House Speaker Kevin McCarthy is preparing to unveil next week a plan that would suspend the nation’s debt ceiling for a year in return for spending concessions, according to people familiar with the talks.
(Bloomberg) — House Speaker Kevin McCarthy is preparing to unveil next week a plan that would suspend the nation’s debt ceiling for a year in return for spending concessions, according to people familiar with the talks.
The proposal, which would be an opening marker for negotiations with the White House and congressional Democrats, calls for a vote in the House in late May to suspend the debt ceiling until about May 2024, according to two people who asked not to be identified.
This would permit Republicans to seek another round of concessions next year in the stretch run of a presidential and congressional election year.
The bill the GOP is preparing would be a party wish list of spending cuts and regulations changes with little chance of being enacted. But it could form the basis of separate, future budget talks and end the debt-limit standoff that threatens a US payments default this summer.
In return for next month’s vote, non-defense discretionary spending would have to stay at roughly the same level as fiscal year 2022 and grow 1% per year over 10 years, under McCarthy’s tentative plan. Republicans are still discussing defense spending, which some members want to hold at current levels and others want to grow.
Other elements, which have been shared with members of the party’s conference, include: a “clawback” of unspent Covid relief funds, and work requirements for able-bodied Medicaid recipients aged 60 and under who don’t have dependent children. An initiative to include work requirements for food stamp recipients could be included but isn’t in the current framework.
The bill could save up to $4 trillion over ten years and some of that would come from increase revenue achieved by sunsetting old regulations and easing energy permits.
President Joe Biden has called for an unconditional increase of the $31.4 trillion US debt limit, but has said he would discuss a separate budget agreement with McCarthy.
When Congress needs to act to avoid a default is still up in the air with Treasury Secretary Janet Yellen saying it could be as soon as June. An update is expected next week on the deadline after tax season ends.
Treasury has used these extraordinary measures to stave off a default since the debt limit was technically reached in January.
Without legislation to lift the debt ceiling, extraordinary accounting measures deployed by the Treasury Department could push the final deadline until after the November 2024 election, Bipartisan Policy Center expert Bill Hoagland said.
The GOP plan would make the debt ceiling debate part of the campaign.
“If today’s reports are true, Speaker McCarthy is adopting the extreme MAGA House Republican position: threatening our economic recovery, hardworking Americans’ retirement, and catastrophic default in order to force devastating cuts to veterans health care, education, and other programs that lower costs for working families” Andrew Bates, deputy White House press secretary, said in a statement.
McCarthy is set to address the New York Stock Exchange on Monday. A person familiar with his plans said his speech will hit on the debt-limit fight.
Before the current two-week House recess, McCarthy told reporters that his party was “close” to finalizing a debt ceiling bill that could pass the House if Biden continues to refuse to negotiate on the issue. He said that the bill would be based on four topics he had outlined to Biden in a letter: discretionary spending cuts to fiscal 2022 levels, tougher work requirements for some anti-poverty programs, clawing back unspent Covid-19 funds and easing energy permits.
The proposal is separate from a more far-reaching GOP non-binding budget proposal that the party intends to use to demonstrate that the US federal budget could be balanced in 10 years.
The timing of the bill being shared with rank-and-file lawmakers next week was first reported by Punchbowl News.
The GOP is also eyeing savings achieved by blocking Biden’s proposed student loan forgiveness program, lawmakers have said.
McCarthy is coming under increased pressure from his party to put up a debt proposal, given the summer deadline and realization that it could take months to agree on a GOP budget outline given party divisions over levels of cuts to popular programs.
On Wednesday, Oklahoma Representative Kevin Hern, the leader of the large Republican Study Committee caucus, publicly demanded that the House vote on a debt bill by the end of April.
The centrist Main Street Caucus of House Republicans outlined its requests for the bill in a letter to McCarthy Thursday, including expanded work requirements for food stamps.
The group proposes a 1.5% per year increase on domestic appropriations as opposed to the 1% cap advocated by the more conservative House Freedom Caucus. It also proposes a commission to study entitlement spending.
The conservative group FreedomWorks said it supports McCarthy’s latest effort.
“We are encouraged by the progress House Republicans are making to find a compromise in the debt-ceiling debate,” said Adam Brandon, FreedomWorks President. “House Republicans’ common-sense approach would help ease the burden placed on hardworking American families and help return fiscal responsibility to our nation’s capital.”
–With assistance from Mike Dorning and Akayla Gardner.
(Updates with Main Street Caucus letter in paragraphs 20 and 21)
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