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As threat of default intensifies, McCarthy outlines debt ceiling proposal
In as few as seven weeks, the U.S. could be teetering on the brink of a financial crisis, as the country possibly plunges into the first-ever default on its national debt.
I’m referring, of course, to the consequences of hitting the debt ceiling, the statutory limit on how much money the U.S. government can borrow to pay for its spending obligations. Technically, we hit the $31.4 trillion debt limit back in January, but there are certain “extraordinary measures” the Treasury Department can use to move money around and temporarily avoid catastrophe.
Those emergency fixes are set to run out sometime in the summer or fall, which would mean the U.S. has defaulted, which would grind most government services to a halt, which would likely lurch the U.S. economy into a recession, which would possibly cause a global recession.
Despite that doomsday scenario I just sketched out, there has been very little urgency in Washington around the debt ceiling. President Biden and House Speaker Kevin McCarthy have met precisely once on the issue, in January; the two have not even spoken on the phone about the debt limit since. The prevailing sense in Washington is that a compromise will be struck eventually, like one always is, and that may be true, but it would still require the two sides to actually meet, which they are not doing at all right now. (In fairness, though, this type of thing almost always happens at the 11th hour in Washington. Nothing motivates like a deadline.)
McCarthy moved to restart negotiations Monday, finally unveiling the House Republican debt ceiling proposal in an address at the New York Stock Exchange. The speaker announced that the GOP would be willing to raise the debt ceiling for one year in exchange for the following concessions:
- Cutting federal spending back down to 2022 levels, which would amount to about $130 billion in cuts.
- Imposing new spending caps for the future, which would limit federal spending from growing more than 1% each year for the next 10 years.
- Rescinding unused Covid relief funds that were approved but still haven’t been spent, which would bring about $500 billion back into the federal coffers.
- Passing provisions from H.R. 1, the Republican energy package that was approved by the House last month. The bill aims to increase oil and gas drilling, as well as reforming the permitting process to speed up approval of energy infrastructure projects.
- Toughening work requirements for aid programs like food stamps and Medicaid, requiring a greater number of able-bodied adults without children to work if they receive such benefits.
“America’s debt is a ticking time bomb that will detonate unless we take serious, responsible action,” McCarthy said, insisting that a debt ceiling increase be paired with reductions to government spending and other actions aimed at driving down the national debt.
McCarthy’s full proposal is expected to be released today. According to Punchbowl News, the plan will include some additional elements the speaker conspicuously left out of his address, including a provision reversing Biden’s student loan cancellation plan.
To state the obvious, McCarthy’s proposal will go nowhere with Democrats and would be considered dead-on-arrival in the Senate. (A White House spokesperson described the plan as a “vague, extreme MAGA wish list” in response to McCarthy’s speech.)
But the more immediate question for McCarthy: would his proposal even be able to pass the House? As you no doubt recall from the days-long speaker balloting he had to endure to get the job, McCarthy is dealing with a very narrow — and very divided — majority, unable to lose more than four Republican votes to advance a party-line debt ceiling package.
Even he isn’t sure this proposal has the support of his own conference. When asked that question on CNBC yesterday, McCarthy declined to answer. “I think I have the support of America,” he said, before pivoting away to a different talking point. (“I’m still not sure of the answer,” the anchor who asked the question later wrote on Twitter.)
Notably, McCarthy’s outline also did not include anything tying a debt ceiling increase to a plan to balance the budget in 10 years, something many House Republicans have called for. It also left out several demands made by the conservative House Freedom Caucus, raising the question of whether the group — the same rebels who dragged out McCarthy’s speakership coronation — will back a more moderate spending plan.
As Axios notes, 16 House Republicans have never voted to raise the debt ceiling when the issue has come up, even during the Trump administration, a sign of how difficult it will be for McCarthy to persuade some of them to do so now.
Although the party has attempted to put on a united front, under the surface, divisions among House Republicans have continued to simmer since the chaotic speaker balloting. Internal suspicions have only risen since the New York Times reported that McCarthy is sniping about his No. 2 and his budget chairman behind their backs. It is not for nothing that the five ideological caucuses that make up the House GOP are known as the “Five Families,” a reference to the warring Mafia gangs in New York City.
Democrats are counting on the chaos to continue. Biden and his deputies have said they will only accept a clean debt ceiling increase — without any of the concessions McCarthy has outlined — something McCarthy explicitly ruled out on Monday. The Democratic strategy, then, is to bet that McCarthy can’t get his plan through the House with Republican votes, which would leave passing a clean increase with Democratic support as his only option.
It is a risky gambit, especially with the American economy hanging in the balance. Yet Biden has refused to budge from the position, declining to even meet McCarthy again and negotiate. “Unfortunately, I haven’t heard from the White House since our first meeting,” McCarthy said Monday. “President Biden has been missing in action and misleading the public.”
Both sides agree on one thing: the threat of default is real. Neither, of course, agree on the culprit. “I’ll be blunt,” Chuck Schumer, the top Senate Democrat, said Monday. “If Speaker McCarthy continues in this direction, we are headed toward a default.”
Or, in McCarthy’s version: “The longer President Biden waits to be sensible, to find agreement, the more likely it becomes that his administration will bumble into the first default in our nation’s history.” And so, the stalemate continues.
White House: President Biden will sign an executive order directing federal agencies to adopt more than 50 measures aimed at increasing access to child care and long-term care, a move the White House is calling the “most sweeping set of executive actions to improve care in history.” Vice President Harris will hold an event on abortion with Rosario Dawson, continuing her recent emphasis on the issue.
Congress: The Senate will hold confirmation votes on Defense and Justice Department nominees, while the House will attempt to override Biden’s veto of a measure that would have overturned an EPA regulation protecting U.S. wetlands. (A veto override requires two-thirds support in both chambers, which it is unlikely to receive.)
Supreme Court: The justices will hear oral arguments in Groff v. DeJoy, in which former mailman Gerald Groff claims the U.S. Postal Service religiously discriminated against him by requiring him to work on Sundays. The Civil Rights Act of 1964 requires employers to accommodate workers’ religious belief unless doing so imposes an “undue hardship” on their business; the Postal Service said letting Groff skip Sundays would have. (The Postal Service doesn’t deliver mail on Sunday, but it does deliver packages for Amazon.) Two lower courts sided with the Postal Service, but if the Supreme Court were to side with Groff, the justices could enact a major change in the religious accommodations offered at workplaces across the country.
Wilmington: The trial over Dominion Voting Systems’ landmark defamation lawsuit against Fox News is set to begin in Delaware. (Like many businesses, Fox was technically incorporated there.) The proceedings are expected to dredge up embarrassing revelations for Fox and shine a spotlight on the network’s airing of false claims after the 2020 election; if Dominion wins the $1.6 billion it is seeking, it would be one of the largest defamation awards in U.S. history.
New York City: “Two men were arrested Monday on charges that they helped establish a secret police station in New York City on behalf of the Chinese government, and about three dozen officers with China's national police force were charged with using social media to harass dissidents inside the United States, authorities said Monday.” — NPR
At the border: Thousands of migrant children have been forced into punishing jobs in the last two years in violation of child labor laws. The Biden administration repeatedly ignored warnings about the issue, the New York Times reports.
Wisconsin: In addition to the GOP’s state Supreme Court defeat, several Republican candidates lost school board elections in Wisconsin this month, a setback for the party’s broader messaging on critical race theory and transgender issues in schools.
Today, as you’re hopefully aware, is Tax Day. When filling out your taxes, you may have noticed the box asking if you want to direct $3 to the “Presidential Election Campaign Fund.” You may have even checked it.
What is the Presidential Election Campaign Fund? It’s the pot of money distributed to presidential candidates who decide against raising money for their campaigns and opt in to accepting public financing instead.
The only problem? No one uses it. Public financing was a post-Watergate innovation intended to increase transparency in elections, and every presidential nominee from 1976 to 2004 used it. Those nominees agreed not to raise private contributions; instead, they received a lump sum from the government (about $100 million in today’s dollars) to finance their campaigns.
Barack Obama shrugged off the public financing model, gambling (correctly) that he could raise more money from online donations. No nominee has used it since. (Some presidential candidates since then have used public financing for primary campaigns, when candidates who raise $5,000 qualify for matching federal funds as long as they agree to certain spending limits.)
So where does the rest of the money go? According to RawStory, about $430 million is now sitting in the fund, pretty much unused. Generally, less than 4% of Americans check the box, but that still means the fund grows by millions of dollars each year.
There have been some attempts to redirect the money to various causes over the years, but they’ve been largely unsuccessful. As of 2014, a small portion of the fund that was set aside for public funding of nominating conventions (which neither party accepts any more) now goes to fund pediatric research. But that still leaves the bulk of the $430 million just sitting there, aimlessly lingering in the government coffers. Maybe you even added to it today. Happy Tax Day!
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