House Speaker Kevin McCarthy (R-CA) spent months at square one as he tried to force President Joe Biden to agree on federal spending cuts in exchange for a hike to the nation’s borrowing limit.
But Treasury Secretary Janet Yellen’s announcement that the United States could default on its debts as early as June 1 seems to have given House Republicans at least some leverage, based on Biden’s quick call for a meeting of congressional leaders to discuss the pending economic calamity.
Now, House Republicans, holding a narrow 222-213 majority over Democrats, are hopeful the logjam could soon break before the fiscal cliff upends markets both in the U.S. and abroad.
US COULD DEFAULT BY JUNE 1 WITHOUT DEBT LIMIT HIKE, YELLEN WARNS
McCarthy has staked his speakership on reining in federal spending, making a series of concessions to his right flank in the House Republican Conference to win the gavel in January. Conservatives contend federal spending must be slashed to address the $31.4 trillion national debt and eventually balance the budget.
McCarthy sat down with the president on Feb. 1 to start negotiations over the debt ceiling. But Biden refused to engage, insisting that the borrowing limit not be used as a bargaining chip. Biden and Democrats insist the time for negotiations is in the annual budget process. The current fiscal year ends on Sept. 30.
The two have been at an impasse ever since. McCarthy attempted to secure a second meeting with Biden in March but was met with a common refrain from Democrats: “Show us your budget.”
Although Republicans were pressing for steep cuts, they had yet to coalesce around a specific set of demands. Democrats were skeptical that McCarthy could even usher a bill through the House given his five-seat majority and the conservative Freedom Caucus’s aversion to compromise.
Yet McCarthy surprised Washington by quickly muscling a bill through the chamber late last month that would cut the deficit by $4.8 trillion over the next decade and roll back several of the president’s legislative achievements. Among its provisions, the legislation would repeal Biden’s student loan forgiveness program, claw back billions in unspent COVID-19 relief funds, and target the green energy tax credits of the Inflation Reduction Act.
Senate Majority Leader Chuck Schumer (D-NY) warned the bill was “dead on arrival” in the Democratic-controlled Senate, but it served to show Republican unity. (Four House GOP lawmakers voted against the plan, the most McCarthy could afford to lose in a party-line vote.)
More important, House Republicans hoped passing the bill would break the debt ceiling impasse. “The president can no longer ignore by not negotiating,” McCarthy said shortly after the House approved the measure.
McCarthy heard radio silence from the White House in the days following the bill’s passage. But that all changed on May 1, when twin estimates — one from Yellen and another from the Congressional Budget Office — projected the U.S. would be unable to pay all of its bills by “early June” due to lower-than-expected tax receipts. The date was far earlier than most forecasters had anticipated.
Both parties reacted to the new “X-date” by blaming one another for the stalemate. McCarthy knocked Biden for “threatening to bumble our nation into its first ever default,” while Schumer issued a joint statement with House Minority Leader Hakeem Jeffries (D-NY) denouncing “extreme MAGA Republicans” for holding the debt ceiling “hostage.”
But accompanying the partisan posturing was a breakthrough for McCarthy.
Biden declined to schedule another one-on-one with the speaker, but he invited the “Big Four” congressional leaders — McCarthy, Schumer, Jeffries, and Senate Minority Leader Mitch McConnell (R-KY) — to meet at the White House on May 9.
McCarthy got his meeting.
Democrats have gone to great lengths to reiterate that, meeting or not, they will not trade a debt ceiling hike for spending cuts. But they have left the door open to negotiating over spending levels as part of the annual budget process.
Schumer has placed on the calendar a bill that would hike the debt ceiling through 2024 without spending cuts. But he also teed up McCarthy’s debt limit bill, which a Schumer spokesperson said will “ensure that once a clean debt ceiling is passed, the House bill is available for a bipartisan agreement on spending and revenue as part of the regular budget process.”
In effect, the House bill could serve as a shell for compromise legislation. Neither bill is guaranteed a vote, but the move allows the Senate to fast-track its consideration down the road.
Taken together, the moves were far from a slam dunk for McCarthy. But they raised GOP hopes that a deal could be reached.
Sen. Mitt Romney (R-UT), a member of the Senate Budget Committee, said the distinction between debt ceiling talks and budget talks was a matter of semantics.
“That, in my opinion, is just playing with language,” he told the Washington Examiner. “They say they’re separate, but you do them at the same time, you agree to both of them, then it gets done.”
Meanwhile, Sen. Mike Rounds (R-SD) predicted Democrats would eventually move off their no-concessions stance.
“Oh, look, I think it’s positioning to begin with,” he told the Washington Examiner. “We all know that there’s got to be a negotiation on it. They’re identifying their position. That’s to be expected.”
But Democrats are making clear a clean debt ceiling increase is a distinct possibility. Jeffries set into motion a “Plan B” on May 2 that would allow Democrats to lift the debt ceiling with no conditions.
The vehicle, known as a discharge petition, allows the measure to be brought to the floor without McCarthy’s blessing. But Democrats would still need the support of a handful of House Republicans for it to pass.
Complicating matters further, it takes more than 30 days for a petition to reach the floor, meaning there may not be enough time if Washington really only has until June 1. Its prospects in the 51-49 Senate would be even more daunting because a no-conditions debt ceiling hike would need 60 votes to move forward in the chamber.
For now, the GOP is unified behind McCarthy. McConnell agreed to attend the “Big Four” White House meeting, but he, along with the rest of his conference, has reiterated that the speaker is in the driver’s seat in negotiations with Biden.
Sen. Thom Tillis (R-NC), known as a bipartisan deal-maker in the Senate, lamented that expanding debt talks to the “Big Four” risked there being “too many cooks in the kitchen” but said that with such a short window to negotiate, there was political utility to having at least Schumer in the room.
“They need to wrap it together, and we can’t start negotiations with Senate members after the negotiations have finished with Biden and McCarthy,” Tillis told the Washington Examiner. “We don’t have time, and it doesn’t make sense, and it’s not how this process has worked here in my eight years.”
Lawmakers in both parties are so far resisting the prospect of a short-term debt limit hike to allow more breathing room but concede it’s a possibility if Washington can’t break the stalemate.
The House and Senate will only be in session for 12 and 15 days, respectively, in May, while Biden is heading to Japan and Australia on the 19th.
“What we need to do is face this directly and get it done,” Sen. Chris Van Hollen (D-MD), a member of the Appropriations Committee, told reporters. “But obviously, the most important thing is not to go over the cliff.”
Senate Minority Whip John Thune (R-SD) doubted there would be the votes to pass a short-term extension.
Even if Democrats do offer McCarthy a debt ceiling compromise, he will still have to contend with the most conservative members in his conference, some of whom have warned they won’t vote for anything less than what the House passed last month.
“There were probably must-have provisions in the bill to get their vote to begin with,” Tillis said. “If those provisions come out, those are the first ones that you’re going to lose.”
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That means McCarthy, who faces the threat of a no-confidence vote if he crosses the Freedom Caucus, would have to peel off a handful of Democratic votes for any debt ceiling compromise. It’s a risky move that could imperil the very speakership he’s hoping to burnish.
“What the speaker has to do is figure out, for every Republican vote he loses, how many Democratic votes does he pick up to net it out?” Tillis said. “It’s got to be about addition.”
