House Republicans narrowly passed sweeping legislation on Wednesday that would raise the government’s legal debt ceiling by $1.5tn in exchange for steep spending restrictions, a tactical victory for the House speaker, Kevin McCarthy, as he challenges Joe Biden to negotiate and prevent a catastrophic federal default this summer.
Biden has threatened to veto the Republican package, which has almost no chance of passing the Senate in the meantime, where Democrats hold a slim majority.
The president has so far refused to negotiate over the debt ceiling which the White House insists must be lifted with no strings to ensure America pays its bills.
But McCarthy’s ability to swiftly unite his slim majority in the House and bring the measure to passage over opposition from Democrats and even holdouts in his own party gives currency to the Republican speaker’s strategy to use the vote as an opening bid forcing Biden into talks. The two men could hardly be further apart on how to resolve the issue.
The bill passed by a razor-thin 217-215 margin.
“We’ve done our job,” McCarthy said after the vote.
“The president can no longer ignore” the issue of federal spending limits, he said. “Now he should sit down and negotiate.”
As the House debated the measure, Biden indicated he was willing to open the door to talks with McCarthy, but not on preventing a first-ever US default that would shake America’s economy and beyond.
“Happy to meet with McCarthy, but not on whether or not the debt limit gets extended,” Biden said. “That’s not negotiable.”
Passage of the sprawling 320-page package in the House is only the start of what is expected to become a weeks-long political slog as the president and Congress try to work out a compromise that would allow the nation’s debt, now at $31tn, to be lifted to allow further borrowing and stave off a fiscal crisis.
The nation has never defaulted on its debt, and the House Republican majority hopes to maneuver Biden into a corner with its plan to roll back federal spending to fiscal 2022 levels and cap future spending increases at 1% over the next decade, among other changes.
In exchange for raising the debt limit by $1.5tn into 2024, the bill would roll back overall federal spending and:
Claw back unspent Covid-19 funds.
Impose tougher work requirements for recipients of food stamps and other government aid.
Halt Biden’s plans to forgive up to $20,000 in student loans.
End many of the landmark renewable energy tax breaks Biden signed into law last year. It would tack on a sweeping Republican bill to boost oil, gas and coal production.
Democrats derided the Republican plan as a “ransom note”, a “shakedown” and “an unserious bill” that was courting financial danger.
It’s a first big test for the president and the Republican speaker, coming at a time of increased political anxiety about the ability of Washington to solve big problems amid the need to raise the federal debt limit in a matter of weeks.
The treasury department is taking “extraordinary measures” to pay the bills, but funding is expected to run out this summer. Economists warn that even the serious threat of a federal debt default would send shockwaves through the economy.
A non-partisan congressional budget office analysis estimated the Republican plan would reduce federal deficits by $4.8tn over the decade if the proposed changes were enacted into law.
In the Senate, leaders were watching and waiting.
The Senate majority leader, Chuck Schumer, said House passage of the legislation would be a “wasted effort” and that McCarthy should come to the table with Democrats to pass a straightforward debt-limit bill without GOP priorities and avoid default.
The Senate Republican leader, Mitch McConnell, who stepped aside to give McCarthy the lead, said the speaker has been able to unite the House Republicans.
Now, he said, Biden and McCarthy must come to agreement. Otherwise, he said, “We’ll be at a standoff. And we shouldn’t do that to the country.”