Speaker of the House Kevin McCarthy, R-Calif., speaks with reporters about the debt ceiling negotiations at the U.S. Capitol on Tuesday, May 23, 2023.
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WASHINGTON — Debt ceiling negotiations between the White House and congressional Republicans took on a new, tougher tone this week after House Speaker Kevin McCarthy signaled he was unwilling to compromise with Democrats on a list of GOP demands.
Instead, McCarthy MPs say they view a vote to raise the debt ceiling — and to avoid a potentially catastrophic U.S. debt default — as a concession to Democrats, and potentially the only one they plan to do. Given the havoc a default could wreak on the global economy, increasing the borrowing limit is usually a formality, often structured as an accompanying bill that is added to unrelated legislation.
Rep. Patrick McHenry of North Carolina, the GOP’s chief negotiator, was asked Tuesday night about concessions Democrats were getting in a potential compromise with the White House to win Republican and Democratic votes.
“The debt ceiling,” he replied.
“That’s what they’re getting,” added Rep. Garret Graves of Louisiana, another GOP negotiator.
Republicans hold a slim majority in the House, while Democrats have a one-seat advantage in the Senate. Negotiators must therefore craft a bill that can be passed in both houses. Republican demands for policy changes that many Democrats would never vote for will complicate the eventual path of any deal through Congress.
A Democratic official said Republicans have already rejected at least two compromise offers from the White House. The first proposed a freeze on public spending next year at its current level, and another offer would put in place a two-year cap on spending.
While their demands may change, here are the main concessions Republicans want from Democrats, in return for their vote to raise the debt ceiling. Some are relatively easy, while others prove intractable.
- Reform of energy and mining permits: The proposal is arguably the issue on which negotiators can most easily reach consensus, given that the White House And House Republicans support the broader goal of facilitating the launch of new energy projects such as wind farms and gas pipelines in the United States. The talks could get dicey over which permit types to favor: Republicans want fossil fuels, while many Democrats think renewables should be at the top of the list.
- Cancel unused Covid-19 funds: Between 2020 and 2022, Congress has authorized approximately $4.6 trillion to help the United States respond to the coronavirus pandemic. The Congressional Budget Office estimates that about $30 billion of that money was unappropriated and could be clawed back to create savings. President Joe Biden has indicated that the White House will accept this request.
The following are much more delicate.
- New work requirements for Medicaid: The Republican debt limitation bill passed by the House in April would require able-bodied adults without children to work or train to stay on Medicaid, federal health insurance for low-income people. The White House rejected this proposal. “I will not accept any work requirements that will impact medical needs of people,” Biden said earlier this month.
- Changes to current work requirements for food stamps: Unlike Medicaid’s demands, it appears there could be some room for compromise on GOP proposals to raise the retirement age window for those enrolled in the Supplemental Nutrition Assistance Program, or SNAP, of 50 to 55 years old. On the same day Biden rejected Medicaid work demands, he also noted that he supported work demands in the 1990s and said ‘there may be a few more’ that he would support “but nothing major”.
- A lower federal budget benchmark in 2024 than in 2023: This is the biggest sticking point in the whole process, and the issue on which the talks have temporarily broken down a few times.
McCarthy, of California, often equates America’s $31.4 trillion national debt with personal debt. He argues that if you go over your limit on personal credit cards, then you, and by extension America, must “spend less in the coming year than we spent this year.”
But it is not that simple. Raising the debt ceiling does not allow for more spending in the future. For now, it simply allows the government to cover the bills it has already incurred.
What Republicans are really doing is using their leverage and the implied threat of default to achieve a separate and longstanding GOP policy goal: to force the government to cut discretionary spending. In this case, McCarthy wants 2024 benchmark spending to be reduced to its 2022 level. Yet he also insists that defense spending – which accounts for more than 30% of the total – be protected from any cuts. This means that everything else would have to be further reduced to bring the total number back to 2022 levels.
According to the CATO conservative institute, exonerate the military of a spending cut would require cutting the rest of government — everything from homeland security to public health to air traffic control — by about 20%.
Biden has countered that demand for deep cuts to national programs with a proposal to freeze this year’s spending levels next year, but McCarthy has so far rejected that.
“I don’t think I’m asking for the impossible,” McCarthy said Wednesday. “Let’s spend less money in the coming year than we spent this year.”
In addition to the public demands above, House Republicans also have a second set of demands, a kind of conservative wish list that McCarthy and his team have so far not taken seriously.
Nonetheless, these back-shelf demands were on full display Wednesday. in a note released by Conservative Rep. Chip Roy of Texas, a McCarthy antagonist who led the failed effort earlier this year to deny McCarthy the House Speaker.
Roy’s list of demands contains four additional items. Each of them alone represents a red line for the White House.
- Repeal the electric vehicle tax credits at the center of Biden’s renewable energy agenda, which were passed into the Inflation Reduction Act, or IRA, last year.
- Repeal $80 billion of additional Internal Revenue Service funding, also included in the IRA.
- Reverse Biden executive action to forgive about $315 billion in student loan debt. The Supreme Court will decide the fate of Biden’s plan in the coming weeks.
- Enact the REINS Act, which would require regulators such as the Federal Trade Commission and the Environmental Protection Agency to seek congressional approval before they could issue major rules.
Roy’s memo called on McCarthy and Republicans to “hold the line” and insist that all their demands be met or they don’t deliver at all. He also suggested that, at least for Roy, avoiding a default was not the No. 1 priority.
“Each [of the demands] are essential and none should be left behind just to find ‘agreement’,” Roy wrote.