House Speaker Kevin McCarthy made a revealing comment after discussing the budget and debt limit with President Joe Biden in the Oval Office last week. “I would like to see if we can come to an agreement long before the deadline,” he said.
McCarthy’s suggestion that he would like to avoid a protracted, anxiety-filled debt limit drama could be interpreted as a disingenuous attempt by the California Republican to claim the mantle of reasonableness before unleashing a flood of unreasonable demands. But I see it as a recognition on McCarthy’s part that the debt limit is not a valuable hostage, easily tradable for a tidy ransom. The debt limit is more like a hand grenade; you don’t want it in your hand when it explodes. McCarthy appears to want to put the pin back in.
If Republican leaders thought they would gain leverage by acting as if they were crazy enough to blow up the economy—spooking Biden as well as the financial markets—they would rev up the crazy talk instead of dampening it.
Instead, on January 29, the Sunday before the White House meeting, when Face the Nation moderator Margaret Brennan asked McCarthy, “You will avoid a default? You will not let that happen on your watch?” McCarthy responded, “Look, there will not be a default.” That tracked with Senate Minority Leader Mitch McConnell’s earlier declaration, “America must never default on its debt. It never has, and it never will.”
McCarthy’s low-key beginning to the debt limit discussions is a bit surprising because of how he won the speaker’s gavel. House Freedom Caucus holdouts, who had complained about the December 2021 vote to raise the debt limit and the December 2022 passage of the $1.7 trillion omnibus spending bill, had blamed McCarthy for caving to the Democrats (even though McCarthy voted against both measures). McCarthy won their support after backing a House rule allowing a single member to call a vote on ousting the speaker, informally supporting a budget resolution that eliminates deficits in 10 years, and tying any debt limit increase to a budget-cutting agreement. (Budget resolutions are nonbinding but are intended to guide the work of Congress’s annual appropriators.) If McCarthy moves toward raising the debt limit without such an agreement, one disgruntled Republican could force a vote on his speakership, which he could lose if just five Republicans defect.
However, at least at this initial stage, McCarthy doesn’t appear to be feeling much pressure from his right flank. The fiscally austere Republican Study Committee—which includes most House Republicans and has aggressively pushed for spending cuts—has yet to articulate clear demands.
On February 1, during a private lunch meeting of RSC members, Representative Kevin Hern, the group’s chair, presented a set of “policies for discussion in debt limit negotiations.” The Oklahoman’s fuzzy demands are void of hard numbers and don’t even include a fixed timeframe for achieving a balanced budget. But some of his goals are worded vaguely enough to be theoretically achievable, including calls to “reverse recent increases in overall discretionary spending,” “institute statutory limitations on annual discretionary spending levels,” and “establish a long-term fiscal control focused on reducing spending to restrain the growth of our federal debt as a percentage of the nation’s economy.” For example, “statutory limitations” can be set at high levels with exemptions. “Restrained growth of debt”—a far cry from the RSC’s call in its proposed fiscal year 2023 budget to “slash federal debt”—can happen slowly.
The RSC list includes a demand to “ensure an increase in the debt ceiling is accompanied by commensurate spending reductions.” This is akin to the demand made by House Speaker John Boehner during the 2011 debt limit negotiations, the last time a Democratic president in his third year squared off with a newly Republican-controlled House. However, Boehner went a step further than “commensurate” and said, “cuts should be greater than the accompanying increase in debt authority.” He won, sort of. The final compromise increased the debt limit by $2.1 trillion, designed to last a little more than a year. It also aimed to cut spending by the same amount, but over a decade.
What happened over the next 10 years? Federal spending as a percentage of the gross domestic product did decline during the rest of President Barack Obama’s tenure, from 23.1 percent in 2011 to 20.6 percent in 2016. That held steady under President Donald Trump until 2020 when pandemic relief brought it to 31.1 percent, the highest since World War II. As of 2022, the figure is 24.6 percent, a sharp decline from two years ago but higher than envisioned when the 2011 deal was struck. The moral of the story: a pinky promise to spread out cuts over a long period doesn’t tie the hands of future Presidents and Congresses.
Just as the RSC is struggling to settle on concrete positions, so is the Republican Party as a whole. McConnell, who usually likes to flex his parliamentary muscles, has deferred to McCarthy, saying, “I think the final solution to this particular episode lies between Speaker McCarthy and the president.” Yet McCarthy is speaking in generalities; he told reporters he didn’t give Biden any specific requests in their first meeting.
Why can’t Republicans settle on an actual negotiating position? The answer is that they are too divided to make the math add up.
Think of the budget as three different pots of money: entitlements—such as Social Security and Medicare—the military, and everything else. Republicans used to be fairly united on cutting entitlements and funding the military. No longer. As I wrote previously, Representative Michael Waltz, a Green Beret who succeeded Ron DeSantis in Florida’s sixth congressional district, argued that we should target entitlements and not balance the budget “on the backs of our troops and our military.” Then Trump declared Social Security and Medicare should be off limits. Shortly thereafter, McCarthy sided with Trump, saying on Face the Nation, “Let’s take those off the table … Social Security, Medicare, you keep that to the side.”
If that’s the case, then what about the military? The less hawkish, Russia-friendly America First faction of the GOP is growing, particularly in the House, and they are more open to military spending cuts. Old-school Reaganites are more commonly found among Senate Republicans. Case in point: Senator Lindsey Graham recently said on Fox News, “To my House Republican colleagues: you send a bill over the Senate that cuts defense, I’ll try to kill it.” An Air Force veteran, Graham was defending his vote for the $1.7 trillion omnibus, even though he said “it did suck,” because it had a generous 10 percent increase in military spending. McConnell would likely have Graham’s back, considering he made the same case for the omnibus, arguing that the bill “equips our armed forces with the resources they need while cutting nondefense, nonveteran spending in real dollars.”
That’s right, this supposed big government monstrosity of an omnibus bill cut spending, relative to inflation, in the “everything else” pot. The increase in nondefense, nonveteran spending was 5.5 percent, while inflation in 2022 was 6.5 percent.
The mathematical problem for wannabe budget balancers is that once you leave Social Security, Medicare, and the Pentagon alone, there is not enough money left to cut. As explained by the deficit hawks at the Committee for a Responsible Federal Budget, “To achieve balance within a decade, all spending would need to be cut by … 85 percent if defense, veterans, Social Security, and Medicare spending were off the table. These cuts would be so large that it would require the equivalent of ending all nondefense appropriations and eliminating the entire Medicaid program just to get to balance.” Goodbye FBI, National Parks, and Head Start. (Note that Medicaid is also an entitlement program.)
The only way out is to acknowledge, explicitly or implicitly, that balancing the budget in 10 years is neither possible nor desirable. Lo and behold, the 10-year marker is not being laid down by McCarthy or reiterated by the RSC.
Even if Republicans had a consensus position, wildly waving around the debt limit hand grenade would not be wise. They don’t need to play reckless games to force Biden to negotiate. They have other leverage: The September deadline to pass spending measures to keep the government running in the next fiscal year. Control of the House gives Republicans inherent leverage in formulating those measures.
However, the deadline for hitting the debt ceiling is estimated to be June. That’s roughly three to four months before the end of the fiscal year, and Republicans do seem to have one consensus: the debt limit should not be raised without some sort of budget agreement. Bloomberg reported on January 26 that “House Republican leaders are considering proposing a short-term extension of the federal debt ceiling to delay the risk of a default until September 30,” effectively punting the debt limit on the spending bill timetable (unless short-term extensions are passed). But it is not clear that far-right House members would accept a summer debt limit reprieve. (Asked on Face the Nation if he supports pushing the debt limit deadline to September, McCarthy dodged: “I don’t want to sit and negotiate here.”)
So, when McCarthy says, “I would like to see if we can come to an agreement long before the deadline,” he probably means it. For McCarthy, the debt limit and spending deadlines are not opportunities to seize but death traps to avoid. If the speaker can pull off a springtime budget agreement before doomsday deadlines approach and far-right demagoguery shifts into overdrive, maybe he can keep his post through 2024.
The question for Biden and the Democrats is: should they help McCarthy? Is it better to forge a quick deal and have a much less anxious summer and fall? Or should they take their time, force Republicans to take unpopular positions, and make McCarthy sweat?
That’s a tricky question to answer. But in all likelihood, the result will be the same: modest budget cuts, not nearly enough to balance in 10 years, and no harm to Social Security and Medicare. But some trimming to nonmilitary spending. A Republican-run House is not going to give Democrats a status quo budget. President Obama had to cut some spending once Republicans took the House in 2010. President Bill Clinton had to cut some spending once Republicans took over Congress in 1994.
Today, even the most moderate House Republicans—the ones who have entertained using a discharge petition to circumvent McCarthy and pass a debt limit increase with mainly Democratic votes—would only do so with conditions. “There’s got to be some commitment by President Biden to reduce spending for us to even consider doing a discharge petition,” said Representative Don Bacon, the moderate Republican who represents blue Omaha.
Biden will have to assess in future discussions with McCarthy how badly the speaker wants the debt limit issue resolved. If it’s bad enough to keep cuts to a minimum, then Biden should take an early deal, keep the markets calm, and let the economy keep humming.
