The House of Representatives is expected to vote this week on a Republican plan to raise the debt ceiling while cutting spending and stimulating economic growth.
However, the bill’s passage in the House—let alone in the Democrat-controlled Senate—is anything but certain.
Cuts, Caps, Clawbacks
First, the bill would limit spending by returning discretionary federal spending to the 2022 level.At the same time, many Republicans have said they would not cut defense spending, which accounts for more than half of the discretionary portion of the budget. That would require a 22 percent decrease in many programs Americans depend on, according to President Joe Biden.
It would result in higher costs for students, the loss of child care for thousands of families, reductions in services for veterans and senior citizens, and the loss of food assistance for 10 million people—including 4 million children, Biden told a group of union employees on April 19.
The bill would also cap growth in discretionary spending at 1 percent annually for 10 years. Discretionary spending increased 1.5 percent in 2022 and is projected to grow even more by the end of fiscal year 2023.
Second, the bill proposes to save taxpayer money through so-called clawbacks of some funds that have already been allocated but not yet spent. The plan would prevent some planned spending from going ahead.
The measure would also prohibit the president’s student loan forgiveness program and place financial limits on some executive actions.
Third, Republicans say the bill will grow the economy in two ways. One is by reinstating work requirements for many people receiving Supplemental Nutrition Assistance Program funds (SNAP) or Medicaid.
The bill requires states to track and report the percentage of people enrolled in SNAP who are employed, and the median earnings of those who were eligible to work upon leaving the program.
The bill will also grow the economy by repealing or altering certain green-energy tax credits, including those for solar and wind facilities serving low-income communities, second-generation biofuels, and electric vehicles.
“By restoring these common-sense measures, we can help more Americans earn a paycheck, learn new skills, reduce childhood poverty, and rebuild the workforce,” McCarthy said.
“It will also protect and preserve Medicare and Social Security because more people will be paying into it. And, we will prevent President Biden’s executive overreach to spend money outside the normal process, which President Biden has abused to the tune of 1.5 trillion in unilateral executive actions.”
Democrats have focused their opposition mostly on the cuts to government programs.
Rep. Jim Himes (D-Conn.) responded to the proposal with a flat no.
“No! I don’t think we should be cutting food stamps to hungry children. No, I don’t think we should be making it harder for kids to go to college,” he told NTD, sister media to The Epoch Times in an interview at the Capitol on April 20.
Peter C. Earle of the American Institute for Economic Research, offered his view.
“House Republican leaders want the Biden Administration to dial back a number of their most high profile initiatives: the funding for 80,000 new Internal Revenue Service employees, student loan forgiveness, green subsidies in the Inflation Reduction Act, and others,” the economist told The Epoch Times.
Republican Aim
The measure would increase the debt ceiling by $1.5 trillion, but any portion of that increase not used by March 31, 2024, would expire.However, both Democrats and Republicans have publicly stated they would not allow the country to miss bill payments. The real point of delaying the increase, as McCarthy has said on numerous occasions, has been to use the debt ceiling to focus attention on federal spending and force the president to negotiate over future spending cuts.
As for provisions of the bill, the speaker seems to be less concerned with the line items than with using its passage as a means to bring Biden to the negotiating table.
The president has been stalling for months on discussing the debt ceiling, insisting that to do so would call into question the “full faith and credit of the United States.”
As for negotiating on spending, Biden has said there was no point because the Republicans had not yet unveiled their proposed cuts.
That changed on April 19 when McCarthy presented the Limit, Save, Grow Act.
According to Earle, the limited provisions of the increase virtually guarantee that negotiations will be repeated within a year.
“To anyone who has observed that debt ceiling battles are happening more frequently—they’re correct. The treadmill is speeding up, and we’re likely to be back in this situation 10 or 11 months from now,” he said.
That would place debt ceiling negotiations squarely into the election year, a tactic Rep. Sydney Kamlager-Dove (D-Calif.) decried as a dangerous ploy.
Future Uncertain
The president’s refusal to negotiate over spending cuts appears to have been based on the idea that House Republicans are divided, with McCarthy at the mercy of what Biden calls MAGA extremists within the party.But some insiders say Biden may be overestimating the level of division among Republicans.
Internal discussions on the debt ceiling have dominated leadership discussions since January, and the leaders of the so-called “Five Families,” the most prominent Republican House caucuses, have a good idea of what it will take to forge a Republican consensus, a Capitol Hill staffer familiar with the matter told The Epoch Times.
Even so, Republicans hold 222 seats in the House and can afford few defections if they are to achieve a 218-vote majority.
Rep. Nancy Mace (R-S.C.) is not in favor of the bill in its current form, she said during a televised interview on April 24.
“I’m leaning against voting for it at this time because I just don’t understand why we can’t have a conversation about balancing the budget, cutting spending, and doing so over the next 10 years, because inflation is still on the rise,” Mace said.
“You’ve got to cut spending and cut taxes in order to grow the economy at a rate that can overtake the debt that we’ve taken on in this country,” she said.
Mace said she is concerned about the repeal of certain green energy tax credits, which could impact the solar industry in her state.
Victoria Spartz (R-Ind.), an economist and known as an independent voice within the Republican caucus, was undecided on the bill a day after its announcement. But she was adamant that Congress take some kind of action.
“We have to have a proposal of some kind because the country is going to hell,” Spartz told NTD.
“We break even on mandatory spending, and 100 percent of the rest of the spending is debt,” she said. “I think it’s important for us to move the needle on real ticket items, and I hope that we can get something done for the people.”
If the Limit, Save, Grow Act were passed into law, it likely would not have a great impact on inflation, according to some economists.
“The specifics of the plan itself would probably have a relatively muted impact on the overall economy,” economist Mischa Fisher, who has worked for Congress and now teaches at Northwestern University, told The Epoch Times.
“I think you would see slightly lower levels of inflation relative to current baseline plans. You would probably see a slightly lower cost of energy,” Fisher said.
“But most of the time, because the discretionary spending budget is such a small part of the overall budget, changes to discretionary spending levels don’t usually have as big an impact on people’s day-to-day lives as the political debates surrounding them would imply.”
In regard to inflation, Earle agreed. “It’s difficult to imagine that these negotiations will impact inflation directly—at least in the short term,” he said.
“But if both sides stonewall one another until the eleventh hour, it’s possible that we’ll see U.S. government security prices crater and the yields on short-term instruments (bills and notes) shoot up to levels not seen in years.”
“We will likely see a compromise spending bill sometime early this summer. But if that, too, results in obstinance and brinksmanship, high degrees of financial market volatility are likely,” Earle said.
