Washington Update: Monday, May 29, 2023
US House vote set for Wednesday on Biden-McCarthy debt ceiling agreement.
On Saturday evening, President Biden and House Speaker Kevin McCarthy (R-CA) announced a tentative agreement to lift the existing $31.4 trillion Federal debt limit for two years while cutting and capping some government spending over the same period, a breakthrough after a marathon set of crisis talks that has brought the nation within days of its first default in history.
Congressional passage of the plan before June 5 -- when the Treasury is projected to exhaust its ability to pay its obligations -- is not assured, particularly in the House, which plans to consider it on Wednesday. Republicans hold a narrow majority in the chamber, and right-wing lawmakers who had demanded significantly larger budget cuts in exchange for lifting the borrowing limit may revolt.
Political stakes in US House vote are especially high for Speaker McCarthy.
Speaker McCarthy’s survival as speaker could be at stake if he can't contain the anger of right-wing Republicans, some of whom are already criticizing the compromise. Perhaps 60 of 222 Republicans (or 27% of the caucus) have signaled they may vote against the plan. (Of course, there was never any expectation that the hardest of the hardline conservatives would vote for a deal that Democrats would swallow.)
But it does mean McCarthy could need votes from nearly that many Democrats to pass the plan. President Biden and House Democrats would then need to deliver those votes despite wariness among progressives.
Speaker McCarthy can likely afford to lose dozens of conservatives' support when the House votes on the plan later this week. What he can't do, however, is anger those members so much they trigger a motion to oust him. Under rules McCarthy agreed to in January to secure enough conservative GOP votes to be elected speaker, just one House member can bring a "motion to vacate," and force a vote to remove the speaker. So far, no one has threatened that. But the rhetoric was heated this weekend.
Considering that House conservatives effectively deposed McCarthy’s predecessors -- Speaker John Boenher (R-OH) and Speaker Paul Ryan (R-WI) -- anything seems possible.
Former President Trump has not yet commented.
Former President Donald Trump has yet to weigh in on the Biden-McCarthy deal.
Last week, he urged Republican lawmakers to let the United States default on its debt if Democrats don’t agree to significant spending cuts. Trump has outsized influence in the House Republican caucus. More than half of Republicans in the House of Representatives were elected for the first time since 2016, and therefore under Trump’s banner.
Financial markets getting more jittery as debt ceiling looms in June.
Financial markets have become more jittery as the U.S. moves closer to the X-date. Last week, Fitch Ratings said it was placing the nation’s top AAA credit rating on review for a possible downgrade.
As a Washington Post headline put it this weekend: “U.S. leaders gamble with world’s most trusted asset in debt showdown.” “The nation’s leaders are gambling with the singular financial instrument that global markets use as the measuring stick against which all other assets are priced. Investors regard Treasurys as the next best thing to cash.”
AHA raises concerns default could affect payments to hospitals.
As the possibility of national debt default came into view last week, the American Hospital Association warned hospitals that they should prepare for the possibility of delayed Medicare payments. Federal spending on all health programs accounted for 29% of federal outlays in FY2023, or $1.9 trillion out of $6.4 trillion. Medicare is the second-largest program in the federal budget. Medicare spending last year totaled $747 billion, representing 12% of total federal spending.