Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our s each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro . The top Republican on House Financial Services doesn’t want Kevin McCarthy to pick a fight with the Biden administration over the debt ceiling. Rep. Patrick McHenry (R-N.C.), who’s poised to chair the powerful committee if Republicans take control of the House, told MM on Monday that he opposes McCarthy’s (R-Calif.) plan to use the debt limit to extract potentially painful spending cuts from Democrats next year. “It's important that Congress raise the debt limit,” McHenry said, adding that he looked forward to making sure members “understand the debt limit; what it is, why it exists and the consequences for inaction.” McHenry’s unwillingness to mess with a key mechanism affecting how Washington pays its bondholders — to say nothing of millions of Social Security, Medicare and Medicaid beneficiaries — could put him at odds with House Republicans who want to exert maximum pressure on Democrats to force spending reductions. Treasury markets are “the lifeblood of the global economy,” said McHenry, a 17-year incumbent who has deep relationships within the financial services sector. While McHenry underscored the risks of using the debt ceiling as a bargaining chip, McCarthy told Punchbowl News last month that it’s time for Congress to stop “ lifting [the government’s] credit card limit .” Raising the debt limit allows the government to cover expenses that Congress has already incurred; it doesn’t authorize new spending. McCarthy’s comments signaled a revival of Obama-era budget battles that convulsed markets and put the government in danger of default. (Republicans and Democrats reached agreements to raise the debt ceiling three separate times during the Trump administration, but financial markets generally shrugged off those confrontations.). The stakes are somehow higher now. The House Budget Committee expects government debt to hit the current $31.4 trillion ceiling sometime early next year. If Democrats don’t act to raise that limit during lame duck — when their agenda’s likely to be packed with votes on judicial appointments and must-pass defense funding legislation — House Republicans could push the government toward a fiscal cliff around the same time many economists think the U.S. will enter a recession. In normal times — if such a thing even exists anymore — Congress would address a possible recession with government spending and stimulus. That’s politically impossible so long as consumer prices continue to soar. McHenry’s certainly not calling on Congress to approve new spending. But threatening the government’s ability to meet its basic obligations comes at considerable risk, he said. “It's an important function of the government for us to make good on the checks that we cash,” said McHenry. IT’S TUESDAY — Have a tip, story idea or feedback to share? Let us know: kdavidson@politico.com and ssutton@politico.com .
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