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McCarthy concessions raise stakes on budget, debt limit

Speaker's deal increases the risk of a battle over the debt limit and a partial government shutdown

Incoming House Appropriations Chair Kay Granger will have her hands full trying to make the math work.
Incoming House Appropriations Chair Kay Granger will have her hands full trying to make the math work. (Bill Clark/CQ Roll Call file photo)

The deal between Speaker Kevin McCarthy and his conservative detractors lays a foundation for the massive spending cuts that some want, but it also sets up a daunting challenge for GOP lawmakers who want to keep the government functioning after winning control of the House.

By increasing the difficulty of reaching a bipartisan agreement on spending, it could raise the risk of a market-rattling battle over the debt limit and a partial government shutdown later this year. But first, House GOP lawmakers need to agree among themselves about what’s actually on the table.

If spending bills for the next fiscal year are capped at fiscal 2022 levels as proposed in the deal, the assumed cuts would slice over $130 billion, or 8 percent, from levels in the recently enacted omnibus spending law.

Military and national security-related programs, which received more than half of this year’s budget boost, or $76 billion, would take a 10 percent hit if cuts were applied proportionally. But top Republicans are already warning that’ll never happen.

Kay Granger, R-Texas, the incoming Appropriations chairwoman, said in a statement after McCarthy was elected speaker that she looks forward to working with other committees to “cut wasteful spending while maintaining our national security priorities.”

Granger went on to put a finer point on the matter. “There have been reports that House Republicans support cutting our national defense,” she said. “Let me be clear — this House Republican does not support that position.”

The GOP candidates for House Budget chairman say they want to write a budget resolution with the goal of the House adopting it ahead of taking up fiscal 2024 appropriations bills. But getting all Republicans on board a budget blueprint is a formidable challenge with only four votes to spare.

And that’s all before the House has to try to reach a compromise with the Democratic-controlled Senate over sharply divergent spending priorities.

[McCarthy wins speaker election, finally]

Austerity now?

The deal, if it holds, would largely impose the balanced-budget blueprint that former President Donald Trump’s budget director, Russ Vought, drafted and shopped to conservative lawmakers last year. It purports to cut some $10 trillion in projected spending over the next decade while producing a slight surplus in the final year — all while making room for $3.3 trillion in tax cuts.

Complicating matters is that two of the largest pots of federal dollars, Social Security and Medicare benefits, would be spared the ax, leading to bigger cuts across every other program.

“What we’ve been very clear about is we’re not going to touch the benefits that are going to people relying on the benefits of Social Security and Medicare,” Rep. Chip Roy, R-Texas, said on CNN’s “State of the Union” on Sunday. Roy was one of the lead negotiators seeking concessions from McCarthy in exchange for ultimately backing his speaker bid.

Roy, pictured during last week’s speaker nominating process on the floor.  (Bill Clark/CQ Roll Call)

But while seniors wouldn’t technically see a reduction in Medicare benefits, the Vought plan would still slash about $1 trillion from Medicare payments to providers, which could cause them to limit access and pare back services.

Overall, the proposal calls for cutting $4 trillion from projected health care spending over a decade, including from Medicaid and repeal of President Barack Obama’s health care law that Republicans were unable to achieve even when they had control of all three branches of government.

Another $2 trillion in cuts would come from other mandatory programs, such as agricultural price supports, food stamps and child nutrition, student loans, disability insurance and more.

Defense vs. nondefense

Vought’s plan includes tight caps on appropriations, cutting about $4 trillion from discretionary funds, mostly from nondefense programs, though defense wouldn’t be spared either.

Total “base” appropriations for fiscal 2023, excluding supplementals and other typical upward adjustments, are $1.602 trillion, according to the Congressional Budget Office. The comparable figure for fiscal 2022 is $1.471 trillion, as Roy outlined Sunday, so the House GOP-drafted fiscal 2024 spending bills are expected to produce a $131 billion net cut.

Roy said the agreement doesn’t specify how much of a hit defense programs would take relative to nondefense. Once the new, shrunken topline is in place, Roy said, “then let’s all sit down and figure out … how we’re going to spend all that discretionary spending.”

Speaking on the same program as Roy on Sunday, Rep. Daniel Crenshaw, R-Texas, said it wasn’t yet clear how much pain the defense budget will be in for.

“The deal that I understand is you’ve got to balance the budget in a 10-year window. So that’s the deal. And the baseline for that balancing is at 2022 levels. That does not necessarily mean there’s automatic cuts to the defense budget,” said Crenshaw, a former Navy SEAL. “That’s going to get worked out in the appropriations process.”

Some Republicans are already making threats to tank the conservatives’ agreement if defense cuts are on the table. Rep. Tony Gonzales, R-Texas, said Sunday he plans to vote against GOP leaders’ revised rules package on Monday, even though it wouldn’t set any actual funding levels.

“This has a proposed billions of dollar cut to defense, which I think is a horrible idea when you have an aggressive Russia and Ukraine, you’ve got a growing threat of China in the Pacific,” Gonzales said on CBS’ “Face the Nation” program.

But the numbers are stark for nonsecurity-related programs if defense is spared the budget ax.

If the entire $131 billion cut back to last year’s levels were trained on nondefense accounts, it would mean a nearly 18 percent reduction on average, which already may be untenable with moderate Republicans.

What’s more, politically sacrosanct veterans health care funding has already received advance appropriations for fiscal 2024 that are 8 percent higher than the current year, at $128.1 billion, and that figure nearly always grows as more costs are identified. So if veterans health were excluded from the calculation, the hit to nondefense discretionary programs could top 22 percent.

House Appropriations’ top Democrat, Rosa DeLauro of Connecticut, warned in a statement that capping spending at fiscal 2022 levels “kills the 2024 government funding process before it has even started, all but guaranteeing a shutdown.”

“These types of cuts would harm communities and families across the United States who are already struggling with inflation and the rising cost of living,” she said in a statement, adding that they would put support for veterans, law enforcement, small businesses and military families at risk.

While Crenshaw backs a robust defense budget, he declined to rule out any Pentagon spending trims.

“I want to do what’s right for the Pentagon. I also want them to spend the money better,” he said Sunday on CNN. “I think we can use the money at the Pentagon to make it go a lot further.”

Some GOP appropriators have begun to accept that they will have to write spending bills to fiscal 2022 limits, people with knowledge of the talks said. But others are frustrated they had little if any input into the negotiations.

Mario Diaz-Balart, R-Fla., a senior appropriator, said last week that Republicans “have been very, very concerned about excessive spending. So the number’s going to shrink no matter what. The issue now is what that number is.”

Process gridlock

Even before getting to the point of negotiations with the Senate and White House, House Republicans could have a major challenge on their hands just passing individual appropriations bills at the levels Freedom Caucus and other conservatives are envisioning.

There’s a chance for lawmakers working across the aisle to team up to breach spending ceilings for appropriations bills, though it’s not clear how realistic that is.

Brian Fitzpatrick, R-Pa., who’s been negotiating on behalf of McCarthy, said he didn’t believe lawmakers would be forced to comply with the austerity proposed by the conservative holdouts.

“We still have our voting cards,” he said. “So, the will of the House will ultimately rule the day.”

Typically, spending limits written into the budget — whether by formal budget resolution or more informal procedures — can be enforced by points of order on the floor. The Rules Committee regularly waives such points of order in the rule for legislation, but under a GOP House it’s unclear if waivers would be granted.

If a point of order is raised on the House floor on legislation that isn’t protected by the rule, and if the presiding officer determines the objection is valid, a member could appeal the ruling of the chair, according to procedural experts. It would take a simple majority to sustain the appeal.

But such an appeal has not been sustained for more than a half-century, according to the Congressional Research Service.

And then there’s the potentially freewheeling floor amendment process for appropriations, which used to be commonplace until recent years when leaders of both parties started using mainly structured or even closed rules to limit amendments.

Roy and others last week said as part of the deal to back McCarthy’s speaker bid, GOP leaders agreed to go back to open rules for appropriations. But an open-ended amendment process could also be a recipe for prolonged fights on spending bills.

Steny H. Hoyer, D-Md., who is heading back to the Appropriations Committee after serving in leadership, said last week an open process leads to “filibuster by amendment” in which lawmakers force endless amendment votes to hold off passage.

Crenshaw acknowledged Sunday that open rules could make the process “messy” and “time-consuming,” but that “it does make members feel like they actually have a voice.”

“The big thing they’re trying to push, and they’re totally right to push for this, is regular order,” Crenshaw added. “Regular order where we … actually set budget limits and we actually push 12 appropriations bills.”

French Hill, R-Ark., one of McCarthy’s allies who helped negotiate the deal, said Friday that a shutdown doesn’t need to be the end result of any appropriations hang-ups. He said Republicans were seeking to design a mechanism that automatically triggers a continuing resolution if the House passes its spending bills but the Senate doesn’t act.

“It would be a way for all members of Congress to say, look, we want to fund our government, we want to rein in spending. But if the Senate doesn’t act in the right way, we’ve agreed on this CR that would be triggered by the lack of certain bills not being passed on Oct. 1,” Hill said.

Debt limit

As bad as a partial government shutdown would be, breaching the statutory debt ceiling later this year could be far worse since it affects every government service, not just those operating on annual appropriations.

Social Security checks would be delayed if Treasury couldn’t borrow more to pay its bills, for instance; neither would military salaries be paid, or potentially even interest payments to bondholders, putting the pristine U.S. credit rating at risk.

Roy takes a different view: that continuing to add to the $31.3 trillion national debt is what’s going to sink Treasury’s creditworthiness.

“The fastest way to guarantee we have debt rating problems is to keep spending money we don’t have and keep piling on debt, and that’s what we’re doing,” he said Sunday.

Private forecasters say Treasury could run out of borrowing room by summer unless Congress acts.

“So the debt ceiling debate is going to be in a few months. Let’s do it now, guys. Get this out there. Both sides of the aisle, everybody within each party,” Roy said. “Let’s figure out how we’re actually going to fix this because the American people are sick of us not doing our job.”

Roy said he wanted to avoid a repeat of the 2011 debt limit battle that led to steep cuts that didn’t spare the Pentagon. “Defense spending was getting whacked pretty good. And we don’t want to see that,” he said. “But we need to put limits on spending and then get to the table.”

And when asked about using the new “motion to vacate” provision in the House rules package, triggering a floor vote to oust the speaker to hold McCarthy’s feet to the fire on the debt ceiling, Roy had this to say:

“I’m not going to play the what-if games of how we’re going to use the tools of the House to make sure that we enforce the terms of the agreement. But we will use the terms of the House to enforce the terms of the agreement.”

Caitlin Reilly, Ellyn Ferguson and Peter Cohn contributed to this report.

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