America has just days to raise or suspend the debt ceiling before June 1. At least, according to Treasury Secretary Janet Yellen.
“We expect to be unable to pay all of our bills in early June and possibly as soon as June 1. And I will continue to update Congress, but I certainly haven’t changed my assessment. So I think that that’s a hard deadline,” Yellen said during an interview on NBC’s Meet the Press. House Republicans aren’t so sure. “June 1st? Everybody knows that’s false,” South Carolina’s Rep. Ralph Norman said of Yellen’s X-date. “I don’t believe that the first of the month is a real deadline,” Florida Rep. Matt Gaetz claimed. “I don’t understand why we’re not making Janet Yellen show her work.”
If June 1 is a “hard deadline,” as Yellen suggests, then President Joe Biden’s White House and the Democrats certainly have not been acting like it. For months, Biden and the Democrats refused to negotiate over the debt ceiling.
“The President wouldn’t negotiate, wouldn’t even discuss it, for 100 days,” Pennsylvania’s Rep. Scott Perry, House Freedom Caucus chairman, told The American Conservative in a phone interview. “We all knew it was gonna be a problem, but the White House did nothing for essentially three months.”
Biden has been clear that a debt ceiling increase is “not negotiable,” that it simply must happen. Point taken, but that’s not the question at hand. House Republicans, even those who have never voted for an increase in the debt ceiling, know the debt ceiling must increase. “What we said is, look, we acknowledge the problem exists, we don’t like it, we didn’t create it, but we’ve got to deal with it,” Perry told TAC.
Despite all his blustering about non-negotiables, Biden has been forced to the table as his administration’s proclaimed deadline hurtles near.
The divide that remains between Republicans and Democrats is a well-established partisan split. In exchange for an increase in the debt ceiling, Republicans want spending cuts. Democrats, on the other hand, have asked for a clean debt ceiling increase bill, ostensibly claiming they are willing revisit spending cuts at a later date (likely when the federal government is projected to run out of funding in late September), but really are trying to avoid the spending cuts altogether.
The reality is that the Biden White House and Democrats made a bad bet. They believed that, because of the fight over the Speaker’s gavel, the debt ceiling issue would cause the Republican caucus to fracture. Members to House Speaker Kevin McCarthy’s right, they thought, would outright prevent a debt ceiling increase, rather than push for legislation that increased the debt ceiling while curtailing spending. Without anything coming out of the House, Democrats believed McCarthy would come to the negotiating table without any leverage. If a deal was struck to increase the debt ceiling, they believed the House Freedom Caucus and other members to the right of McCarthy would once again go to war with the Speaker and even potentially use the motion to vacate they fought for to evict him from the Speaker’s office. If all else failed, Democrats thought maybe Senate Minority Leader Mitch McConnell would come to their rescue.
To Biden and the Democrats’ chagrin, that’s not how it played out. At times, however, it seemed things were going the Democrats way. House Republicans floated creating a budget blueprint that would go into excruciating detail on the cuts necessary to get their support for increasing the debt ceiling, but that effort fell apart after weeks of internal Republican negotiations.
What Republicans came up with instead, however, was the Limit, Save, Grow Act, which McCarthy and Republicans managed to pass in late April by a vote of 217 to 215. Getting the conference to coalesce around the Limit, Save, Grow Act was no small feat, especially since the bill is rather comprehensive and substantive, and not a watered-down messaging bill one might expect in order to get the mixed Republican caucus’s approval.
The Limit, Save, Grow Act would increase the debt ceiling by $1.5 trillion or through March 31, 2024, whichever happens first. In exchange for the debt ceiling increase, government spending for FY24 would be set to FY22 levels—a level that the government was operating on just a few months ago—and allow for 1 percent growth year-over-year for the next decade, saving American taxpayers an estimated $3.6 trillion.
Other spending cuts would be secured by rescinding unused Covid-19 funding, saving the U.S. an estimated $50 to $60 billion, and gutting the Biden administration’s expansion of the IRS, estimated savings that amount to about $70 billion.
The legislation would also defang one of Biden’s chief legislative accomplishments, the Inflation Reduction Act. The Inflation Reduction Act added all kinds of green subsidies. “These special interest tax breaks will cost up to three times more than what Democrats claimed they would be when they sold the Inflation Reduction Act to the American people,” according to a press release from the House Ways and Means Committee. “The Joint Committee on Taxation—which initially estimated the IRA’s green subsidies would cost $271 billion—now project the costs will more than double to $570 billion, before including the additional costs of electric vehicle subsidies. Other independent analysis tags the price of the IRA’s special interest tax breaks at over $1 trillion.” The Limit, Save, Grow Act would put an end to many of these subsidies, as well as the green electricity tax breaks that have overwhelmingly gone to billion-dollar corporations and Chinese firms.
Furthermore, it would restore work requirements for welfare programs like Temporary Assistance for Needy Families (TANF), Medicaid, and food stamps, and rescind Biden’s effort to forgive student debt.
Many conservative members of the Republican caucus aren’t thrilled they had to vote for an increase in the debt ceiling, Perry among them. Nevertheless, Perry told TAC that “it was important, especially for folks like me, who have never voted for a debt ceiling increase because I didn’t come to Washington, D.C. to bankrupt my country, to say, look, we can be a part of solving this problem.”
“This is a bad situation that you’ve got to find a good solution to,” Perry continued. “So you have the agreement to raise the debt ceiling one and a half trillion dollars or by the end of March, whichever comes first, in exchange for policies that start changing the trajectory of our spending so that we don’t continually have to keep raising the debt ceiling.”
“For the past two years, Democrats have had a spending addiction which has fueled inflation and inflicted financial pain on every American family. It’s time to end their addiction and House Republicans are united to curb inflation, make our economy stronger, spend less to put us on better fiscal path, and make us less dependent on China,” McCarthy told TAC via email. “House Republicans acted early and responsibly by passing a bill that would save taxpayer money and avoid default, while President Biden ignored the problem for 100 days just as he completely ignores the border crisis.”
But the Limit, Save, Grow Act is dead on arrival in the Democratic-led Senate. Biden has already suggested he’d veto the bill. Still, Republicans managed to pass a bill to increase the debt ceiling while Democrats sat on their hands in the belief that the issue would throw Republicans into disarray.
The Senate, under the leadership of Senate Majority Leader Chuck Schumer, doesn’t “even have a bill ready,” Perry said in a tone of utter disbelief. “They just thought they could demand that we increase the credit card limit, and we would just accept that,” Perry continued. “Now suddenly they’re scurrying around demanding that we change what we pass. That’s not how this is supposed to work. We passed the bill, and now we need to know what they can pass. We’ve already done our work. We did our work last month, knowing that this was coming and knowing that somebody had to be sensible and responsible.”
Democrats, it seemed, believed they’d be bailed out, either by the breakdown of the House Republican conference or by McConnell in the Senate.
In January, House Democrats, led by Rep. Mark DeSaulnier of California, introduced “The Breaking the Gridlock Act,” a forty-five–page piece of legislation that sought to use a discharge petition to force a debt-ceiling increase to the floor and circumvent Republican leadership. For the discharge petition to pass, however, the Democrats would have needed five Republicans to cross party lines. The introduction of “The Breaking the Gridlock Act” demonstrates that the Democrats had some confidence that centrist members of the Republican caucus would break ranks while McCarthy shored up his right flank. But no such break occurred.
Without any movement from the Biden White House or Senate Democrats, the essentially powerless House Democrats made a far-flung attempt to get Republicans to defect. On May 2, the week following the House’s vote on the Limit, Save, Grow Act, House Democrats introduced an emergency rule that permitted the collection of signatures for the discharge petition starting on May 16. Every House Democrat has signed the petition, but have failed to court a single Republican vote.
Democrats thought McConnell might come to their rescue. A number of Democrats, including President Biden, called on McConnell to come to the negotiating table. McConnell, they seemed to believe, was their best shot at getting a clean debt ceiling increase.
But McConnell is staying out of it. “The president knows how to do this…. Until he and the Speaker of the House reach an agreement, we’ll be at a standoff,” McConnell told reporters in early May. “The president and the Speaker need to come together and solve the problem.”
McConnell agreed to sign on to a letter to Schumer that stated, “The Senate Republican conference is united behind the House Republican conference in support of spending cuts and structural budget reform as a starting point for negotiations on the debt ceiling,” and thus “will not be voting for cloture on any bill that raises the debt ceiling without substantive spending and budget reforms.”
What’s more, Lee tweeted a vow on Thursday to “use every procedural tool at my disposal to impede a debt-ceiling deal that doesn’t contain substantial spending and budgetary reforms.”
“Senator Schumer needed to know that the Senate Republicans will not simply rubber-stamp a debt ceiling increase,” Lee said of the letter in an email to TAC. “Our nation’s mounting debt demands careful attention and responsible action. As elected representatives, it is our duty to uphold the fiscal integrity of our country and safeguard Americans’ interest. That’s precisely what the House-passed legislation accomplishes.”
“It is also why I have made it clear that I will use every procedural tool at my disposal to impede a debt-ceiling deal that doesn’t contain substantial spending and budgetary reforms,” Lee added.
“The Democrats never have had any interest in getting our fiscal house in order,” Perry claimed. “They literally and essentially have told me they always plan to just increase the debt ceiling,” and assumed Republicans would be unwilling or unable to act.
They’re only claiming to have interest in doing so now because, with nowhere to turn and no course of action, the Democrats have become victims of their own doomsday predictions. The White House claims that a prolonged default could lead to a massive recession in which more than 8 million people lose their jobs. A brief default could result in the loss of 500,00 jobs, but Moody’s Analytics claims that if the default lingered on to just one week, job losses could amount to 1.5 million.
That’s not to say Republicans deny that a failure to reach an agreement on the debt ceiling would harm the economy. Democrats, rather than lay in the bed they made, are trying to force Republicans into taking their spot. “There’s a fair number of indicators that say it’s not going to happen on June 1,” Perry said. “ The most recent one is we’re sending another pile of money to Ukraine. A country that’s going broke, that can’t pay its bills, doesn’t send a bunch of money over to another country in a war that we’re not even supposed to be involved with.”
Whether Democrats are willing to push negotiations past their proclaimed deadline of June 1 remains to be seen. Negotiations between Biden, Democrats, the White House’s team of negotiators, McCarthy, and Republicans are continuing with mixed results. Over the weekend, there were walkouts and accusations levied by both sides. But the commitment to continue negotiating necessarily remained.
Shortly after Biden returned from the G-7 summit Sunday, he spoke to McCarthy over the phone in preparation for Monday’s Oval Office meeting between the president and the Speaker. In the president’s absence last weekend, the White House sent Shalanda Young, Louisa Terrell, and Steve Ricchett to rendezvous with the speaker, Rep. Patrick McHenry of North Carolina, and Rep. Garret Graves of Louisiana. The talks stretched into Sunday night, with the White House offering a deal to limit spending on defense and other programs such as housing aid, education, and scientific research.
It was a clever offer—other than defense spending, propose cutting programs Republicans would like to cut, but would be unpopular, and then hang them with it if they accept. If Republicans decline, as they did, turn around and claim they offered Republicans massive concessions. The more likely of the two options was always the latter; to keep the Republican conference together, to the disappointment of this magazine, McCarthy likely couldn’t get away with defense spending cuts.
McCarthy retorted with another clever offer: demands to increase spending on defense, border security, and veterans care, and cuts to other domestic programs, which the White House had to reject to maintain Biden’s domestic agenda.
After Biden and McCarthy met at the White House on Monday, McCarthy said the meeting was “productive,” and the president implied the same. Throughout the week, there’s been little movement towards a solution despite continued meetings.
“There is a significant gap between where we are and where they are,” Graves told reporters Tuesday night. “Unless and until the White House recognizes that this is a spending problem, then we’re gonna continue to have a significant gap.”
Wednesday meetings were more of the same. “I think we’ve made some progress working down there, so that’s very positive,” the Speaker claimed. “There was a number of issues that are out there that we’ve been working on, I think being able to find some ways that we can probably get to fruition on a couple of these, there’s still a number of these out there.”
As it appears Biden and McCarthy are getting closer to a deal, some on the right have expressed concern that McCarthy might be willing to give more away than he has to. Center for Renewing America President Russ Vought tweeted Thursday, “Kevin McCarthy is on the verge of striking a terrible deal to give away the debt limit thru Biden’s term for little in the way of cuts. Nothing to crush the bureaucracy. They are lining up Democrats to pass it. The DC cartel is reassembling. Time for higher defcon.”
It’s good to keep pressure on the Republicans negotiating with the White House—Republicans have the leverage and ought to turn it into a win. But the cracks in the Republican caucus can’t become a chasm. Doing so could turn the odds back in the Democrats’ favor, potentially leading to a deal that’s worse for Republicans if McCarthy continued on the current trajectory.
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Representative Chip Roy of Texas, one of the strongest proponents of the Limit, Save, Grow Act, delivered a simple message on the House floor Thursday: “Hold the damn line.”
Republicans are willing to do what Democrats thought they wouldn’t: raise the debt ceiling. And that’s precisely what has sent Democrats spiraling. “Look, it’s a new day in Washington, DC, people demanded a change in the status quo,” Perry said. Be careful what you wish for, you just might get it.
Oh, and, per the Wall Street Journal, the U.S. Treasury Department is “quietly laying the groundwork for potentially delaying some payments after June 1.”
