(The Center Square) – President Joe Biden and House Speaker Kevin McCarthy, R-Calif., reached a tentative compromise to raise the debt ceiling over the weekend, but the plan still faces a rocky path forward.
Lawmakers on both sides have expressed frustration with the concessions made to reach that deal with several suggesting they will not vote to support the debt limit increase. If a deal is not passed by June 5, U.S. Treasury officials say the nation risks defaulting on its debt obligations, hurting the national credit rating, and sending shockwaves through the U.S. economy and the global markets.
“I just spoke with Speaker McCarthy, and we’ve reached a bipartisan budget agreement that we’re ready to move to the full Congress,” Biden said over the weekend. “And I think it’s a really important step forward…and it takes the threat of catastrophic default off the table; it protects our hard-earned and historic economic recovery.”
The “Fiscal Responsibility Act” extends the debt limit until January 1 of 2025, notably through the next election. Democrats have touted that the agreement does not significantly cut nondefense spending. McCarthy says the plan would freeze for fiscal year 2024 and then increase by 1% in 2025 and touted that the bill takes back $20 billion that was previously appropriated to the IRS as well as another $30 billion of unspent COVID relief funds.
The agreement would also expand work requirements for food stamps for some American adults. McCarthy touted the wins for Republicans, arguing that in the last several debt limit increases, there were no spending cuts of this kind.
“This responsible debt limit agreement reduces overall spending, reduces non-defense spending, and reduces the deficit—unlike any debt limit increase in recent history,” McCarthy said.
However, several Republicans in the House have suggested they will vote no on the deal as currently constructed. They point to an increase in the national debt as the major issue, rallying in opposition to that rising number.
Lawmakers seem to be disputing even the dollar amounts in the deal itself, arguing, for example, that a smaller increase should not be called a spending “cut.” Because the annual federal deficit has grown so large, lawmakers could reduce the deficit but still add trillions of dollars in debt over the next few years.
McCarthy, who managed to get concessions in a divided government, is also taking fire since he was barely able to win the support of conservative Republicans to be Speaker of the House.
“The D.C. Swamp has proposed the largest debt ceiling increase in our nation’s history, adding $4 trillion to the existing $31 trillion national debt,” Rep. Matt Rosendale, R-Mont, said in a statement after the deal was reached. “The Fiscal Irresponsibility Act fails to cut spending and continues to fund the Democrats’ and Biden Administration’s radical agenda. It is frankly an insult to the American people to support a piece of legislation that continues to put our country’s financial future at risk. Montanans did not send me to Washington to support business as usual, which is why I will be voting AGAINST the Fiscal Irresponsibility Act.”
White House officials seemed to back up conservative Republicans’ concerns when touting the agreement. A White House official spoke on a press call on background reporters to that effect. Normally, comments on background are not published verbatim, but the White House published a transcript online of the comments:
“This is a — much different from the 22 percent cut to non-defense discretionary priorities and 10 years of caps that was originally laid out by House Republicans,” the official said. “In fact, this outcome is roughly what would have happened to non-defense spending if we hadn’t had a budget agreement this year and instead had enacted a full-year continuing resolution.”
Senate Republicans have their problems with the deal as well. Sen. Rand Paul, R-Ky., reacted sharply on Twitter after the deal was brokered.
“Fake conservatives agree to fake spending cuts,” Paul said. “Deal will increase mandatory spending ~5%, increase military spending ~3%, and maintain current non-military discretionary spending at post-COVID levels. No real cuts to see here. Conservatives have been sold out once again!”
Democrats have blasted Republicans, calling for a debt limit increase without the proposed cuts.
“The Republicans holding the entire world economy hostage unless they get what they want has been an outrageous display of extremist politics,” Sen. Bernie Sanders, I-Vt., wrote on Twitter.
Republicans, though, have pointed to soaring debt and inflation in recent years. The national debt is projected to hit $32 trillion this year, and inflation remains stubbornly high.
The U.S. Bureau of Economic Analysis released its Personal Consumption Expenditure index Friday which showed the PCE rose 0.4% in April. As The Center Square previously reported, inflation soared during Biden’s administration, with prices for some items like groceries increasing over 10% in one year alone. The U.S. Federal Reserve has raised interest rates nearly a dozen times to help lower inflation, but that has helped hiked the average mortgage interest rate above 7%.
Though inflation has slowed from its height after the pandemic, the latest federal data shows it continues to rise at an elevated pace.
Concern over figures like that are helping Republicans stand their ground in demanding spending cuts. Federal debt spending helps fuel the money-printing that increases the money supply and along with it, inflation.