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From “The New York Times,” I’m Michael Barbaro. This is “The Daily.”
Today, for Republican House Speaker Kevin McCarthy, the looming crisis over the US debt ceiling may soon require him to make a painful choice — prevent a financial catastrophe or keep his job.
Congressional reporter Catie Edmondson explains.
It’s Monday, May 1st.
Catie, the last time we had you on the show, it was back in January. And Kevin McCarthy and the new, very narrow House Republican majority had just finished a grueling fight over the speakership. And that fight pitted McCarthy against the most hardline conservatives in the House who wanted to extract concessions from him before they would vote for him as Speaker. And as we know, McCarthy ultimately won that fight by making those concessions, the most notable of them being that any one member of the House could call a vote to basically fire McCarthy as Speaker at any time, which effectively put him at the mercy of the same wing of his party who he had the hardest time winning over.
And the question coming out of all of that was whether Speaker McCarthy could ever truly rule this unruly group of Republicans or whether he was basically doomed as Speaker from the start. And over the past few days, it feels like we’ve started to get an answer.
We did. We saw an early test balloon floated, essentially. And it was on a really high-stakes issue. It was on the fight over raising the debt ceiling.
And just remind us of the basics of that fight. I know it is a complicated subject, a slightly academic subject. But just walk us through it.
At some point over the summer, we don’t know exactly when, but we’re estimating maybe by June, the government is going to hit the limit of how much money it can borrow in order to fund government operations. And so Congress is going to have to pass, and then the White House is going to have to sign, a bill raising that limit. If Congress doesn’t raise the debt ceiling, the United States can’t borrow any more. And the government stops working. It can’t pay its bills.
Right, which is why the government raises the debt ceiling time after time after time because everybody of both parties, traditionally, is pretty invested in making sure the government can pay its bills and that it doesn’t default on its debt.
That’s right. A default would invite catastrophic economic consequences.
But what we have seen over the past several years is that Republicans often decide to try to weaponize the issue, particularly when there is a Democrat in the White House. They’ve held up the debt ceiling as a tool essentially to try to force a confrontation with Democrats in the White House and to try to get them to swallow deep spending cuts. And that is where house Republicans are right now.
They have told the White House, essentially, we’re not going to do this the easy way. We’re not going to just lift the debt ceiling for nothing. If you want our votes in order to avoid a default, then you are going to have to negotiate with us. And you are going to have to take on some of our demands, which in this case, is broadly deep spending cuts. House Republicans think that federal spending is out of control. And they want to wind that down.
And so that left this question of would House Republicans be able to coalesce and unite around some type of opening offer to negotiate with the White House on?
Right. Would McCarthy as Speaker be able to persuade all these Republicans, especially these conservative Republicans, to get on the same page or would it devolve into the kind of ugly spectacle we saw surrounding his election as Speaker?
That’s exactly right. We know that it is a tiny majority that Kevin McCarthy has. He’s giving a lot of power to the hard right lawmakers who are the ones who really want to see very deep spending cuts here. And so that type of messy spectacle is exactly what Kevin McCarthy had been trying really hard to avoid. He wanted to be able to get his conference behind just one single proposal.
Mm-hmm. And how, in light of that truly messy speaker’s race, does he go about trying to do that, to get everyone on the same page on the debt ceiling?
Well, at first, their efforts kind of fail. They initially had an idea that they were going to lay out this grand budget proposal. And they were going to lay out all of the cuts that they were going to demand in exchange for lifting the debt ceiling and that, ultimately, that budget at the end of the day was going to balance the nation’s budget in 10 years.
Which is an extremely ambitious feat. They ultimately weren’t able to get there. There was too much infighting. The math didn’t quite work. And so instead, House Republican leaders pivot and they say, well, instead of laying out this large, grand budget, why don’t we put together a piece of legislation that lays out some of the terms that we will ask the White House to agree to in order for us to vote to raise the debt ceiling?
So something far less ambitious but with the same theoretical endpoint of communicating to the White House what it would take to lift the debt ceiling.
Exactly. And the thing is, even getting his members united around that more modest proposal is not easy for Speaker McCarthy. He particularly has to win over, again, really the same group of conservatives that we talked about back in January because there is a critical bloc of hard right lawmakers in his conference who just do not want to raise the debt ceiling really under any circumstances and in fact pride themselves on the fact that they’ve never voted to do that ever.
And so he really sets out to do that in a couple of ways. And one of those ways is to really try to bring them into the fold, to make them feel like members of the team. I think in a lot of past Republican speakership, we’ve seen Republican leaders keep conservatives at an arm’s length. And that’s because traditionally those lawmakers have raised hell —
— for Republican speakers. And so rather than trying to marginalize them or push them out, McCarthy actually brings them in and makes a point of courting their votes, listening to their concerns, making them feel heard. And the other portion of this is that he says to them, look, this is about bringing President Biden to the negotiating table.
We have to keep our focus on making sure that the political pressure is on Biden here, our political enemy. Right? He’s the enemy, not me. And he tells them, essentially, if you guys don’t vote for this, if we can’t show that we have the votes to pass our own proposal, then you guys are going to be cutting my legs out from under me because when I go to the negotiating table with President Biden, he’ll think I’m completely weak.
And so ultimately, after really weeks, essentially, of McCarthy courting these lawmakers, bringing them into the fold, doing some arm twisting, some flattery, he believes that he has the votes to pass this bill. And he decides he’s going to put it to the floor for an up or down vote.
- archived recording 1
Now to Capitol Hill where house Republicans are set to hold a key vote on the debt ceiling today.
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The problem is it’s not clear McCarthy has the votes from his own Republicans.
- archived recording 3
Are Republicans going to pass this bill or not?
And I have to tell you, Michael, it’s very rare for congressional leadership to schedule a vote on a bill without being absolutely sure that it’s going to pass.
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House Speaker Kevin McCarthy can only afford to lose four potential GOP votes to pass the bill. So how many holdouts are there, yourself included?
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I’m leaning against voting for it at this time.
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Every program has got to be frozen. We can’t allow programs to grow 6 percent, 8 percent, 10 percent.
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I’m voting no.
But on Wednesday afternoon, there all of us reporters were sitting in the House chamber looking at every possible holdout to see how they were voting. We were watching whipping happen on the House floor as the vote was going on. And at the end of the day —
- archived recording 8
Yeas are 217. The nays are 215. The bill is passed.(Video) McCarthy promises to continue debt ceiling talks after Biden meeting | USA TODAY
— McCarthy had the votes.
So several hard right Republicans who do not ever make compromises of any kind made a compromise here.
Exactly. That’s why this was such a big deal.
So for Speaker McCarthy, this is a real accomplishment.
Yeah, I think that’s right. I think you have to give credit where credit is due. And look, he started the year in hellish circumstances with these hard right lawmakers subjecting him to a humiliating vote after humiliating vote. And here, on something that actually really matters on a matter of policy, he kept his conference largely united.
Right. He delivered. OK, let’s turn to what’s actually in this bill. What have all these House Republicans demanded in return for actually raising the debt ceiling?
So first and foremost, they’re calling for sweeping spending cuts, essentially a 14 percent cut over the next decade.
And it takes aim at several of the key accomplishments of the Biden administration so far. It would look to claw back some of the climate measures he was able to pass through Congress. It would claw back money that he had appropriated to the IRS to try to improve enforcement of the highest earners to make sure that they were paying their fair share of taxes.
They also are trying to increase work requirements for recipients of social programs, federal social programs like Food Stamps and Medicaid, which are two programs that Democrats have fiercely defended.
And it would also roll back his executive order forgiving student loan debt.
Hmm. So if you’re President Biden, this Republican plan to get the debt ceiling lifted now it looks like a plan to more or less gut your domestic agenda. And it probably looks extremely painful.
That’s right. The message here that Republicans have sent to President Biden is that if you want our votes to raise the debt ceiling, then you, President Biden, are going to have to give us a pound of flesh. And the White House and Democrats I think were really hoping or maybe expecting that House Republicans were going to be in complete disarray, that they were going to be beset by infighting and maybe never really coalesce around a starting negotiating position.
And I think the fantasy, honestly, was that then House Republicans would simply have to raise the debt ceiling if they couldn’t come up with a solution of their own. And that’s why it was so important for Speaker McCarthy to get the votes to pass a Republican opening bid because it essentially forces President Biden to come to the negotiating table.
Right. Basically, McCarthy was able to convince these conservative Republicans to focus on Biden. And by focusing on Biden rather than on fighting with McCarthy, they have forced Biden to now sit down with them and negotiate.
- archived recording (kevin mccarthy)
Just as it took me 15 rounds to win speaker, the one thing I have promised the American public, I will never give up on you.
And they have done all this work to get to the hard part.
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You’ve underestimated us. We’ve done our job — the only body in here that’s done theirs.
McCarthy is going to have to negotiate with the White House. He’s going to have to negotiate with Democrats. And he’s going to have to come back to his conference with some sort of compromise. And that is going to be the test for him and for his speakership.
- archived recording (kevin mccarthy)
I’ve sat down with the president on February 1st. He ignored the rest of this time. Now he should sit down and negotiate.
We’ll be right back.
So Catie, let’s now turn to this hard part, these negotiations between Republicans and the White House. What are Democrats, what is the president saying about this debt ceiling bill? What has been the reaction to this platter of cuts and rollbacks from House Republicans?
Well, unsurprisingly, Democrats absolutely hate it.
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Speaker McCarthy and House Republicans want to force working Americans to accept either a punch to the gut or a blow to the head.
Chuck Schumer has taken to the Senate floor numerous times to rebrand it.
- archived recording (chuck schumer)
It might as well be called the Default on America Act because that’s exactly what it is — D-O-A. Instead of doing what —
Their argument is the spending cuts that House Republicans are lobbying for are going to hurt popular federal programs that help veterans, that help the working class. Their argument is that these new work requirements for social programs that Republicans want to impose are really taking aim at the most vulnerable in society.
- archived recording (chuck schumer)
Either the US defaults on national debt for the first time in American history or MAGA Republicans get their way and America defaults on everything else.
They say that this is a cruel bill that they cannot allow to pass.
And it does up the political pressure for President Biden to sit down at the negotiating table with Speaker McCarthy.
I guess, I’m curious, though, Catie. What if President Biden just said, no, I will not negotiate with you? And here’s why. I don’t think that raising the debt ceiling should have any strings attached to it. I just want you to raise the debt ceiling period. And I won’t have a conversation about doing that if it involves any of these spending cuts or policy rollbacks. What would theoretically happen if he did that as a tactic?
Well, the problem with that strategy is it seems extremely plausible that there would be a number of hard right Republicans who would be more than happy to call his bluff, who would hold fast to their pledge not to raise the debt ceiling without any conditions. And that would force us into a default, which our colleagues who cover the economy have said would have dramatic, disastrous economic consequences globally.
And aside from all of the economic pain that would cause, there’s also the fact that President Biden has announced his re-election campaign.
And what president wants to run for re-election during a recession?
So given that, what do we expect these negotiations to actually look like? How much do we expect everyone to move toward each other?
Well, as with any negotiations, both sides theoretically have to start inching toward the middle to find some sort of common ground. And that is where the dynamics become incredibly dangerous for Speaker McCarthy because he is going to have to negotiate with a White House, with Senate Democrats, who will absolutely not swallow some of the demands his conference has stipulated.
And so at the end of the day, whatever deal he strikes with Democrats is going to be a watered down version of the bill he just barely was able to pass. And he is going to have to take that watered-down product back to his conference, including the incredibly conservative lawmakers he’s been able to appease so far, and sell them on this product, get them to vote on this deal.
And because his majority is so narrow, as we’ve talked about with you, if just a handful of conservative House Republicans say, no, I will not agree to a watered down bill to raise the debt ceiling, then McCarthy won’t have enough votes to pass this watered-down bill. And then what?
Well, in that situation, at least the White House and Senate Democrats hope that a few moderate Republicans might be willing to vote for this watered down solution. But then Democrats would essentially come in and bail McCarthy out. And McCarthy would be able to pass this deal by leaning on lawmakers in the opposing party. And that, obviously, would be politically catastrophic for him as Speaker.
Just explain that, why that’s politically catastrophic.
It would be a political catastrophe for him because he would essentially be ignoring the will of his own members to raise the debt ceiling, something they don’t want, using Democratic votes, votes from the opposing party, the enemy party.
Right, a betrayal.
Exactly. And it is not hard to imagine in those circumstances that at least one lawmaker would be so incensed by this act of betrayal that they would move to try to oust McCarthy from the speakership, as any one lawmaker is now able to do as a result of the concessions McCarthy made to become speaker in the first place.
In other words, lifting the debt ceiling and sparing us all an economic catastrophe, is almost guaranteed in one way or another to imperil Kevin McCarthy’s speakership, a speakership he barely got in the first place.
Well, look, after he won this floor vote passing Republicans’ opening offer in these negotiations, Speaker McCarthy came off the House floor and he said, you see? I had it. You guys always underestimate me. Don’t underestimate me. And so it is possible that there is a world in which he is able to pull this off, to raise the debt ceiling, and keep all of his members happy. But there are also two other really grim scenarios.
One is that he can’t pull it off, we don’t raise the debt ceiling, and we default. And the other is that in order to avert that economic catastrophe, he has to essentially sacrifice his job as speaker and use Democratic votes to get it done.
Catie, thank you very much.
We’ll be right back.
Here’s what else you need to know today. Over the weekend, federal regulators took over First Republic Bank of San Francisco and sold it to JPMorgan Chase in their latest attempt to end the crisis among regional banks that began in March. The decision marks the third time in the past two months that regulators have seized a bank because of its weak finances. Regulators took over Silicon Valley Bank on March 10th and Signature Bank two days later.
First Republic’s problems became insurmountable last week when it disclosed that customers had pulled out half of the bank’s money, news that sent its stock price plunging about 75 percent. All 84 branches of First Republic will reopen this morning as branches of JPMorgan Chase. The acquisition makes JPMorgan Chase, already the nation’s largest bank, even bigger.
Today’s episode was produced by Rikki Novetsky, Mary Wilson, and Shannon Lin. It was edited by Rachel Quester with help from Patricia Willens, contains original music by Brad Fisher, Rowan Niemisto, and Marion Lozano and was engineered by Chris Wood. Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly.
That’s it for “The Daily.” I’m Michael Barbaro. See you tomorrow.