This past week House Republicans narrowly passed their proposal to increase the debt ceiling until April 1, 2024. The proposal would increase the debt ceiling by $1.5T and be linked to proposed cuts that would total over $4.5T over a 10-year period. In fact, the day before the vote, the Republican leadership got a big boost when the non-partisan Congressional Budget Office (CBO) estimated that the cuts in the bill could reduce spending by $4.8T over 10 years.
Passing the debt-ceiling bill was critical to Republican Speaker Kevin McCarthy in his game plan to get President Biden and Senate Democrats to sit down with him and try to negotiate a bipartisan budget and debt-ceiling bill. As the Speaker was able to proclaim after passage of the Republican plan – only the Republican House has actually passed a bill increasing the debt ceiling.
Now the real challenge begins, as the two sides have to see if there is any middle ground. The Republicans kept their commitment not to cut Social Security, Medicare or defense, meaning that the entire $4.5T was in other programs and by necessity making deep cuts in some areas. The Republican bill also cut back many of the clean-energy measures that were included in last year’s Democratic centerpiece legislation, the Inflation Reduction Act (IRA), and other social welfare programs, including programs for veterans run by the VA. At the last minute, the Republican leadership restored cuts that their bill had made to ethanol tax incentives, which had threatened to lose the support of Representatives from Iowa for the bill. Ethanol has become a huge user of U.S. corn production and hence support from the midwestern Republicans.
The bottom line is that the carefully crafted bill passed with one vote to spare – the final tally was 217 to 215. Four conservative Republicans voted NO. A bill dies on a tie vote.
Now the ball is in the court of the White House and Senate Democrats as they develop a strategy to deal with the Republican alternative. The House bill has no chance of becoming law, and the final bill will need Democratic support as the final product is likely to lose more than four House Republicans. The House is out for two weeks, but talks can start once the President decides on the next steps.