Social Security and Medicare.

Young said the White House looked forward to seeing a Republican budget that suggests the programs are off the table. “Have they changed their position? Maybe,” she said.

Republicans who control the House of Representatives are working to release their own budget in coming weeks, which lawmakers have said could contain up to $150 billion in cuts for domestic non-defense spending.

Republicans are determined to avoid tax hikes and to preserve tax cuts for the wealthy implemented under former President Donald Trump.

The hardline House Freedom Caucus last week issuing a counterproposal that includes a near freeze on discretionary spending and an end to multiple Biden programs.

Young warned that the Republican focus on discretionary non-defense spending would mean drastic cuts for child care, low-income home heating and cooling assistance, border operations and foreign relations. “The list goes on and on,” she said.

A presentation by the nonpartisan Congressional Budget Office last week laid out options for addressing the deficit and projected that spending cuts would have substantially less effect on the deficit than increased tax collections.

(Reporting by David Morgan in Washington; Editing by Scott Malone, Matthew Lewis and Marguerita Choy)