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Politics Foreign Affairs Culture Fellows Program

Deal or No Deal: Debt Ceiling Edition

President Joe Biden and House Speaker Kevin McCarthy have a deal, but will House Republicans go for it?

Speaker McCarthy Hosts Annual Friends Of Ireland Luncheon At The U.S. Capitol

Rep. Chip Roy's message last Thursday was simple: “Hold the damn line” on Republican efforts to secure spending cuts in exchange for an increase in the debt ceiling. Over the holiday weekend, however, House Speaker Kevin McCarthy retreated.

McCarthy struck a deal with President Joe Biden’s White House that appears to forgo many of the wins Republicans were poised to score. Previously, the McCarthy-led House GOP managed to pass the Limit, Save, Grow Act—a fairly comprehensive bill that would cut major portions of Biden’s inflationary agenda and limit future spending in exchange for a modest increase to the debt ceiling. But the deal now at issue in the House, first the Rules Committee and then potentially the floor, does no such thing.

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“Thus far in this Congress, the dynamic force in Washington has been the unified House majority: the fact that we resolved in January on concrete details how we were going to go forward together. And it has been impactful over this first several months of Congress. Imagine the decision of Kevin McCarthy and his negotiators to forfeit that,” Rep. Dan Bishop of North Carolina said during a Tuesday press conference. “Can you calculate the cost of surrendering that advantage?”

The ninety-nine-page piece of legislation borne out of McCarthy and Biden’s agreement would suspend the debt ceiling limit, which currently sits at $31.4 trillion, until January 2025. It’s a massive victory not only for Biden and the Democrats, but for the uniparty writ large.

It punts a real debate about the debt ceiling—a dollar amount increase—to a lame duck session of Congress after a presidential election. For the rest of Biden’s first term, the Treasury Department would be able to borrow however much is necessary for America to pay its bills. Biden and the Democrats will probably abuse this power to further entrench their deeply-rooted structural advantages in the administrative state.

Extending the debt ceiling increase until January 2025 removes the debt ceiling, and the nation’s fiscal irresponsibility generally, as a live issue during the election. If the Republican nominee wins in 2024, the GOP president-elect would have zero say in the debt ceiling negotiations. What’s more, the brazenness of the uniparty, in all of its swampy splendor, is on display for all to see during spending-bill negotiations. By punting to January 2025, McCarthy takes away what could have been a massive cudgel Republicans could use against the uniparty during the 2024 election cycle. 

The January 2025 date, Bishop said, “removes the issue from the national conversation during the presidential election to come. How could you more successfully kneecap any Republican president than to take that issue out of his or her hands?”

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It’s a mighty concession to make. Maybe one would assume that in exchange for these debt ceiling extensions, Republicans would have managed to get many of the spending cuts they passed in the Limit, Save, Grow Act.

Nope. 

The Limit, Save, Grow Act would have cut the $80 billion given to the IRS in the Inflation Reduction Act to expand its operations and train 87,000 new IRS agents. In the deal struck over the weekend, just $1.38 billion of the IRS funding would be rescinded. Another $20 billion not yet spent would be repurposed in 2024 and 2025 to other non-defense spending programs. Not to worry: It’s not like Democrats have a history of weaponizing the IRS against its political opponents.

Under the Limit, Save, Grow Act, the government would have also revoked between $50 to $60 billion of unused Covid-19 funding, given Biden himself has declared the pandemic is over. The deal Biden and McCarthy struck rescinds about half of the unused Covid money.

The legislation also fails to cancel green subsidies included in the Inflation Reduction Act, whereas the Limit, Save, Grow Act would have repealed about $1.2 trillion in these subsidies that have been channeled to the ultra-wealthy and Chinese-owned firms.

The deal does not include the Limit, Save, Grow Act’s end to Biden’s student loan forgiveness plan, though Biden agreed to end the freeze on student loan repayments beginning in August. Modest increases for welfare work requirements were included, but fell short of the Limit, Save, Grow Act’s provisions. And the REINS Act, which was incorporated into the Limit, Save, Grow Act to rein in the administrative state, was nowhere to be found. 

Furthermore, the future cuts in spending Republicans managed to pass in the House—paring back FY24 spending to FY22 levels and capping spending growth to 1 percent each year for the next decade—were neutered. Instead of a spending cap spanning ten years, Republicans got two years, and changes those caps from stipulations to mere suggestions. 

At a Tuesday press conference with Bishop and other House Freedom Caucus members, Rep. Chip Roy of Texas said, “Not one Republican should vote for this deal. It is a bad deal. No one sent us here to borrow an additional $4 trillion to get absolutely nothing in return.”

“At best, if I'm being really generous,” Roy said, all Republicans would get is “a spending freeze for a couple of years.”

The deal struck between McCarthy and Biden, “is chock full of cosmetic things, artificial things, things that actually have been outright lied about,” Bishop stated.

“There are two paths here,” Roy later added. The first: “Take up the bill that we passed. It's a good bill. It's sitting over the Senate, they could pass it and send it to the president.” The second, Roy claimed, is that McCarthy should pull the 99 page piece of legislation from consideration. “I don't think he even has a majority of his own conference at this point,” Roy said in an aside.

“Right now, Covid recisions are in the bill, Covid recisions of $29 billion," he continued. "They've already taken that in this bill and they've swept 22 billion and just set it over the Department of Commerce for play money. Take that money, take IRS money, and go tell Janet Yellen, 'You're gonna pay every bill you need to pay, and we're gonna sit down at the table and do the job for the American people.' But don't tell me you're gonna put me over a barrel for $4 trillion because you refuse to do your job. That is what Speaker McCarthy should have told the president of the United States.”

Roy’s prediction that McCarthy might have to rely more on Democratic support than Republican support to get the deal through the House might come true. As Tuesday drew on, other House GOP members beyond those present at the press conference on Capitol Hill, such as Reps. Wesley Hunt, Cory Mills, Nancy Mace, and Kat Cammack, came out against the McCarthy-Biden deal.

In fact, the deal might not even get out of the Rules Committee. As part of the January negotiations that resulted in McCarthy winning the race for speaker, hardline conservatives secured more representation on the House Rules Committee with one-third of the majority’s seats. Two of the three hardline conservatives, Roy and Rep. Ralph Norman of South Carolina, have said they will vote against the deal in committee. 

What’s more, the Washington Post is reporting that Democrats on the Rules Committee are prepared to vote against the deal in committee, which means that all eyes fall on Rep. Thomas Massie of Kentucky, who has yet to come out on whether he’s for or against pushing the deal through committee. If Massie is a no, it’s 7–6 against, and McCarthy and Biden will be sent back to the drawing board.

Maybe there's something more to McCarthy's decision to go forward with a softer debt ceiling deal than his Republican colleagues wanted. In September, Republicans and Biden's Democrats will have to negotiate for an increase in the federal government's funds or risk a government shutdown, and perhaps McCarthy sees that September date as a better opportunity for Republicans to negotiate for spending cuts because a government default is much higher stakes than a government shutdown.

But first McCarthy needs to ensure his tenure as speaker lasts until September. When a reporter asked Freedom Caucus members if they'd be willing to use the motion to vacate if McCarthy goes forward with this deal, Rep. Perry did not answer and said "we're dealing with the bill right in front of us." Right behind him, Bishop raised his hand while Rep. Andy Biggs giggled.