Dueling Debt Ceiling Plans
According to the inside-the-Beltway publication Punchbowl News, U.S. House Republican leaders will press for a vote on raising the nation’s statutory debt ceiling as soon as next week. (As a reminder, the federal government is expected to hit this borrowing threshold — effectively, the government’s credit card limit — early this summer. If Congress does not raise the debt ceiling before then, the country risks default and, potentially, economic catastrophe.)
House Speaker Kevin McCarthy (R-Calif.) previewed the GOP leaders’ plans in remarks Monday at the New York Stock Exchange. We will look at his outline this week — along with a few other debt ceiling ideas that have been floated by other lawmakers.
Debt Ceiling: What House Republican Leaders Want
In his remarks this week, Speaker McCarthy tied the debt ceiling debate to one of American voters’ chief concerns: rising prices for everyday goods. “We are seeing in real-time the effects of reckless government spending,” Speaker McCarthy said. “Record inflation, and the hardships it causes. Rising interest rates. Supply chain shortages. Instability in the banking system. And uncertainty across the board.”
To combat rising prices, Speaker McCarthy proposed a one-year debt ceiling increase paired with spending cuts and a set of other policy changes Republicans believe will fuel economic growth. Specifically, in exchange for raising the debt limit through May 2024, Republicans want Democrats to agree to:
Capping non-defense federal discretionary spending at fiscal year 2022 levels;
Limiting budget growth annually for the next 10 years to one percent;
Prohibiting student loan debt forgiveness;
Repealing green energy tax credits;
Enhancing work requirements for public benefits, including food stamps;
Increasing U.S. domestic energy production; and
Reducing federal regulations.
Democrats did not bite.
While President Joe Biden did not respond directly to Speaker McCarthy’s remarks, White House spokesperson Andrew Bates said the Republican leader’s plan amounted to “economic hostage taking.” Bates also said Speaker McCarthy “failed to clearly outline what House Republicans are proposing and will vote on.”
For their part, White House officials have been clear they expect House Republicans to release a full fiscal year 2024 budget before Democrats will negotiate further with GOP on combining a debt ceiling increase with spending cuts. Speaker McCarthy did not hit that mark Monday. (Readers may recall that Speaker McCarthy and President Biden met in February to discuss a path forward on the debt ceiling. In his speech this week, Speaker McCarthy acknowledged the two have not spoken about this issue since then.)
Without support for the White House or Democrats in Congress, where will House Republican leaders go from here? Yesterday, they offered framework for a debt ceiling increase to rank-and-file GOP lawmakers.
Some Republicans also did not bite.
Rep. Nancy Mace (R-S.C.) told Politico, “I’m not there yet.” She said she wants Republican leaders to fight for more policy priorities to be included in the debt ceiling deal. Rep. Matt Gaetz (R-Fla.), who was one of Rep. McCarthy’s chief foes during the marathon race for House speaker earlier this year, said, “We still have to resolve major questions like the dollar amount, and the duration, and the policy concessions we are seeking from the Senate.”
Speaker McCarthy’s plan now is to sidestep the traditional process of sending legislation through the committee of jurisdiction and instead use the House Rules Committee to push forward the bill. If this path is the one Republicans ultimately take, it would violate the pledge Speaker McCarthy made to conservative Republicans earlier this year to return House operations to “regular order.”
Reneging on that agreement, and raising the ire of his fellow Republicans, is not the only thing Speaker McCarthy needs to worry about. Other GOP lawmakers have their own ideas for raising the debt ceiling.
Centrist And Conservative Republicans Have Their Own Plans
Two factions within the House Republican caucus — the Republican Study Committee and the Main Street Caucus — have released their own outlines for addressing the debt ceiling.
According to The Hill, like Speaker McCarthy, the 70 members of the centrist Main Street Caucus want to “claw back billions in coronavirus funds they say have gone unspent, end the ongoing pause on federal student loans repayment, and return non-defense discretionary spending to fiscal 2022 levels.” They also want to enhance work requirements for the Americans who receive SNAP benefits.
There are subtle difference in their plan and Speaker McCarthy’s, however. While Speaker McCarthy wants to limit spending over the next decade to one percent, the Main Street Caucus has said it would allow a more generous 1.5 percent growth. Additionally, in a letter to Speaker McCarthy, Main Street Caucus members said they want to convene a bipartisan panel to propose solutions to increase “the sustainability of Medicare and Social Security” and for Congress to “reassert oversight of the rulemaking process by requiring specific congressional authorization of major rules.”
The Republican Study Committee (RSC) released its plans for raising the debt ceiling in March. The RSC said it wants to:
Ensure a debt ceiling increase is accompanied by commensurate spending reductions;
Reverse recent increases in overall discretionary spending and institute statutory limitations on annual discretionary spending levels;
Increase domestic energy capacity and reduce regulatory and permitting barriers.
End the national COVID-19 emergency;
Increase workforce participation;
Pass pro-growth tax policies;
Eliminate wasteful spending on duplicative programs;
Transition non-entitlement mandatory programs to the discretionary side of the budget, giving Congress control of funding for these programs;
Establish a long-term fiscal control that would restrain the growth of the national debt as a percentage of the nation’s economy; and
Codify procedures to ensure the federal government honors obligations like federal debt payments, national security and veterans, Social Security, and Medicare.
Like Speaker McCarthy, the White House and Democratic leaders in Congress also must contend with proposals from their rank and file.
An Alternative Debt Ceiling Plan For Democrats?
While House and Senate Democratic leaders have stood behind the White House’s strategy for raising the debt ceiling, last Friday Roll Call reported Rep. Jared Golden (D-Maine), “a moderate House Democrat from a key swing district” where the majority of voters supported former President Donald Trump in 2020, has offered a plan “that includes policy proposals designed to appease both parties.”
The proposal came in the form of a letter — not to the White House or Democratic congressional leaders, but to Rep. Golden’s own constituents. Specifically, the congressman asked his fellow lawmakers to come together to:
Pass a two-year budget that sets topline spending numbers for fiscal years 2024 and 2025;
Agree to a short-term debt limit suspension bill enacting those toplines and providing time for appropriators to write fiscal 2024 spending bills to the agreed-upon cap;
Include further debt limit increases in the fiscal 2024 and 2025 appropriations bills if they adhere to the agreed-upon toplines; and
Approve, over the next two years, additional measures to reduce the budget deficit.
Regarding spending for fiscal year 2024, Rep. Golden suggested Congress adjust the fiscal year 2022 budget topline for inflation. “In other words,” Rep. Golden said. “Allow spending to go up with price increases, but reverse the additional spending increases Congress passed on top of that.” While Republicans might be amenable to that plan, they will not like Rep. Golden’s plan for raising taxes, which include:
Increasing the corporate tax rate from 21 percent to 25 percent for businesses with more than $10 million in profits;
Restoring the top marginal individual rate to 39.6 percent (from 37 percent) for taxpayers who earn more than $400,000;
Expanding the one percent surtax on corporate stock buybacks; and
Closing unspecified “loopholes.”
Where do all of these various plans leave Congress?
Is Congress Closer To A Deal Than It Was Last Week?
Republican leaders can only lose four votes in their own caucus — otherwise the Speaker’s plan to raise the debt ceiling will be defeated. Given the internal GOP dissent noted above, getting the required votes will be a difficult feat to achieve.
But even if Speaker McCarthy’s bill survives in the House, Senate Majority Leader Charles Schumer (D-N.Y.) has said he will not allow a vote on the plan in the Senate. In fact, before Speaker McCarthy’s remarks, Majority Leader Schumer was clear: “I’ll be blunt,” he said. “If Speaker McCarthy continues in this direction, we are headed toward a default.”
In other words: even if there is a House vote next week, when it comes to averting a potential economic crisis, lawmakers still have not meaningfully moved the ball.