What Republicans want in exchange for raising the debt limit

WASHINGTON — Debt ceiling negotiations between the White House and congressional Republicans took on a new, harder tone this week after House Speaker Kevin McCarthy signaled that he was not willing to compromise with Democrats over a list of GOP demands.

Instead, McCarthy’s deputies say they view a vote to raise the debt ceiling — and to avoid a potentially catastrophic U.S. debt default — as a concession to Democrats, and potentially the only one they plan to make. Given the havoc a default could wreak on the global economy, increasing the borrowing limit is typically a formality, often structured as a companion bill that gets tacked on to unrelated legislation.

Rep. Patrick McHenry, of North Carolina, a chief GOP negotiator, was asked Tuesday night what concessions Democrats were getting as part of a potential compromise with the White House to win both Republican and Democratic votes.

“The debt ceiling,” he replied.

“That’s what they’re getting,” added Rep. Garret Graves, of Louisiana, another GOP negotiator.

Republicans hold a narrow majority in the House, while Democrats have a one-seat edge in the Senate. So negotiators need to craft a bill that can pass in both chambers. Republican demands for policy changes that many Democrats would never vote for will complicate any eventual deal’s path through Congress.

A Democratic official said Republicans have already rejected at least two compromise offers from the White House. The first proposed a government spending freeze next year at its current level, and another offer would put in place a two-year cap on spending.

While their demands could change, below are the key concessions Republicans want from Democrats, in exchange for their vote to raise the debt ceiling. Some are relatively easy, while others are proving intractable.

• Energy and mining permitting reform: The proposal is arguably the easiest issue for negotiators to reach consensus on, given that both the White House and House Republicans support the broader goal of making it easier to launch new energy projects such as wind farms and gas pipelines in the United States. The talks could get dicey over the question of what kinds of permits to prioritize: Republicans want fossil fuels, while many Democrats believe renewable energy should top the list.

• Rescind unused Covid-19 funds: Between 2020 and 2022, Congress authorized approximately $4.6 trillion to help the United States respond to the coronavirus pandemic. The Congressional Budget Office estimates that about $30 billion of that money has not been earmarked and could be clawed back in order to create savings. President Joe Biden has indicated that the White House will agree to this demand.

The next few are much trickier.

• New work requirements for Medicaid: The Republican debt limit bill passed by the House in April would require able-bodied adults with no children to work or train for work in order to stay on Medicaid, the federal health insurance for low-income people. The White House rejected this proposal. “I’m not going to accept any work requirements that’s going to impact on medical health needs of people,” Biden said earlier this month.

• Changes to current work requirements for food stamps: Unlike the Medicaid demands, it appears there could be some room for compromise on GOP proposals to raise the work retirement age window for people enrolled in the Supplemental Nutrition Assistance Program, or SNAP, from 50 to 55 years old. The same day Biden rejected the Medicaid work requirements, he also noted that he supported work requirements in the 1990s and said “it’s possible there could be a few others” he would support “but not anything of any consequence.” 

• A federal budget baseline number in 2024 that is lower than it was in 2023: This is the biggest sticking point in the whole process, and the issue over which the talks have broken down temporarily a few times.

McCarthy, of California, often equates the U.S. national debt of $31.4 trillion to individual consumer debt. He argues that if you go “over your limit” on personal credit cards, then you, and by extension America, need to “spend less in the coming year than we spent this year.”

But it’s not that simple. Raising the debt limit does not authorize more spending in the future. For now, it merely allows the government to cover the bills it has already incurred.

What Republicans are really doing is using their leverage, and the implicit threat of default, to accomplish a separate, longstanding GOP policy goal: Force the government to roll back discretionary spending. In this case, McCarthy wants 2024 baseline spending to be rolled back to its 2022 level. Yet he also insists that defense spending — which makes up more than 30% of the total — be insulated from any cuts. This means everything else would need to be slashed even further to get the overall number back to 2022 levels.

According to the conservative-leaning CATO Institute, exempting the military from a spending rollback would require cutting the rest of government — everything from homeland security to public health to air traffic control — by around 20%.

Biden has countered this demand for steep cuts to domestic programs with a proposal to freeze this year’s spending levels next year, but McCarthy has so far rejected that.

“I don’t think I’m asking the impossible,” McCarthy said Wednesday. “Let’s spend less money in the coming year than we spent this year.”

In addition to the public demands above, House Republicans also have a second set of asks, a conservative wish list of sorts that McCarthy and his team have so far not brought to the table in a serious way.

Nonetheless, these back-shelf demands were on full display Wednesday in a memo released by conservative Rep. Chip Roy, of Texas, a McCarthy antagonist who led the failed effort earlier this year to deny McCarthy the House speakership.

Roy’s list of demands contains four additional items. Each of them on its own represents a red line for the White House.

1. Repeal the electric vehicle tax credits at the center of Biden’s renewable energy agenda, which were passed last year in the Inflation Reduction Act, or IRA.
2. Repeal $80 billion in additional Internal Revenue Service funding, also part of the IRA.
3. Overturn Biden’s executive action to forgive approximately $315 billion worth of student loan debt. The Supreme Court will decide the fate of Biden’s plan in the coming weeks.
4. Enact the REINS Act, which would require regulatory agencies such as the Federal Trade Commission and the Environmental Protection Agency to get congressional approval before they could issue major rules.

Roy’s memo called on McCarthy and Republicans to “hold the line” and insist that all of their demands be met or they give nothing at all. It also suggested that, at least for Roy, avoiding a debt default was not the No. 1 priority.

“Each [of the demands] are critical and none should be abandoned solely for the quest of a ‘deal,'” wrote Roy.