McCarthy, Biden Reach Debt Ceiling Deal; House Freedom Caucus Opposes
Negotiating teams representing President Biden and House Speaker Kevin McCarthy (R-Calif.) reached an agreement early on Memorial Day weekend to suspend the debt ceiling and control spending, detailed in the text of a 99-page bill, The Fiscal Responsibility Act of 2023, published on Sunday. While the agreement contained some conservative priorities that angered House progressives, members of the House Freedom Caucus complained the eventual product was far short of acceptable and vowed to oppose it.
What’s in the Bill
The bill would suspend the public debt limit until January 1, 2025, at which point it would be raised to accommodate any debt accumulated between now and then. The date is strategically chosen between the 2024 general election and the swearing in of the next Congress, enabling the current Congress to make another debt ceiling after they know the results of the next election. During this debt limit suspension, the bill would prevent the Treasury Secretary from stockpiling cash and would allow only debt obligations necessary to “fund a commitment incurred pursuant to law.”
The bill also imposes discretionary spending limits for fiscal years (FY) 2024 and 2025. It caps discretionary defense spending at $886.3 billion in FY 2024 and $895.2 billion in FY 2025 and discretionary nondefense spending at $703.6 billion in FY 2024 and $710.7 billion in FY 2025. FY 2024’s discretionary spending total cap ($1.59 trillion) keeps current spending flat, while FY 2025’s discretionary spending cap represents a 1% increase from FY 2024. However, the total for FY 2024 is 22% higher than for FY 2021 and 28% higher than for FY 2019 — before the COVID pandemic — due to COVID-era stimulus packages and several large spending bills Democrats passed last year, which dramatically expanded federal spending.
By comparison, the Limit Save Grow Act, which House Republicans passed last month, capped all discretionary spending at $1.47 trillion in FY 2024 (the compromise spending cap is 8% higher), followed by 1% growth (less than inflation) over the next 10 years. The Limit Save Grow Act would save an estimated $4.8 trillion over 10 years, according to the Congressional Budget Office (CBO). The compromise bill would save $1.5 trillion over 10 years, the CBO estimated Tuesday, relative to its May 2023 baseline projections. The White House estimates the compromise bill will yield $1 trillion in 10-year savings (when compared to recently swollen federal spending commitments), while a New York Times analysis puts the 10-year savings at about $860 billion.
Another major section in the bill dealt with retrieving and repurposing money that Congress allocated, but which was never spent. This includes billions of dollars from COVID-relief stimulus packages and the IRS budget expansion, although the “rescission of unobligated funds” in the bill fell far short of what GOP budget hawks were hoping to see.
Beyond the fiscal topline, the compromise bill also incorporated several policy priorities:
- It would terminate the suspension of student loan payments and interest accrual, which has been repeatedly extended from the COVID-era CARES Act, and stipulated that “the Secretary of Education may not use any authority to implement an extension.”
- It would require administrative agencies to submit written notice of any “discretionary administrative action” that would increase spending and include a proposal to reduce spending elsewhere by a greater or equal amount. However, it allows the White House Office of Management and Budget (OMB) to grant waivers, exempts any administrative action totaling less than $1 billion over 10 years, exempts the process from judicial review, and sunsets the provision at the end of 2024 — before the next administration.
- It would tweak work requirements for food stamp programs, increasing the work requirement for SNAP benefits from age 50 to 55 years while adding exemptions for homeless, veterans, and young adults who reached majority in foster care. It requires the Secretary of Agriculture to “make public all available State waiver requests” and requires that exemptions “not exceed 8 percent of the number of covered individuals in the State.” It also modifies the way that Temporary Assistance for Needy Families (TANF)’s minimum participation rate requirement is calculated and requires a pilot project on “performance benchmarks for work and family outcomes.”
- It would streamline environmental permitting for construction projects, promote the storage and interregional transfer of energy, and expedite the completion of the Mountain Valley Pipeline, which would transport natural gas to Virginia from West Virginia, the home state of two key senators, Shelley Moore Capito (R) and Joe Manchin (D).
What’s Not in the Bill
While the contents of the “Fiscal Responsibility Act of 2023” are highly relevant, much of the opposition it has encountered is explained by what is not in the bill. As detailed above, House conservatives wanted the much deeper spending cuts included in the Limit Save Grow Act, which would save up to $4.8 trillion over 10 years, instead of the estimated $860 billion to $2.1 trillion in the compromise bill.
In particular, the compromise bill dramatically reduced the amount of money called back from the Internal Revenue Service. The Limit Save Grow Act would have retracted $80 billion of IRS funding authorized in the Inflation Reduction Act, but the Fiscal Responsibility Act only rescinds $1.3 billion.
Other missing provisions nixed from the Limit Save Grow Act include a total “nullification” of Biden’s student loan bailout, currently before the Supreme Court, food stamp provisions requiring recipients to work “80 or more hours per month,” and the repeal of massive green energy subsidies passed by a Democrat-controlled Congress last year.
One progressive priority absent from the deal is any tax increase. President Biden’s “plan to reduce the deficit by $3 trillion” combined $2.6 trillion in tax hikes with $274 billion in tax hikes disguised as “spending cuts,” argued National Review’s Dan McLaughlin.
The Fiscal Responsibility Act of 2023 also neglected the largest portions of the U.S. federal budget, those dedicated to non-discretionary spending such as Social Security, Medicare, and Medicaid. Despite the looming insolvency, House Republicans chose to sidestep the issue in the Limit Save Grow Act, thus evading the politically devastating rhetoric with which Democrats were prepared to sink any reform attempt.
Responses to the Bill
In order for The Fiscal Responsibility Act of 2023 to pass the House, McCarthy can only afford to lose four Republican members, unless Democrats join in to vote for the bill. Already, at least 25 Republicans — mostly from the conservative Freedom Caucus — are on record opposing it.
The bill’s opponents include at least two of nine Republicans on the House Rules Committee, which decides what legislation can come to the floor. The Rules Committee considered the compromise bill Tuesday.
Rep. Dan Bishop (R-N.C.) called the bill a “disaster deal” that “locks in the COVID gov’t expansion and the ensuing spending debt spiral.” Rep. Andrew Clyde (R-Ga.) called the bill a two-year “spendathon” and said, “no conservative can justify supporting this insanity.” Rep. Eli Crane (R-Ariz.) said he refused to support the bill because he would not “be complicit in the managed decline of this country.” Rep. Chip Roy (R-Texas) tweeted a chart of the differences between the Limit Save Grow Act and the “GOP ‘Deal’ with the Swamp,” as he put it.
At a press conference held Tuesday, the House Freedom Caucus suggested they might introduce a “motion to vacate the chair” — remove the House Speaker — if McCarthy goes forward with the bill. According to House rule changes adopted in January, a motion to vacate the chair may be brought by a single member and takes precedence over all other questions. If no more than five Republicans vote with Democrats to remove McCarthy as speaker, it would cripple the House until such time as a majority of the chamber could decide on another speaker.
Another faction of Republicans has also expressed misgivings. Senator Lindsey Graham (R-S.C.) said he opposes the bill because it didn’t contain enough funding for defense.
Meanwhile, Democratic leaders are trying to get members of their party to embrace the deal. White House Communications Director Ben LaBolt on Sunday urged progressives to vote for the bill as a way of “preventing default,” and also because it didn’t repeal “signature legislation of this administration. … So, if you voted for those items, you should vote for this as well.” House Assistant Minority Leader Rep. Jim Clyburn (D-S.C.) said Monday it was “incumbent on me to do what I can” to support the bill, after OMB Director Shalanda Young, one of the members of Biden’s negotiating team, endorsed it. “51% of the House is under Republican control, 51% of the Senate is under Democratic control. That means that we’ve got to find compromise,” he said.
For some Republicans, the very fact that Democrats have agreed to the bill is an argument against it. “Look, if you want to know how to assess this deal, one of the ways to do so is listen to what the Democrats are saying,” said Senator Ted Cruz (R-Texas) on Monday. “There, Joe Biden is urging every Democrat to support it.”
While conservative policy commentators generally agree in describing the compromise deal as a mixed bag, they disagree over how to rate it. The editors of The Wall Street Journal on Monday called the bill “a significant victory for GOP priorities,” explaining that “Mr. Biden tried to jam the GOP into a clean debt increase, but Republicans forced him to the table.” On the other hand, Heritage Foundation President Kevin Roberts said Monday that “Americans lose out” in the bill because Republicans gave away their leverage in “closed-door negotiations.” He urged Republicans to “go back to the negotiating table and demand more concessions from the Biden administration.” Somewhere in between, National Review’s editors said Tuesday the deal is “about what you’d expect from an agreement between a Democratic president and congressional Republicans who narrowly control only one chamber of Congress — maybe better than what you’d expect given the potential fractiousness of the GOP majority.”
What Comes Next?
The Rules Committee approved the Fiscal Responsibility Act of 2023 Tuesday in a 7-6 vote. Roy and Rep. Ralph Norman (R-S.C.) voted with Democrats against the bill, while Freedom Caucus member Rep. Thomas Massie (R-Ky.) voted for it. The bill could get a final House vote as early as Thursday. A motion to vacate the chair could delay the final vote. The bill would then proceed to the Senate, where Democrats hold a 51-49 majority. There it would need 60 votes without amendments, which would require the Senate to return the bill to the House for another vote. If the bill cleared both chambers, it would then go to President Biden’s desk.
Lawmakers in Washington are racing against a new estimated deadline of June 5, the latest possible day the U.S. could still pay its bills on time without a debt ceiling increase.
Joshua Arnold is a staff writer at The Washington Stand.