One Hour to Midnight

The first shots in the U.S. Congress’ new legislative battle were fired as Kevin McCarthy teases out his plan for what a Republican-controlled House budget would look like. McCarthy’s election as speaker of the House was contingent on him promising a “battle” with President Joe Biden’s administration over the budget and ever-looming debt ceiling. This battle came quickly. Just two weeks into his speakership, Treasury Secretary Janet Yellen announced that the United States has reached the debt ceiling—the legal maximum amount of debt the U.S. government can hold—and was resorting to extraordinary measures to pay the government’s bills. Goldman Sachs economists have predicted these measures could become ineffective as soon as June 5. If the national debt exceeds the ceiling on this date, then the U.S. government defaults on its debt obligations—which would upend the global financial system. 

With pressure mounting on Congress from the White House and the private sector to avert this crisis, McCarthy unveiled his plan—the “Limit, Save, Grow Act of 2023”—which would raise the debt ceiling enough for one year in exchange for measures designed to reduce the deficit. 

How do Republicans plan to do it? The GOP is adamant about not raising taxes, so it can’t get any new revenue that way. It is also promising not to touch non-discretionary spending like Social Security or Medicare, which means it can’t cut from the government’s largest expenditures. This leaves the government’s discretionary spending on the chopping block—but lowering the largest portion of this spending, the defense budget, is politically unpopular with Republicans. Without the resolve to raise taxes or cut entitlement and defense spending, McCarthy’s only choice is to start cutting from many of the nation’s much smaller federal programs. 

McCarthy’s proposed bill more or less seeks to undo all of the current administration’s signature accomplishments: It removes clean energy subsidies, ends the increased funding for the IRS program, adds work requirements for several entitlement programs, and ends the student loan forgiveness program. In response, the White House has maintained since January that it will not compromise on raising the debt ceiling, and other Congressional Democrats have called the proposed budget “dead on arrival.” 

McCarthy can not count on the unanimous support of his own caucus either. The proposal does satisfy the infamous 20 or so far-right Republicans who extracted so many concessions back in January during the vote for Speaker of the House——including key committee placements—but it does little for the moderates in swing states. After all, those clean energy subsidies go a long way in helping states set up new clean energy industries. Furthermore, the Congressional Budget Office predicts that removing the IRS funding increase would actually increase the deficit.

McCarthy may have won the battle for the speakership, but his “reward” is now the borderline impossible task of balancing the needs and interests of his entire caucus, while also knowing anything he proposes is going to be met by a Democratic Senate and president. Thus, McCarthy must walk the tightrope over the possibility of default, all while the doomsday clock ticks ever closer to its deadline.