Rebuffed by President Joe Biden since February on that point, McCarthy and his team are now attempting to demonstrate their seriousness by drafting their own debt limit proposal — one that includes a half-dozen attempts to slash federal spending or loosen regulations in a bid to boost the economy.
“We are seeing in real time the effects of reckless government spending, record inflation and the hardship it causes,” McCarthy said inside the colonnaded walls of the New York Stock Exchange on a gloomy morning as a smattering of progressive protestors chanted out front. “Rising interest rates, supply chain shortages, instability in the banking system and uncertainty across the board.”
The speaker on Monday repeatedly blamed Biden and Democrats for driving higher inflation through excess spending, reiterating that any hike in the debt limit should be offset by significant spending cuts. He said Republicans would pass their own bill within weeks but offered no further details on which cuts his conference wants to see.
Some early drafts of those plans have been shared with GOP members in recent days, but party leaders stress that nothing is final until the entire conference can weigh in.
McCarthy vowed that in the next few weeks, “the House will vote on a bill to lift the debt ceiling into next year, save taxpayers trillions of dollars, make us less dependent on China, and curb high inflation — all without touching Social Security or Medicare.”
The bill is almost certain to include some of the GOP’s recently-passed energy priorities, including a new way to streamline the permitting process, as first reported by POLITICO.
Much of the discussion over what that bill will look like is expected to kick off this week, with Congress returning from a holiday recess to a sense of rising anxiety in both parties over the debt standoff. Even so, McCarthy sought to reassure the markets during his speech, saying defaulting on the nation’s existing debt “is not an option.”
“I have full confidence that if we limit our federal spending, if we save taxpayers money, if we grow the economy, we will end our dependence on China, we will curb inflation, and we will protect Medicare and Social Security so America will be stronger,” McCarthy said — repeatedly invoking former President Ronald Reagan, a favorite among many Wall Street traders.
The California Republican ripped Biden for doing “nothing” on the federal debt and annual deficits, saying that as a senator, Biden “voted for spending reforms attached to debt limit increases four times.”
Democrats have dismissed McCarthy’s initial proposal — which includes steep spending cuts, stricter work requirements for social programs and a new deregulatory push — as going nowhere in a divided government. They argue that Republicans should cleanly lift the borrowing limit and avoid risky negotiations with potentially dire consequences for the global economy.
“Speaker McCarthy continues to bumble our country towards a catastrophic default, which would cause the economy to crash, cause monumental job loss and drastically raise costs to the American people. He went all the way to Wall Street and gave us no more detail,” Senate Majority Leader Chuck Schumer told reporters after the speech.
Schumer said he would be willing to meet with McCarthy after the Republicans decide on a specific package of spending cute. He also stressed that while he would be willing to discuss future spending levels, he wouldn’t entertain tying that conversation to the debt limit.
“No more facts, no new information at all. I’ll be blunt. If Speaker McCarthy continues in this direction, we are headed to default,” Schumer said. And as for McCarthy’s push for a one-year debt ceiling increase — which would punt the issue until the heat of the 2024 campaign season — Schumer called it a “terrible idea.”
Wall Street traders and executives continue to believe that House Republicans and the White House will eventually cut a deal ahead of a deadline sometime this summer, avoiding a default. Republicans and Democrats clashed over the debt limit through much of former President Barack Obama’s tenure, including the first downgrade of U.S. debt by ratings agency Standard & Poor’s in 2011. (That crisis led to 10 years of spending austerity, known as budget caps, that only just ended.)
Still, the path to a deal remains unclear. McCarthy on Monday said that a “no-strings-attached debt limit increase cannot pass” — which happens to be exactly what Democrats have unwaveringly demanded.
But even a GOP-only measure may not be easy to pass in the House. Republicans can only lose four votes on the floor, meaning that virtually all of McCarthy’s conference must line up behind a package that stands no chance of becoming law in its current form.
Already, that opening offer on the debt limit is running into some potential political pitfalls — including an expiration date that would tee up another high-stakes fiscal fight just months before the 2024 presidential election.
McCarthy “again failed to clearly outline what House Republicans are proposing and will vote on, even as he referenced a vague, extreme MAGA wish list,” White House spokesperson Andrew Bates said, accusing the GOP of increasing costs for families and taking “food assistance and health care away from millions of Americans” with their emerging proposal.
“A speech isn’t a plan, but it did showcase House Republicans’ priorities,” Bates said.
Burgess Everett contributed to this report. Ferris reported from Washington.
