On The Money — Schumer tells McCarthy to show his cards

The top Senate Democrat wants Republicans to explain just how exactly they want to cut spending in exchange for keeping the country solvent.

We’ll also look at how many millions of Americans would lose their jobs if the U.S. defaulted and how the IRS is trying to fix the tax-filing process.

But first, find out which Democrat has jumped into the race to unseat Sen. Kyrsten Sinema (D-Ariz.).

Welcome to On The Money, your guide to everything affecting your bills, bank account and bottom line. For The Hill, we’re Sylvan Lane, Aris Folley and Karl Evers-Hillstrom. Subscribe here.

Schumer calls on House GOP to unveil proposed spending cuts in debt ceiling negotiations

Senate Majority Leader Charles Schumer (D-N.Y.) called on House Republicans on Monday to lay out the spending cuts they’re proposing as part of a deal to raise the debt ceiling and decried what he called their strategy of “brinkmanship” and “hostage taking” to open negotiations.

Schumer said in remarks on the Senate floor that Democrats are prepared to “move quickly” and “well in advance of default” to raise the country’s borrowing authority.

Last week, the U.S. reached the $31.4 trillion ceiling, forcing the Treasury Department to resort to “extraordinary measures” to avoid a default.

The comments come days after President Biden indicated he plans to meet with Speaker Kevin McCarthy (R-Calif.) to discuss raising the debt ceiling. The White House, however, said later that day he will not entertain policy changes such as spending cuts as part of any negotiation.

McCarthy and conservative Republicans are expected to push for cuts to Social Security and Medicare in any deal, and some national defense spending could also be on the chopping block.

The Hill’s Al Weaver has more here.

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And as his House colleagues push for cuts, Senate GOP Leader Mitch McConnell (Ky.) is set to play a pivotal role in the debt ceiling fight expected to consume Washington.

McConnell is a central figure in a fight between conservative House Republicans determined to win huge cuts to domestic spending and a White House that, at this stage in the game, is refusing to negotiate spending cuts for a debt ceiling hike.

Al has more on McConnell’s role here.

LEADING THE DAY

Debt default would cost 6 million jobs, push jobless rate to 7 percent: analysis

The U.S. economy could suffer an economic hit comparable to the 2007-08 financial crisis and recession if the federal government defaulted on its debt, according to an analysis released Monday.

• Mark Zandi, chief economist for Moody’s Analytics, estimated that the U.S. would lose 6 million jobs, $12 trillion in household wealth and 4 percent of gross domestic product (GDP) if Congress and the White House fail to raise the federal debt limit before the U.S. runs out of cash.
  
• The unemployment rate would also rise to at least 7 percent, up from the December 2022 rate of 3.5 percent.

While a brief default would likely be enough on its own to cause a recession, Zandi warned, a protracted standoff over the debt ceiling would be ruinous for a vulnerable U.S. economy.

“If policymakers actually do fail to increase or suspend the limit before the Treasury runs out of cash and defaults on its obligations, interest rates will spike, and stock prices will crater with enormous costs to taxpayers and the economy,” Zandi wrote.

Sylvan explains why here.

Read more: The White House has sought to highlight the resilience of the U.S. economy in the face of high inflation, rising interest rates and mounting layoffs across the technology, real estate and media sectors in making arguments for Biden’s economic stewardship.

But new threats are now on the horizon even as the White House hopes for a soft economic landing from the fight over the debt limit and the Federal Reserve’s efforts to lower inflation.

REFUNDS ON TIME?

IRS funding boost sets high hopes for smoother tax filing season

Expectations for a smooth tax filing season are high after two chaotic cycles brought on by the coronavirus pandemic, which resulted in huge backlogs of tax returns and unanswered calls. That optimism was boosted by $80 billion in funding for the agency passed by Democrats as part of the Inflation Reduction Act last year.

• Treasury officials told reporters Friday that the IRS had hired 5,000 new customer service reps and will have them trained by late February to answer calls during the 2023 tax filing season that officially opened on Monday and closes on April 18.
  
• Treasury officials also said Monday that the IRS had hired around 650 additional personnel to provide in-person support at taxpayer assistance centers.

The IRS aims to get to an 85 percent level of service. Last year, the IRS picked up just 7.5 million calls out of 73 million calls placed.

Tobias Burns has the story here.

EXTRA CREDIT

A growing number of Americans face potentially crippling credit card debt

Americans are piling on credit card debt just as interest rates are reaching historic highs.

• A new survey from Bankrate, the consumer finance company, found 46 percent of cardholders carrying credit card balances from month to month, up from 39 percent a year ago.
  
• A December survey by U.S. News & World Report asked consumers to give the main reason for their credit card debt. The most common response was “increased costs coupled with insufficient income.”

“The pressure people are feeling from rising costs at the grocery store or gas pump, it creates this situation where people are using more of their income even though they’re not consuming more,” said Bruce McClary, a senior vice president at the nonprofit National Foundation for Credit Counseling. “The things that they typically buy are costing more.” 

Daniel De Visé has more here.

Good to Know

A group of House Democrats sent a letter on Thursday asking the Government Accountability Office to investigate why the IRS failed to “adequately conduct mandatory audits” into former President Trump’s tax returns.

Other items we’re keeping an eye on:

• Federal authorities have seized almost $700 million from FTX founder Sam Bankman-Fried, mostly from shares of Robinhood that he owned.
  
• The Biden administration is threatening to veto Republican-led legislation that would restrict the release of oil from the country’s emergency reserve.
  
  

That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and coverage. We’ll see you tomorrow.