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Kevin McCarthy’s concessions could lead the GOP to a budget crisis

Kevin McCarthy’s concessions could lead the GOP to a budget crisis

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House Republicans are poised to steer the country into a series of fiscal showdowns as they seek to force the White House to agree to massive spending cuts, threatening a return to the political crisis that once nearly crippled the economy and nearly sank the US government in bankruptcy.

The prospect of a crash rose sharply after conservatives struck a deal with Rep. Kevin McCarthy (R-Calif.) that clinched his election as House Speaker early Saturday. To end days of noisy debate, party lawmakers said they had agreed to take a hard line in upcoming budget talks, potentially including demands for major changes to Social Security and Medicare.

“This is the biggest challenge in this Congress,” Congressman Patrick T. McHenry (RN.C.), a top McCarthy ally, said shortly after the speaker’s vote, adding that “the debt, the deficit and the fiscal house — that is . top priority for House Republicans.

Kevin McCarthy was elected Speaker of the House of Representatives, breaking a historic deadlock

In the hours before 3 p.m on the speaker’s latest vote, Republicans sketched the early contours of what they might pursue next year — billions of dollars in spending cuts, largely aimed at federal health care, education, labor and other local agencies that Democrats say are already underfunded.

Incumbent Kevin McCarthy (R-Calif.) finally secured enough votes to become Speaker of the House after the fifth longest speaker battle in history. (Video: John Farrell, JM Rieger/The Washington Post)

Some GOP lawmakers have even signaled they would push for those cuts — along with other, more structural changes to federal entitlement programs — in exchange for a vote to raise the debt ceiling. That cap is the legal limit on how much the U.S. government can borrow to pay its existing bills, and lawmakers must act to raise or suspend it — or face the country’s default, which many experts fear , that it will cause a global fiscal catastrophe.

“Make no mistake, the debt ceiling issue itself is meant to encourage better policies that move forward on spending,” said Congressman Adrian Smith (R-Neb.), who is running to head the top tax-focused House committee. “I don’t think we should shy away from that.”

The new threats have raised the prospect of a high-stakes political confrontation, as one wrong move could trigger financial chaos and a full-blown recession. More than a decade ago, the mere prospect of the US defaulting on its bills rattled global markets while costing US taxpayers more than $1 billion.

Citing those past standoffs, many Democrats this week issued their own ultimatums: They said they were willing to discuss federal spending with their newly empowered GOP colleagues, but would not bargain on the debt ceiling.

“I think the president has been very clear and will continue to be clear: There is no negotiation on whether the United States pays its bills on time,” said Sen. Chris Van Hollen (D-Med.), a member of the House Budget Committee.

“This is an obligation that every member must take seriously,” he continued. “We’ll say over and over again, there’s a line in the sand here, and we’re not going to give the extreme Republicans their wish list in exchange for them just letting the country pay its bills on time.”

McCarthy’s election in the early hours of Saturday morning nevertheless emboldened House Republicans, who have overcome their fierce ideological divisions – at least for now. Speaking to reporters after the result was confirmed, McCarthy said the political divisiveness that characterized last week’s debate had been instructive, helping the party “build the trust with each other” needed to govern.

McCarthy will now be tasked with keeping Republicans united in a chamber where the GOP majority is razor thin — and as his rocky rise has demonstrated, conservatives wield enormous power. Many of those lawmakers expect McCarthy to deliver on a vast array of promises, including his pledge to cut spending and extract other policy concessions from the Democratic-led Senate and White House. If he doesn’t, the right-wing bloc has the power to try to remove McCarthy as speaker.

Republicans have at least two key fiscal deadlines to deal with this year. They need to raise the debt ceiling before the government breaches the borrowing ceiling, which could happen as early as this summer, according to Shai Akabas, director of economic policy at the Bipartisan Policy Center, noting that the exact date will depend on upcoming federal data.

But lawmakers also must work to fund federal agencies and programs before the current fiscal year ends on Sept. 30. Democrats and Republicans passed the current $1.7 trillion spending measure, known in legislative parlance as the omnibus, at the end of 2022 — and failure to replace it would shut down Washington in the fall.

With the election unsettled, Congress is bracing for more spending showdowns

Although the issues are technically separate, Republicans have signaled early interest in bringing them together, raising the stakes in the event of congressional inaction. “We believe there should be specific, specific spending limits associated with raising the debt ceiling,” said Rep. Chip Roy (R-Texas), a member of the conservative House Freedom Caucus who opposed McCarthy as speaker. , until it provides a number of discounts.

Going into those fights, some Republicans pledged to cut federal spending to at least the levels passed in fiscal year 2022, which would amount to billions of dollars in cuts compared to current spending. Others in the party said they also intend to produce a budget plan that balances the federal ledger — which last ran a $1.38 trillion deficit — over the next decade.

Democrats this week blasted the approach: Rep. Rosa L. DeLauro (D-Conn.), the top partisan lawmaker on the House Appropriations Committee, called it a “backroom deal” that “kills the 2024 government funding process ., before it even started, but didn’t guarantee a stop.”

McCarthy did not detail the extent of the promises he made to conservatives in pursuit of the speaker’s gavel; his office did not respond Saturday to a request for comment. But many GOP lawmakers this week sounded increasingly bullish about their new sense of purpose in trying to strike a hard spending deal with the White House.

“You can’t have a balanced budget unless you start cutting,” said Congressman Ralph Norman (RS.C.), another member of the House Freedom Caucus, promising to “look at every dollar.”

Nearly 12 years ago, a similar political dynamic played out in Washington — with what some would describe as disastrous results. The 2010 election saw the rise of the austerity-minded Tea Party as right-wing gains took over the House and demanded steep spending cuts from then-President Barack Obama.

At one point in 2011, Republicans used the debt limit to force Democrats’ hand, refusing to raise the debt ceiling without significant spending cuts. The ultimatum itself carried enormous, immediate consequences, costing taxpayers more than $1.3 billionraising borrowing costs and sinking the Dow Jones industrial average by more than 2000 points during the summer crisis.

To break the impasse, Democrats eventually agreed to a plan that slashed and capped domestic spending for 10 years — an approach some budget experts described as indiscriminate and harmful to Americans who rely on government services.

“The cut was incredibly damaging,” said Sharon Parrott, director of the Center on Budget and Policy Priorities, a left-leaning think tank, noting that fell hard on a wide range of agencies — from cutting child care costs to depleting the ranks of the federal workers who oversee Social Security.

More than a decade later, the legal spending caps were lifted — paving the way for Biden in the first two years of his presidency to take advantage of the Democratic majority and greatly expand the budget. Despite the recent stimulus, however, Parrott acknowledged that some federal agencies and programs “in many ways haven’t recovered from what some of the cuts did.”

The debt itself still totaling more than $31 trillion, running annual deficits of about $1 trillion or more for the past five fiscal years, according to the Treasury Department. While Republicans blame Democrats for the problem, the growing gap between what the country earns and spends is instead the result of bipartisan politics — from the $1.5 trillion tax cut package by GOP lawmakers in 2017 under President Donald Trump to approx $5 trillion in emergency coronavirus aid which began under Trump and ended with Biden’s American bailout.

Where did the covid aid money go?

“This is a year where we shouldn’t be borrowing more,” said Maya McGuinness, leader of the Committee for a Responsible Federal Budget, which advocates for deficit reduction, citing recent spending and other factors, including high inflation.

Still, MacGuineas acknowledged that the political climate could make it impossible “to govern in any of the ways we need to” – opening the door, perhaps, to a rematch of high-stakes clashes since 2011.

“I see them pretty much the same way,” she said. “People are raising an issue that is very legitimate and important, namely the fiscal health of the country, but the approach and the solution are reckless and unrealistic.”

Under Trump, as the government approaches the borrowing ceiling, Republicans have not made similar spending requests at the risk of fiscal disaster — and Democrats have provided votes to prevent a default. But GOP lawmakers haven’t always let Democrats down the same support under Biden, threatening to push the country to the fiscal brink at some point in 2021. At the time, Mark Zandi, chief economist at Moody’s Analytics, provided for that bankruptcy would destroy up to 6 million jobs and up to $15 trillion in household wealth.

This time, however, Democrats say they have learned their lesson — and say they are unwilling to negotiate significant concessions on spending in exchange for averting a catastrophic outcome.

“Democrats have learned their lesson over the last decade, and we understand that we are entering a period of great risk,” said Sen. Brian Schatz (D-Hawaii), a member of his House Appropriations Committee. “It set a precedent that was unique in American history where one party threatened the world economy and actually got a bunch of political concessions in exchange for their militancy, and at this point we just have to say we’ve seen this movie before.”

Democrats also insist they are unwilling to cut Social Security and Medicare, taking advantage of Republicans’ commitment to overhaul federal benefits programs. In his statement congratulating McCarthy, Biden himself stressed that it was “imperative that we protect Social Security and Medicare, not cut them,” noting that post-pandemic improvements in the economy may be at risk.

“It’s imperative that we continue this economic progress,” Biden said, “not roll it back.”

Liz Goodwin contributed to this report.


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