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McCarthy, Biden to meet in hopes of avoiding debt limit debacle

Unlike in 2011 fiscal standoff, the two biggest players are holding talks early in the process

Speaker Kevin McCarthy, R-Calif., is seen in the Capitol on Friday, Jan. 27, 2023.
Speaker Kevin McCarthy, R-Calif., is seen in the Capitol on Friday, Jan. 27, 2023. (Tom Williams/CQ Roll Call)

When Speaker Kevin McCarthy, R-Calif., meets President Joe Biden on Wednesday to discuss the debt limit, there are some structural advantages in favor of emerging from the fight this summer without tanking financial markets that didn’t exist in 2011, a similar moment in U.S. political history.

The talks are starting with plenty of time to reach agreement before the Treasury Department’s supply of cash and accounting maneuvers runs out, possibly in June. When House Republicans and then-Speaker John A. Boehner, R-Ohio, took control in early 2011, they spent months battling the Obama administration and Democratic leaders over unfinished fiscal 2011 spending bills before even turning to the debt ceiling.

That debate over stopgap bills to avoid a partial government shutdown was occurring even as the Obama Treasury Department was warning of a debt limit breach by mid-May, in which bondholders and every beneficiary of government spending were at risk of missed payments. 

Serious talks to resolve the debt ceiling standoff didn’t even begin until mid-April, though by that time Treasury had pushed its “x date” back to July, and ultimately to Aug. 2. 

President Barack Obama met with House Republicans on June 1 to discuss the budget and debt limit, and he played golf with Boehner later in the month. But Obama and Boehner didn’t really get down to their own private negotiations until July, after negotiations led by then-Vice President Biden and then-House Majority Leader Eric Cantor, R-Va., collapsed June 23.

The Obama-Boehner talks then faltered after Boehner couldn’t sell tax increases to his conference and Obama was hemmed in by a bipartisan Senate agreement that called for higher taxes than he’d agreed to with Boehner.

All the rage

Still, in early 2011, deficit-cutting was all the rage. Senior members of both parties were on board, including Obama, and the midterm elections turned in part on a backlash over spending increases that occurred both under Obama and the Democrats and during the George W. Bush administration. Boehner had some 40 additional GOP votes to work with than McCarthy and his razor-thin majority today. 

Going into the debt limit talks, Republicans were emboldened by the April 2011 appropriations package that cut nondefense discretionary spending below the previous year. 

Days after the spending bill cleared, House Republicans adopted an austere budget blueprint written by then-Budget Chairman Paul D. Ryan, R-Wis., envisioning sweeping changes to entitlement programs. They lost just four Republicans on the party-line vote — exactly the margin McCarthy has today — while still adopting the budget with about 20 votes to spare.

There wasn’t much question that any debt limit package would contain deficit-reducing measures; the question was what mix of spending cuts, tax increases or both would be part of it. But that turned out to be a complicated negotiation, and negotiators didn’t leave themselves much time to figure it out. 

Ultimately the 2011 deficit-reduction and debt ceiling increase package — with its tight discretionary caps and “supercommittee” to achieve further savings — cleared the Senate on Aug. 2, with Obama’s signature a little later just ahead of Treasury’s deadline.

Fast forward to 2023, and McCarthy goes into the talks after needing 15 ballots to be elected speaker; there is little sign of agreement within his conference on how to cut spending or what a budget blueprint would look like; and there’s no appetite among Democrats for spending cuts, at least without putting tax increases on the table. 

It’s not clear how solid support for linking cuts to the debt limit is among Senate Republicans. Just half the conference signed onto a letter last week from Mike Lee, R-Utah, and Rick Scott, R-Fla., saying they “do not intend to vote for a debt-ceiling increase without structural reforms to address current and future fiscal realities and manage out-of-control government policies.”

There’s also less support among voters for reducing deficits. According to Gallup, 64 percent of those polled in March 2011 said they “personally worry” about federal spending and deficits “a great deal.” By March 2022, that figure had dropped to 48 percent.

Meanwhile, House Republicans have already floated the option of disarming the debt limit, at least temporarily, through a series of short-term suspensions while negotiations are ongoing.  McCarthy has declined to publicly comment, saying he won’t negotiate in the press, but he’s clearly stated that “default” is not an option.

And, of course, arguing they learned their lesson from 2011, Biden and top Democrats are refusing to negotiate as part of the debt limit talks — calling instead for a “clean” increase without conditions.

‘Different breed of cat’

So on the surface, it might appear that McCarthy is going into the discussions already needing to figure out face-saving terms of surrender. But to top GOP lawmakers and veterans of debt limit battles on both sides of the aisle, the fight is only beginning.

“The president knows full well, since he was a negotiating partner years ago, that this has been done before,” Senate Minority Leader Mitch McConnell, R-Ky., told reporters Tuesday, downplaying the fact he didn’t sign the Lee-Scott letter. “And I think the deal has to be cut, obviously, between the House majority and the Democratic president in order to have a chance to survive over here. So we’re all behind Kevin and wishing him well in the negotiation.”

McConnell has also pledged that the U.S. would never default on its obligations.

Senate Minority Leader Mitch McConnell, R-Ky., conducts a news conference in the Capitol after the Senate luncheons on Tuesday, Jan. 24, 2023. (Tom Williams/CQ Roll Call)

While there are divisions within the House GOP Conference over how to cut spending, there appears to be unity on avoiding cuts to Social Security and Medicare benefits; veterans spending also seems to be sacrosanct. And although McCarthy and others have pledged to root out “waste” at the Pentagon, it’s not clear there’ll be much appetite to cut defense appropriations.

House Budget Committee Republicans could issue a set of principles as soon as this week, McCarthy ally and panel member Ralph Norman of South Carolina said Tuesday. But translating those into 218 votes on a budget resolution is a different matter, he said.

There’s also been a hefty dose of sniping between the parties before talks have even begun. The White House has put out rapid-response missives almost every time McCarthy or other Republicans mention cutting spending, or any talk of “saving” Social Security or Medicare — which some consider a euphemism for benefit cuts. 

The White House has also taken pains to characterize the McCarthy meeting as a “discussion,” also encompassing other issues, rather than a “negotiation” on the debt ceiling. Top White House aides put out a memo to “interested parties” on Tuesday, in advance of the McCarthy meeting, saying Biden will ask the speaker for commitments to avoiding default and for Republicans to release their own budget plan.

Of course, there was partisan sniping during the 2011 episode as well. Obama attacked the Ryan budget blueprint in an April speech as Ryan and other top Republicans sat in the crowd, which caused many in the GOP to write off prospects for agreement. 

But Boehner at the time, like McCarthy today, kept up the optimism, urging Obama to “lock arms and jump out of the boat together” on deficits. 

Biden hasn’t been quite as conciliatory. On Tuesday he called McCarthy a “decent man,” but blasted his concessions to the Freedom Caucus as “just absolutely off the wall for speaker of the House to make.”

“Look, this is not your father’s Republican party,” Biden said. “I mean it; this is a different breed of cat.”

Pessimism mounts

There is a sense of alarm among some veterans of past debt limit fights, including Republicans.

“People who have been through this before on both sides of the aisle in government do view this as feeling different than the past,” Neil Bradley, who was deputy chief of staff to Cantor during the 2011 debate, said during a U.S. Chamber of Commerce event last week. 

Bradley, executive vice president and chief policy officer for the Chamber, cited Biden’s unwillingness to negotiate over the debt limit and what he said is less support for raising the debt ceiling among Republicans than a dozen years ago.

“The Democratic White House wanted to have a discussion on debt and deficit” in 2011, Bradley said. “That is not the case today.” He said Biden’s refusal to negotiate “is a posture that moves us closer to default, not farther away.”

Tom Kahn, Democratic staff director of the House Budget Committee at the time, said default is “a bigger risk and scarier this time because I think compared to 10, 11 years ago, I think House Republicans have moved even further to the right and their demands are more extreme.”

Kahn, now a fellow at American University, said GOP conservatives’ demand to balance the budget in a decade could sink their party’s ability to stay unified. “When you have deficits of over $1 trillion the notion of balance requires such deep cuts that even many Republicans could not vote for them,” he said.

At the same time, Kahn worries McCarthy lacks the support to be able to sell a deal he reaches with Biden. “Anything the White House and McCarthy could agree on would make it very difficult for McCarthy to remain in power because he depends for support on the far right,” he said.

Chris Campbell, a former GOP Senate Finance aide and Treasury assistant secretary, thinks Biden ultimately will have to go through the motions of negotiating a debt limit increase, without actually reaching a deal.

“I think they will likely have to do something and make it look real,” said Campbell, chief policy strategist at Kroll, a financial advisory firm. But he added the probability is low that a deal can be struck that would “meet the needs and demands of the committed conservatives and yet would pass the Senate.”

That’s what scares even the most battle-hardened veterans who’ve seen numerous fiscal fights go down to the wire, only to be resolved with a last-minute accord.

Peter Cohn and David Lerman contributed to this report.

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