Millions of Americans could face significant repercussions unless Speaker Kevin McCarthy finds a way out of a debt situation he has created for President Joe Biden, which now threatens to ensnare his own House Republicans. On Monday, McCarthy visited Wall Street to emphasize that the House GOP majority will not agree to increase the government's borrowing limit unless Biden consents to spending cuts that would undermine his domestic policies and diminish his presidential legacy.
Despite this, McCarthy reassured traders that he would not allow the U.S. government to default on its debts—a scenario that could stop Social Security payments, spark a recession, and lead to job losses by fall if the debt ceiling isn't raised.
The risk to Americans is evident, as it's challenging to see how a new speaker with a slim majority and a faction of extremists can achieve either outcome. Unlike most countries, the U.S. requires legislative approval to increase its borrowing limit, turning a routine task into a political tool in these polarized times. The government needs to borrow to cover spending already approved by Congress, and while it has always maintained a strong credit rating, the threat of default has previously led to a downgrade.
In a private meeting on Tuesday, McCarthy urged his colleagues to support a bill that would raise the debt limit for a year but demand spending cuts from Biden. He presented it as a way to bring the president to the negotiating table, though the bill is unlikely to pass the Democrat-controlled Senate. Internal disagreements among GOP members about the bill's specifics highlight the challenge McCarthy faces.
Rep. Scott Perry, head of the conservative House Freedom Caucus, expressed frustration over the lack of detail and called for deeper cuts. Some members are hesitant to commit, with Rep. Tim Burchett stating he's currently a "no" vote. Disagreements within a majority party are not uncommon before finalizing a package, and House Financial Services Chair Patrick McHenry remains optimistic about the bill's passage in the House. He questioned what the White House would do once the package is passed, emphasizing that a clean debt ceiling increase won't pass the House.
McHenry's remarks expose a flaw in the GOP's strategy, which assumes Biden will have no choice but to negotiate. The White House insists the House should pass a straightforward bill to raise the borrowing limit. McCarthy faces a leadership test, as there's no guarantee he can pass the measure with such a narrow majority and internal GOP disagreements. Even if it passes the House, it will likely be a Republican-centric proposal that Biden and the Senate Democrats will reject. Any compromise could fracture GOP support.
Despite these challenges, McCarthy confidently predicted he would secure enough votes for his initial bill. However, his previous optimistic predictions about securing the speakership required significant concessions and multiple voting rounds. This time, the stakes involve the livelihoods of Americans and the global economy, not just McCarthy's political ambitions.
Republicans are struggling to negotiate among themselves, let alone with Biden. Rep. Dusty Johnson, involved in shaping the GOP's stance, acknowledged the difficulty in narrowing down conservative policy goals to a manageable number. Some Republicans have vowed never to vote for raising the debt ceiling on principle, giving them leverage in McCarthy's narrow majority. Democrats are unlikely to assist McCarthy if GOP members defect, as they would have to support cuts opposed by Biden.
The upcoming debt ceiling showdown could define the relationship between Biden and McCarthy over the next two years. Both leaders have much at stake, and the outcome will influence their legacies. While Republicans have the right to leverage their election win to push for spending cuts, the question remains whether this is the right battle when jobs and economic stability are at risk. Critics point out Republican hypocrisy, as they raised the debt limit under Trump without issue.
To win this battle, McCarthy must shift the political narrative to blame Biden for any default and economic fallout. On Monday, he argued that the real threat is not default but the rising national debt, accusing Biden of inaction. Past fiscal standoffs with Democratic presidents have often backfired on Republicans, with Clinton and Obama successfully portraying them as reckless.
McCarthy aims to depict Biden as unyielding for not negotiating over the debt ceiling. The two haven't met in over two months, and the White House maintains that budget discussions, not debt ceiling negotiations, are the appropriate forum. McCarthy is in a difficult position, as Congress holds the power to raise the borrowing limit, yet he demands concessions from Biden for a task only lawmakers can complete. A default would harm everyone, especially a president gearing up for reelection, but McCarthy risks losing if he triggers an economic crisis.
The White House emphasized the need for a responsible approach to the debt limit, recalling how Republicans handled it during the previous administration. Senate Republicans have mostly stayed out of the fray, though Senate Republican leader Mitch McConnell urged Biden to negotiate with McCarthy. McCarthy's recent speech suggests that a political crisis over the debt ceiling is nearing a critical point, with Senate Democratic Majority Leader Chuck Schumer warning of an impending default if McCarthy continues on his current path.