Climate credits, IRS funds snarl GOP debt limit talks
Despite lingering disagreements, party leaders are optimistic they’ll get the votes
A push from conservatives to repeal clean energy tax credits and IRS enforcement funding from Democrats’ 2022 climate, tax and health law has emerged as one of the key sticking points in House Republicans intraparty debt limit negotiations.
Speaker Kevin McCarthy and his leadership team presented the current outline of their debt limit proposal in a closed-door conference meeting Tuesday morning, but the feedback members provided shows the party is far from uniting around a single bill.
Republicans haven’t even decided on their preferred mechanism for lifting the debt limit, as members debate a specific dollar increase versus a suspension through a certain date.
The plan includes capping fiscal 2024 discretionary spending at fiscal 2022 levels and limiting annual growth to 1 percent for the remainder of the decade; canceling President Joe Biden’s student loan forgiveness plan; clawing back unspent pandemic aid; parts of a House-passed energy package; and a measure requiring congressional authorization for major administration regulatory initiatives.
House GOP leaders are optimistic they can resolve any disagreements and are aiming for a vote on the measure next week. But they’ll need an aggressive whip effort that ultimately limits defections to no more than four Republicans, the maximum the 222-member majority can lose on what’s expected to be a party-line vote.
“I’m confident we’ll get something done,” said House Majority Whip Tom Emmer, R-Minn. “This is not a top-down thing. This is a bottom-up thing.”
The bottom-up feedback was already working, as McCarthy told reporters Tuesday evening he’d “probably” have to include repeal of the clean energy credits in the bill.
He said he was “concerned” about making the debt limit a bill a revenue measure — which under the Constitution would need to originate in the House — because Senate Democrats could use that as a vehicle to try to pass their own tax priorities.
McCarthy said the bill text will be rolled out "rather soon" and said he expects the measure to pass next week.
Whatever bill Republicans put together is meant to serve as an opening bid in negotiations that Democrats have so far declined to engage in, as they seek a “clean” debt limit bill without preconditions attached.
Some moderates uneasy about portions of the House GOP plan say they're not ruling it out, on grounds that there will have to be further negotiations with the Senate and White House.
Rep. Brian Fitzpatrick, R-Pa., who represents a district Biden carried in 2020, said he needs to see details of the package before deciding how he'll vote. But he's open to supporting it even though it's expected to include parts of the GOP energy bill he voted against.
"I'm viewing this as like a volley. This is not final passage of anything, so I'm taking a different perspective on it," Fitzpatrick said.
Democrats have also demanded that Republicans produce a budget plan, and Republicans are hoping this bill will be enough to get Biden and his party to the negotiating table. Biden on Tuesday panned McCarthy for proposing "huge cuts to important programs that millions of Americans rely on," noting "he threatened to be the first speaker to default on our national debt."
The bill will likely skip committee markups and go straight to the floor. “This is the committee of the whole, as the speaker said,” Emmer told reporters.
House Freedom Caucus Chairman Scott Perry, R-Pa., and caucus member Dan Bishop, R-N.C., are two of the 20 members whose initial opposition to McCarthy in the speaker’s race led to leadership commitments about moving bills through “regular order.“ But they said the process that leadership outlined is fine with them.
“The conference as a whole is working as intensively on this as anything I’ve ever seen,” Bishop said. Despite the “great process,” he said there’s not yet enough “serious spending reduction” in the plan to satisfy him.
Rep. Tim Burchett, R-Tenn., said the emerging plan follows through on a lot of GOP promises but he would need to see more significant spending reductions before voting for a debt limit increase.
“We just keep spending on nonsense, and we just can’t do that,” he said. “We’ve got to hold the line.”
The debt limit “x date,” when the Treasury runs out of cash to continue paying bondholders and other obligations on time, could hit as early as June or as late as September, experts have said.
The timing will be determined in part by the outcome of tax receipts flowing in this week ahead of the annual tax-filing deadline. Goldman Sachs Group Inc. on Tuesday said revenue inflows appear weaker than previously expected, and that there's now a bigger risk that the deadline could hit in early June.
Rep. Steve Womack, R-Ark., pointed to weak tax collections as a reason to get moving fast on debt limit negotiations.
"If it’s going to begin with us passing a bill, let’s get the damn bill on the floor and let’s see where it goes," Womack said.
Tax enforcement, green energy
One issue is that dozens of conference members are pushing for more cuts than leadership has laid out.
Conservatives in particular want to undo parts of Democrats’ climate and tax law.
“I want to make sure that those 87,000 IRS agents are defunded,” said Freedom Caucus member Anna Paulina Luna, R-Fla. “That’s something that we promised the American people.”
Hern said several members brought that up in the conference meeting, noting a measure to repeal the IRS enforcement funding was the first bill the new Republican-controlled House passed. That bill, which passed in a party-line 221-210 vote, would claw back about $71.5 billion of the total $80 billion in extra funds that Democrats gave the IRS, leaving in place only taxpayer services and tech modernization money.
There was also a “constant voice” of members in the conference meeting pushing for repeal of clean energy tax credits enacted in last year’s budget law, Hern said.
Good said eliminating the climate-related tax credits is “essential” to getting his vote.
But members of the tax-writing Ways and Means panel, among others, said they were concerned about adding a tax title to the debt limit package.
Republicans will have to weigh the “significant” impact of repealing the clean energy credits against “the political strategy” of sending the Senate a revenue measure, Ferguson said.
If a repeal of clean energy credits is included, thus opening the package to tax provisions, other GOP priorities could also be contenders. Republicans have been pressing for the revival of several business tax breaks that lapsed or phase down under their 2017 tax law.
Those include bringing back upfront expensing for all research and development costs and preserving a full and immediate deduction for the cost of buying equipment, machinery and other assets. Rep. Vern Buchanan, R-Fla., said he’d like to see those provisions addressed if the package has a tax title, arguing that it would help the U.S. keep up with other countries incentivizing R&D.
Date vs. dollar increase
Another GOP disagreement is over whether their bill should suspend the debt limit through a certain date or raise it by a specific dollar amount.
Rep. Matt Gaetz, R-Fla., said he wants both, and to have the limit hit at whichever comes sooner. “I’m for as many opportunities as we can to have downward pressure on the spending that is driving inflation,” he said.
Gaetz said leadership presented how long different dollar amounts would likely last. Republican Study Committee Chairman Kevin Hern, R-Okla., said one option under discussion is a $2 trillion increase, which Republicans expect would last a year.
Rep. Bob Good, R-Va., a Freedom Caucus member, said he wants a dollar increase, to be able to compare that with the spending cuts Republicans put in the bill.
“We need to ensure that the immediate cuts exceed the amount of the debt ceiling increase,” he said.
Rep. Barry Loudermilk, R-Ga., said he favors suspending the debt limit through a specific date and that multiple options, ranging from late this year to late next year, are on the table.
“If you’re just going with a number, that’s more subjective to the Department of Treasury,” he said. “If we give a date then everybody knows where we’re gonna go. It puts more of that requirement or that responsibility back in the hands of Congress, not in the executive branch.”
Loudermilk said he’s open to listening to arguments for the dollar figure increase, and fellow Georgia GOP Rep. Drew Ferguson thinks the conference feedback is trending toward that.
“I would be surprised if we don’t see a dollar amount as opposed to a date,” Ferguson said.