When the House passed a bill to raise the debt ceiling on Wednesday night, Republican leaders made a pledge: The legislation was just a “down payment” on reining in the federal budget.
The deal Kevin McCarthy (R-CA) brokered with the White House was a win for the speaker — he got President Joe Biden to agree to modest spending cuts under divided government. But the bill fell trillions short of the savings conservatives in his conference were hoping for.
DEBT LIMIT: THE GOVERNMENT SPENDING STANDOFF THAT COULD COME NEXT
McCarthy has staked his early speakership on cutting the size of government, in no small part because the hard-liners threatening to oust him demand it.
But the backroom deal-cutting on display Thursday as the Senate took up the debt ceiling bill shows the difficult road ahead for McCarthy as lawmakers eye ways around the legislation’s budget caps.
The upper chamber comfortably passed the bill on Thursday night, yet most Republicans voted against it. Some of those “no” votes were fiscal hawks upset the bill didn’t go further in its cuts; even more were China hawks unable to stomach the amount budgeted for defense.
The deal grows defense spending to $886 billion, a 3% increase over this year’s levels, but when adjusted for inflation, that growth is actually a cut.
Enough Republicans voted “yes” to get the bill to the president’s desk, but even as the chamber agreed to the caps, Senate leadership was promising a supplemental bill for Ukraine aid that could be stuffed with more money for defense.
What’s more, Majority Leader Chuck Schumer (D-NY) made clear he viewed “emergency” funding for domestic priorities, including the fentanyl epidemic and disaster relief, to be on the table later this year as well.
Those commitments, announced from the Senate floor ahead of the final vote, were necessary to keep senators from obstructing the bill’s passage. The chamber operates by unanimous consent, meaning a single member can drag the process out. Facing a Monday deadline to avoid default, leadership acquiesced.
“It was important for some of our members to have folks on the record, acknowledging that there clearly will be a need for additional assistance for our national security interests,” Minority Whip John Thune (R-SD) told the Washington Examiner.
But the promises amounted to a tacit acknowledgment that the budget caps aren’t real, at least in the eyes of the Senate. Lawmakers would find a way to plus-up spending.
There is no shortage of defense hawks in the House, and Ukraine aid has proven to be a bipartisan endeavor. That means at least some supplemental funding stands a good chance of becoming law.
But the pledge to work around the caps at a time when the conservative Freedom Caucus is demanding deep cuts illustrates a perhaps intractable problem for McCarthy, whose speakership may very well depend on his ability to deliver further fiscal reforms.
Most prominently, it put on display a tension within the Republican Party itself. Even defense hawks want to pare back government spending, but they’re unwilling to compromise the Pentagon budget to do it.
“We're trying to balance defending our country,” said Sen. Mike Rounds (R-SD), “versus recognizing that we could bring ourselves down if we don't get our spending under control.”
The problem is Democrats are unwilling to cut domestic programs without corresponding cuts to defense. This is especially true given Republicans are unwilling to raise taxes.
In divided government, the end result is that any reductions to spending are going to be modest. And more often, when the two sides do agree on parity, it usually goes the other way — both sides commit to roughly 1-to-1 increases, not decreases, in spending.
That principle appears to be at play in the side deal Senate leadership cut. Yes, Republicans can craft a supplemental for Ukraine, but emergency spending for domestic priorities must be considered as well.
The political dynamic does not bode well for McCarthy, who only became speaker in January after agreeing to conservative demands to slash the federal budget.
He failed to roll back discretionary spending to fiscal 2022 levels in the debt ceiling fight, one of his promises to the Freedom Caucus. Those members are now looking to see how he handles the appropriations process later this year as they weigh whether to hold a “no confidence” vote against him.
Washington averted default with a few days to spare, but lawmakers already see a shutdown fight on the horizon as appropriators, now equipped with their top-line numbers, set out to pass a budget.
The Freedom Caucus will demand that McCarthy pursue some of the same cuts that didn't make it into the debt ceiling agreement, likely including a complete rollback of the $80 billion in new funding for the IRS.
How he navigates those demands, understanding that Republicans are limited in what they can do without control of the Senate or White House, will determine the trajectory of his speakership.
Sen. Susan Collins (R-ME), the ranking member of the Appropriations Committee, expressed hope that Congress operating under regular order — leadership also committed to bringing all 12 appropriations bills to the Senate floor — will ease some of the frustration felt by conservatives over the back-room omnibuses that have been crafted in recent years.
Yet she acknowledged there could be trouble ahead of an Oct. 1 deadline to fund the government. “It’s going to be interesting,” she told the Washington Examiner.
Rounds, for his part, expects the Freedom Caucus will use every tool at its disposal to extract spending cuts. “That's part of the process,” he said.
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But he sees the debt ceiling hike McCarthy brokered as a template for future spending agreements.
“I think the fact that the speaker has now shown that he can put together a deal, I think that's going to bring some of the folks in the middle perhaps into trying to negotiate with him,” he added.