House Republicans pass debt-ceiling hike, hoping to spur Biden to talks

[April 27, 2023]  By David Morgan and Richard Cowan

WASHINGTON (Reuters) - The U.S. House of Representatives on Wednesday narrowly passed a bill to raise the government's $31.4 trillion debt ceiling that includes sweeping spending cuts over the next decade.

The bill isn't expected to pass the Senate, and President Joe Biden would veto it if it did - but the mostly partisan 217-215 vote represents a win for Republican House Speaker Kevin McCarthy on an issue that rattled investors and markets.

Now, McCarthy hopes to lure Biden into negotiations on cutting spending, even as the White House and congressional Democrats insist on a debt limit increase with no strings attached.

The U.S. Treasury Department could run out of ways to pay its bills in a matter of weeks if Congress fails to act, and financial markets are already flashing warning signs. A 2011 standoff led to a downgrade of the government's credit rating, which pushed borrowing costs higher and hammered investments.

"We've done our job," a victorious McCarthy told reporters just after the vote. "The Republicans have raised the debt limit. You have not. Neither has Schumer," McCarthy added, referring to Biden and top Senate Democrat Chuck Schumer.

McCarthy bridged deep divides among House Republicans to get the bill passed. Next is the far more daunting task in trying to broker a compromise with Democrats without losing the backing of some of his most conservative fellow Republicans.

McCarthy called on Biden to begin negotiations on a debt limit increase and spending-cut bill and for the Senate to either approve the House bill or to pass its own.

The House bill would increase Washington's borrowing authority by $1.5 trillion or until March 31, whichever comes first, raising the specter of another round of negotiations during the 2024 presidential campaign. The bill would pare spending to 2022 levels and then cap growth at 1% a year, repeal some tax incentives for renewable energy and stiffen work requirements for some antipoverty programs.

White House Press Secretary Karine Jean-Pierre said Biden would not sign off on such cuts.

"President Biden will never force middle class and working families to bear the burden of tax cuts for the wealthiest, as this bill does," she said in a statement. "The President has made clear this bill has no chance of becoming law."

DEMOCRATS SAY BILL 'DOA'

Schumer told reporters the House bill is "dead on arrival" in the Senate and that the Republican measure "only brings us dangerously closer" to an historic U.S. debt default that would shake markets and economies worldwide.

Democrats control the Senate with 51 votes.

House Speaker Kevin McCarthy (R-CA) walks following a closed door meeting on Captiol Hill in Washington, U.S., April 26, 2023. REUTERS/Tom Brenner

Earlier in the day, House Majority Leader Steve Scalise predicted in an interview that passage of the Republican debt limit bill would change the "entire dynamic" and pressure Democrats to engage in negotiations.

Republicans were quick to praise McCarthy's victory, which had been in doubt until the last moment.

"It now demonstrates that we can govern even with a five member majority, and there's been so much criticism that we couldn't do this," Representative Michael McCaul said of the debt ceiling vote. "We've proved to the country that we can govern."

Throughout debate on the bill, Republicans cast Democrats as free-wheeling spenders of taxpayer money, which they say has pushed the national debt into a danger zone.

Democrats, meanwhile, bemoaned the deep spending cuts the measure would bring on programs including healthcare for the poor, Head Start education for pre-schoolers and an array of other programs including law enforcement and airport security operations.

The Department of Transportation said Wednesday the bill would shut down 375 federally-staffed and contract-run air traffic control towers around the country and result in 7,500 fewer rail safety inspection days.

Early on Wednesday morning, McCarthy had to give in to some of his members' demands to keep the legislation alive.

The overnight changes removed a provision that would have ended a tax credit for biofuels that was part of Biden's climate change initiatives in the 2022 Inflation Reduction Act.

Bending to the far-right wing of the party, Republicans also accelerated some new, tougher work requirements for receiving Medicaid healthcare benefits for the poor, angering Democrats.

"Republicans’ massive tax cuts to the rich have cost taxpayers over $10 trillion over the last two decades and now they want America’s workers and families to pay the price," said Representative Richard Neal, the senior Democrat on the House Ways and Means Committee.

The White House has called on Congress to raise the debt limit without conditions, as it did three times under Biden's Republican predecessor, Donald Trump.

Lawmakers do not know precisely how much time they have left to act. The "x-date" when the Treasury Department would no longer be able to pay all its bills could come as early as June or stretch later into summer.

(Reporting by Richard Cowan and David Morgan in Washington; Additional reporting by Katharine Jackson in Washington; Editing by Jonathan Oatis, Matthew Lewis and Grant McCool)

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