White House sounds alarm on debt ceiling fight, warns Medicaid, food stamps at risk

Battle to raise debt limit carries big risks for state, local officials: White House

The Biden administration is warning state and local governments about drastic cuts to Medicaid, food stamps, disaster relief and other federal programs if Congress fails to raise or suspend the debt ceiling soon.

The battle to raise the government's borrowing limit carries big risks for state and local officials, the White House said in a fact sheet obtained by the Associated Press. With the total debt standing at $28.5 trillion, the government would be forced to slash federal programs unless the cap is either suspended or lifted.

The Treasury Department began implementing extraordinary measures to keep the government running after the debt limit was reinstated in August around $22 trillion – about $6 trillion less than the actual level. Treasury Secretary Janet Yellen has warned Congress the federal government will run out of cash to pays its bills sometime in October.


But lawmakers are engaged in a dangerous game of brinkmanship over the debt ceiling: Democrats are pressuring Republicans to support an effort to raise or suspend the ceiling, adamant that they won't stick it in a partisan $3.5 trillion spending bill. At the same time, Senate Minority Leader Mitch McConnell has repeatedly said he will not sanction further increases, arguing that Democrats have the ability to go it alone. 

"Let’s be clear: With a Democratic President, a Democratic House, and a Democratic Senate, Democrats have every tool they need to raise the debt limit. It is their sole responsibility," McConnell tweeted Wednesday. "Republicans will not facilitate another reckless, partisan taxing and spending spree."

President Biden has countered that Democrats joined with GOP lawmakers three times under the Trump administration to suspend the limit, and that the rising deficit is due to Republican spending. He's argued the sweeping tax and spending package Democrats are still crafting will be fully paid for. 

"Let me remind you, these are the same folks who just four years ago passed the Trump tax cut," Biden said in Thursday remarks at the White House. "It just ballooned the federal deficit."


If the U.S. failed to raise or suspend the debt limit, it would eventually have to temporarily default on some of its obligations, which could have serious and negative economic implications. Interest rates would likely spike, and demand for Treasurys would drop; even the threat of default can cause borrowing costs to increase.

The White House fact sheet shows the economic pain would trickle down to states, since so many aid programs rely on federal funding: The government's ability to respond to natural disasters such as hurricanes, earthquakes or wildfires would be hampered. States would also face Medicaid shortfalls because the federal government covers two-thirds of the costs. A

Broaching the debt limit would also endanger about $100 billion in infrastructure grants for highways, airports and public transit, the memo shows.

Another $50 billion for special education, school districts serving poorer students and other programs would also be threatened, as would $30 billion in food assistance and $10 billion for public health.