Debt ceiling: McCarthy wins 1st round, Biden eyes long game

Speaker Kevin McCarthy surprised Washington when he united the raucous House Republican majority to pass a sweeping debt ceiling package

Speaker Kevin McCarthy surprised Washington when he showed he could unite the House's raucous Republican majority to pass a sweeping package to raise the nation’s debt limit by $1.5 trillion in exchange for steep spending reductions, an opening bid awaiting President Joe Biden’s response.

The next moves are more difficult, and politically uncertain.

This week’s stunning turnaround for the battle-hardened Republican speaker is only act one in what is expected to be a long summer battle with Democrats to find agreement to lift the nation’s borrowing capacity and avert a potentially catastrophic debt default.

Biden on Thursday had no direct response to McCarthy’s maneuver. The White House has made clear it is not willing to barter with Republicans over whether or not the nation will pay its bills. Democrats opposed the harsh spending cuts Republicans proposed, and the president vowed to veto McCarthy’s bill.

“We're not negotiating on this,” said White House press secretary Karine Jean-Pierre.

The president has indicated he's willing to talk budget issues, she said. But he's not engaging on whether or not the nation will raise the debt limit.

The U.S. is not a “deadbeat nation” and always pays its debt, she said. “House Republicans are holding our economy hostage and threatening default.”

What has become apparent, though, is that Biden’s refusal to negotiate may not be a tenable position for the White House as the deadline nears for action. While the White House is taking the long view, preparing to slam the Republicans for what Biden calls “wacko” ideas that will harm Americans, at some point the president, and the Democratic-led Senate, will need to respond to the House.

Economic analysts warn even the political threat of a federal default on the nation’s debt, now at $31 trillion, would send shockwaves through an already jittery economy. With economic growth falling to a sluggish 1% annual rate last quarter, according to new data this week, signs point to the potential for a recession ahead.

The Treasury Department continues to pay the nation’s bills, but the money will soon fall short, even though tax returns in April helped replenish the coffers. An analysis from Goldman Sachs puts the deadline for raising the debt limit in late July.

“We’ve lifted the debt limit. We’ve sent it to the Senate. We've done our job," McCarthy said after Wednesday's vote.

McCarthy said the president "should sit down and negotiate.”

Underestimated from the start, McCarthy of California has shown he can muscle legislation to passage using the currency Washington values most — votes — to lay down a policy marker in the debate.

The Republican-passed bill is stacked with party priorities, and imposes broad restrictions on federal government spending that are bound to be unpopular as they chip away at the programs and services Americans rely on in their daily lives. And the bill's bolstered work requirements on recipients of food stamps, health care and other government aid are expected to fall harshly on Americans who need aid the most. The demands are likely to be met with protests.

In the Senate, where Democrats have the majority, Majority Leader Chuck Schumer calls the House package a “ransom note forced on us by the hard right."

Schumer may never even bring the House bill up for a vote in the Senate. Instead, he predicted Americans “will reject steep cuts to education, law enforcement, veterans care and border security” contained in the Republican bill.

Biden and his Democratic allies in Congress want to simply raise the debt limit with no strings attached, a throwback to an earlier era.

But those days may be long passed. Democrats negotiated their own priorities to raise the debt limit during the Trump presidency. And Republicans showed they were willing to take the country to the brink of a first-ever federal default the last time they confronted a Democratic president, during the tea party era a decade ago.

McCarthy found success in uniting the Freedom Caucus and other factions around this proposal, but next steps will be more complicated for the Republican speaker.

The package the Republicans approved, over unified Democratic opposition in the House, included many of the Freedom Caucus priorities. Rank-and-file Republicans know it has little chance of becoming law and was merely an opening salvo to push Biden to the negotiating table. Any compromise may be harder for McCarthy to sell.

“We’re sending over what we believe is a responsible solution,” said Rep. Chip Roy, R-Texas. “Now, it’s your move, Mr. President.”

Like past Republican leaders John Boehner and Paul Ryan, McCarthy risks being chased to early retirement or facing the threat of a vote for his ouster if he doesn’t push hard-right priorities.

For now, Senate Republican leader Mitch McConnell is staying out of McCarthy's way, letting the new Republican speaker try his hand at uniting his conference and confronting the Democratic president where others have failed.

“Getting something like that across the finish line in a narrowly divided House is a remarkable achievement,” said Sen. John Thune, R-S.D., the No. 2 Republican. He called it “a tour de force.”

Sen. John Cornyn, R-Texas, said the House's ability to pass their bill “changes the dynamics considerably.”

People should not expect McConnell to step in and help broker a debt ceiling agreement. “It’s not going to happen,” Cornyn said.

“The whole purpose of this is to compel the president to negotiate and to demonstrate to Washington D..C that Kevin McCarthy has the votes to raise the debt ceiling.” said one McCarthy ally, Rep. French Hill, R-Ark. “The game moves to the White House to see what they are willing to do.”

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Associated Press writers Chris Megerian and Josh Boak contributed to this report.