With debt deal, McCarthy threads the needle

House Speaker Kevin McCarthy, dismissed by critics as weak and beholden to the right flank of his party, appears to have emerged from the first major test of his leadership victorious, if not unscathed. 

As the clock began ticking down toward a potential default on the nation’s record-high debt, he strengthened his hand in negotiations with President Joe Biden by unexpectedly passing – with a united GOP front – a symbolic, partisan bill to cut spending and roll back some Biden initiatives. Last night, after several weeks of high-stakes wrangling, he presided over a bipartisan deal that passed the House with 72% support and strong majorities from both parties – highly unusual for major bills in this era of polarized politics.

If the bill also clears the Senate quickly, it would avoid default on the $31 trillion national debt – anticipated to occur as soon as Monday – and trim an estimated $1.5 trillion in spending over the next decade, though a second round of “adjustments” reportedly could reduce the total cuts to $1 trillion.

While some far-right members expressed displeasure with the end result, others prominently backed the bill, and Mr. McCarthy expressed confidence that his position was not in any immediate peril. Throughout the crisis, the speaker also gave some clues about his willingness and ability to work with Democrats going forward. 

“I think we saw reason prevail,” says Democratic Rep. Dean Phillips of Minnesota, speaking of the broadly bipartisan support. Although many Democrats criticized Mr. McCarthy and his party for acting as “hostage takers” in the debt limit negotiations, Mr. Phillips, a member of the House Problem Solvers Caucus, says he thinks the process may actually have strengthened the speaker’s relationships with President Biden and Democratic Minority Leader Hakeem Jeffries. “Even if it’s a baby step, it’s definitely a step in the right direction.”

“Speaker McCarthy and myself continue to have open, honest, consistent communication,” Mr. Jeffries told the Monitor in a hallway interview. “That’s been the case from the beginning of this Congress, and I expect that it will continue.”

Mr. McCarthy, the son of a firefighter, from Bakersfield, California, rose to prominence in state politics and then Congress with what longtime allies say is a knack for team building and an understanding of what lawmakers need to deliver to their constituents. Though not as eloquent as some of his predecessors, nor as much of a policy wonk, he has surprised many in Washington with his ability – so far – to hold together a fractious Republican Party.

Last night, he got all but one of the 150 GOP votes he had promised to deliver – about two-thirds of his caucus.

He’ll have to contend with the other third once the dust settles. Members of the Freedom Caucus and others are frustrated that he wasn’t able to make more of a dent in deficit spending, which has driven the debt to levels that exceed America’s total annual economic output for the first time since World War II. Many slammed the deal as essentially a spending freeze in exchange for allowing the president to incur another $4 trillion in debt over the next two years.

Democrats, for their part, bemoaned the bill’s new work requirements for government benefit programs. Still, it preserved a number of key Biden policy achievements – including green tax credits, such as for Teslas, which Republicans had sought to axe.

The GOP debt limit bill that Mr. McCarthy first shepherded through the House would have cut the deficit by $4.8 trillion in exchange for raising the debt ceiling by $1.5 trillion. All but four Republicans supported that bill – the passage of which essentially forced the president to negotiate with Mr. McCarthy, after he had initially demanded a “clean” debt limit hike with no strings attached. 

GOP Rep. Chip Roy of Texas credits the speaker, whom he refers to as a friend, for being “relentlessly positive” and working to pull everyone together. But as the contours of the deal Mr. McCarthy was hammering out with Mr. Biden became clearer, Representative Roy says he conveyed to GOP negotiators that there were likely to be a lot of “no” votes on the right. 

In the end, 71 Republicans, including Mr. Roy, voted against the deal; in fact, 16 more Democrats supported it than Republicans, which conservatives pointed to as proof that it was a bad bill. 

“For five months, we were kicking butt and it was working. And I feel like that went off the rails this week,” says Mr. Roy, declining to go into private conversations, or whether he and other conservative members were given a heads-up before the deal was announced. 

“The first real bill that cuts spending” in 10 years

The Fiscal Responsibility Act of 2023, as the bill is titled, rescinds unspent COVID-19 relief funds as well as money allocated for the Internal Revenue Service; requires federal agencies to offset certain new spending with equivalent cuts – often shorthanded as “pay as you go,” or PayGo – through the end of 2024; and ends the suspension on student loan payments. It also expands work requirements for able-bodied recipients of food benefits (SNAP) and Temporary Assistance for Needy Families (TANF), and it includes energy permitting reforms and a green light to finish a major pipeline in West Virginia, a pet project of Democratic Sen. Joe Manchin. 

As both sides tried to sell the deal to their own members, different factions sought to claim victory and minimize the achievements of others. 

Rep. Garret Graves of Louisiana, whom Mr. McCarthy deputized to lead negotiations with the White House, calls the speaker “the best strategist that we’ve had in modern history” – thinking five, six, seven steps ahead. He adds that the speaker empowered his negotiators to work out a deal and together they succeeded despite controlling only one of the three power centers in Washington. 

“When we ran into a roadblock, the speaker was very quick to pick up the phone to call the president,” he adds. 

Fellow negotiator Rep. Patrick McHenry of North Carolina told reporters the speaker “has always been underestimated.”

When asked whether that was true, Democratic Rep. Alexandria Ocasio-Cortez of New York was quick to disagree. “I don’t think so,” she said with a smile, describing Mr. McCarthy’s last-minute promises and gestures as evidence of weak leadership. “I think I estimated him.”

While it’s clear that Mr. McCarthy did not get nearly as much as his party laid out in its April bill, supporters say it includes significant accomplishments.

Among them: an agreement to automatically cut all discretionary spending by 1% if the House and Senate do not pass all 12 appropriations bills by the end of the year. That appropriations process, which is the traditional way Congress decides on a budget, has largely broken down, often resulting in a rushed “omnibus” maneuver. When appropriations bills get rolled into one gigantic spending bill, it avoids government shutdowns but is too opaque a tool to meaningfully shape budgets. Or Congress simply authorizes the government to continue to spend at last year’s budget levels, which prevents any new cuts.

The 1% cuts are known as a sequester, which “is to Democrats what garlic is to vampires,” quipped Wall Street Journal columnist Daniel Henninger, who characterized that spending reform as a major concession by President Biden and congressional Democrats. 

That measure was key to winning over GOP Rep. Thomas Massie, an MIT-trained engineer-turned-Kentucky homesteader who wears an electronic debt counter on the breast pocket of his suit.

As part of the negotiations that eventually helped Mr. McCarthy win the speakership on the 15th round of voting last January, Mr. Massie was given a place on the all-important Committee on Rules. His 11th-hour support for yesterday’s debt ceiling bill proved crucial to staving off a Freedom Caucus rebellion that could have prevented the legislation from even reaching the House floor.

In a phone interview, Mr. Massie says some of his GOP colleagues may have had higher expectations about how much of their April bill would make it into the final deal. But as someone who has long been pushing for greater fiscal responsibility – and was one of the few Republicans to do so under former President Donald Trump – he had a more realistic sense of what was possible.

“Maybe I’m jaded – I’ve been there for more than 10 years,” he said, adding that this is the first time he’s seen Republicans secure meaningful spending cuts. “We’ve been conditioned to gain nothing, ever, on the debt limit bill.”

But other Republicans cast doubt on Mr. McCarthy’s touting of the bill as “bending the curve” of discretionary spending.

“This is an irresponsible bill,” said Rep. Nancy Mace of South Carolina, pointing out that the nonpartisan Congressional Budget Office assessed that despite the GOP getting the work requirements they sought, the bill would actually increase spending on benefits because it expanded eligibility – an assessment Mr. McCarthy’s team said was inaccurate. 

She also belittled the bill’s IRS cuts, a key GOP demand amid concerns that the effort to step up auditing would hurt middle-class Americans and small-business owners. “Page 53, line 11: We’re cutting $1.4 billion of the IRS,” she said. “That’s one and a half percent of the new 87,000 IRS agents.”

“I can’t tell you how disappointed I am in the way that this went down,” said Ms. Mace, who voted no. 

McCarthy promises a bipartisan commission to address debt

Most GOP critics have refrained from discussing whether they would call for a vote to remove Mr. McCarthy – something a single member could initiate, a condition Mr. McCarthy agreed to when trying to secure the speakership. But now that the debt limit vote is behind them, they could press the issue.

“Bring it,” said Mr. McCarthy last night when asked about the possibility, according to Punchbowl News. If such a vote were to occur, Democrats could theoretically join with a small group of far-right Republicans looking to oust the speaker, but they may be reluctant to do so given the possibility of ending up with a more hardline replacement. 

Mr. McCarthy also vowed last night to appoint a bipartisan commission to address how to tackle the debt, which will continue to grow under this new deal. That’s an idea that was proposed by the bipartisan Problem Solvers Caucus, which threw its weight behind yesterday’s bill. 

“I hope that that’s established,” says Representative Phillips, who called for building on yesterday’s deal by matching revenue increases with more “efficient” spending. “This is a beginning, not an end.”