Bipartisan Debt Ceiling Agreement Faces Crucial Vote

The Fiscal Responsibility Act (FRA), an agreement on the US debt ceiling between President Joe Biden and House Speaker Kevin McCarthy (R-Calif.), successfully navigated a vital stage in the House Rules Committee during the extended Memorial Day weekend. This development paves the way for House legislators to vote on the proposed bill.

The Act, intending to address the debt limit, emerged victorious in the committee with a close vote of 7 to 6 on May 30. This triumph sets the stage for the bill’s debate and potential enactment on the congressional floor.

Despite opposition from Rep. Chip Roy (R-Texas) and Rep. Ralph Norman (R-S.C.), who sided with all four Democrats on this influential committee, the bill progressed. The committee’s powerful conservative voices, including Rep. Thomas Massie (R-Ky.), who favored the legislation, were initially feared to obstruct the bill’s course.

The Rules Committee rejected several amendments proposed by both Republican and Democratic members. This move was designed to maintain the integrity of the debt limit deal, meticulously crafted by the White House and House GOP negotiators.

In response to the criticism faced by the Biden-McCarthy agreement, Rep. Byron Donalds (R-Fla.) criticized the proposal on May 30 for endorsing the post-COVID spending levels presented by Biden and the Democrats. Rep. Nancy Mace (R-S.C.) also claimed that the White House had outmaneuvered GOP leadership.

Furthermore, Senator Rand Paul (R-Ky.) proposed a conservative alternative to the agreement. His proposal suggests replacing the two-year suspension on the debt ceiling with a $500 billion increase to compel Congress to address the ongoing debt issue.

An insightful report from the Congressional Budget Office (CBO) posits that this debt limit agreement could cut spending by over $1 trillion in the coming decade. The spending limitations proposed for 2024 and 2025 may reduce about $1.3 trillion from the projected federal budget deficits from 2023 to 2033.

McCarthy shared on social media that this legislation, based on the CBO report, would be the most significant spending cut voted on by Congress in history. The bill is being celebrated as a compromise by both negotiating parties, emphasizing its bipartisan nature.

The Act comes loaded with many provisions, including a rollback of approximately $28 billion in unspent COVID-19 relief funds and about $1.4 billion in IRS funding. It also imposes stricter work requirements for certain government assistance programs and caps total non-defense discretionary spending—excluding veterans’ benefits—at $637 billion for the fiscal year 2024, indicating a $1 billion decrease from 2023. This figure would experience a 1% increase in 2025.

Despite its many provisions, there are also criticisms. The Freedom Caucus expressed concern over the bill’s unspecified debt limit. It highlighted that the proposed legislation would suspend the limit until January 2025. According to critics like Rep. Lauren Boebert (R-Colo.), this hands President Biden an open-ended opportunity to spend until the end of his term.

Some, like Rep. Chip Roy, expressed disappointment in Speaker McCarthy for not pushing harder during the debt limit negotiations, particularly concerning the rescinded COVID relief and IRS funding. However, in the end, the legislation is expected to add $4 trillion to the debt ceiling.

Even as the bill faces opposition, Speaker McCarthy remains unworried about losing his position and expressed uncertainty about the reasons for opposition. He reiterated that the bill constitutes the most significant savings of $2.1 trillion. Despite some critics’ public calls for McCarthy’s removal, the Fiscal Responsibility Act’s fate remains in the House legislators’ hands as it prepares for a floor vote.

For his part, Massie conveyed optimism about including his provision in the Act. This provision mandates that if Congress doesn’t pass all of its appropriations bills by January 1, 2024, spending will be cut by 1 percent annually. He acknowledged the Act’s mix of positive and negative aspects, emphasizing that all must participate in decision-making and perform their legislative duties effectively.

However, skepticism also exists about this provision, as Roy suggests it could motivate Congress to rush through a comprehensive spending bill just before the deadline. According to him, this is a typical occurrence, and he questioned the balance against such a scenario.

Some members of the Freedom Caucus, like Dan Bishop (R-N.C.), have expressed support for removing McCarthy from his role as Speaker in response to the Act and the debt it adds. Bishop publicly acknowledged this, stating that it seemed inevitable. Despite this, McCarthy showed confidence in retaining his position and appeared to downplay the dissent among some of his colleagues.

There is no question that the FRA has stirred considerable debate and sparked differences of opinion among lawmakers. As the bill heads to the floor for discussion and a vote, its future and impact on US national debt hang in the balance. Whether it is the start of a ‘reckoning,’ as Roy suggested, remains to be seen. Regardless of the outcome, this bill represents a significant step in negotiating the debt ceiling and the country’s fiscal responsibility. The ultimate decision will carry crucial implications for the trajectory of US economic policy.