U.S. House GOP pushes through debt ceiling increase coupled with massive spending cuts

The measure will face certain opposition in the Democratic-led U.S. Senate and Biden has threatened a veto, leaving negotiations over a crucial debt ceiling increase potentially needed as soon as June still at a stalemate.

GOP leaders passed the Limit, Save, Grow Act by a margin of 217-215 after late-night maneuvering Tuesday into early Wednesday to pacify party holdouts who demanded expedited work requirements for assistance for low-income Americans and Midwestern lawmakers — including Iowa’s delegation — who wanted ethanol tax credits restored. 

All four of Iowa’s Republican lawmakers voted in favor of the bill.

Four Republicans — Andy Biggs of Arizona, Ken Buck of Colorado, Tim Burchett of Tennessee and Matt Gaetz of Florida — joined all Democrats in voting against the measure, allowing it to pass by the slimmest possible margin. 

Two Democrats and one Republican were not present.

A handful of votes

House Speaker Kevin McCarthy of California could only afford to lose a handful of votes on his plan to tie a reduction in federal spending to raising the debt limit — a promise he made to far-right members during his beleaguered path to the speaker’s gavel. 

The Limit, Save, Grow Act raises the nation’s $31.4 trillion borrowing cap by $1.5 trillion, or until March 31, 2024, whichever comes first, while reducing the federal deficit by a projected $4.8 trillion over the next decade, according to the Congressional Budget Office score.

Biden and Democrats have repeatedly said Congress should deal with the debt limit in a stand-alone bill and maintain that discussions about tax and spending policy should take place within the annual budget and appropriations process. 

McCarthy and Biden last met to talk about the debt ceiling in early February.

“If Joe Biden won’t lead, House Republicans will,” said House Majority Leader Steve Scalise of Louisiana during the GOP morning press conference Wednesday.

“If you look at this package, it represents the most common sense, straightforward approach to addressing the spending problem that got us here as we confront the debt ceiling,” Scalise continued.

In a statement Tuesday, the White House called the proposal a “reckless attempt to extract extreme concessions as a condition for the United States simply paying the bills it has already incurred.”

The House Republicans and Biden are staring down a tight deadline as the looming X-date nears — that’s the date the U.S. Treasury runs out of cash to pay the nation’s bills on time.

The U.S. could default on its obligations as summer hits, possibly as early as June, according to analysis by Moody’s Analytics.

Senate Majority Leader Chuck Schumer of New York said on the floor Wednesday his party would not allow the measure to become law.

“The speaker should drop the brinkmanship, drop the hostage taking, come to the table with Democrats, pass a clean bill to avoid default,” he said. “Given the way the Republican proposal is, that’s the only way to go. Time is running out.” 

Rescinding Biden’s climate agenda

The GOP legislation would return government spending to fiscal 2022 levels and cap most discretionary spending until 2033.

If enacted, the legislation would achieve savings by dismantling parts of Biden’s Inflation Reduction Act, the massive omnibus budget reconciliation package passed last year and celebrated by Democrats for its climate and tax measures.

The bill would repeal $500 million in tax credits for clean energy production and consumer rebates that were included in Democrats’ 2022 climate and tax bill.

When Democrats passed that bill last year, environmental groups praised it as a landmark for climate action. 

As debate on the debt limit bill advanced this week, administration officials and House Democrats also promoted the tax credits’ role in expanding manufacturing jobs, especially in Republican states. 

U.S. Rep. Frank Pallone, a New Jersey Democrat who is the ranking minority member of the Energy and Commerce Committee, said Wednesday that companies have announced $28 billion in new manufacturing for clean energy products like electric vehicles and $242 billion in clean energy capital investments since the law passed.

U.S. Rep. Jen Kiggans, a Republican from southeast Virginia, said she opposed the repeal of clean energy tax credits. She pledged to vote for the bill because it “gets us to the negotiating table,” but said she would continue to advocate for the tax credits to be restored.

The bill would also roll back consumer tax credits on items including electric vehicles and energy-efficient appliances.

The Republican measure would also eliminate grant programs in the climate law to fund methane reduction and clean-energy projects in disadvantaged communities.

The debt limit package also includes sweeping energy legislation the House passed last month. Meant to catalyze fossil fuel production, that bill includes measures to hasten environmental permitting for energy products.  

A measure in that bill would reduce royalty rates for new oil and gas leasing. The provision would also likely reduce federal revenues by $6 billion over the same period, CBO said.

The spending caps in the debt limit bill would also force further cuts to environment and climate programs.

Leaders of the Agriculture and Interior departments told House appropriators last month that the proposed cuts would lead to drastic reductions in their respective budgets for fighting wildfires. The cuts could lead to a loss of between 3,200 and 3,700 workers between the two departments, they said.

The National Park Service could lose one-quarter of its workforce, Interior Secretary Deb Haaland wrote.

Ethanol tax credits restored

The first version of the debt limit bill that Republicans introduced would have removed tax credits for ethanol and other biofuels in the Democrats’ climate bill. 

But in a late-night Rules Committee agreement, GOP leaders dropped those provisions under pressure from Midwestern lawmakers.

That move won the support of Iowa’s four-member delegation, Mariannette Miller-Meeks, Ashley Hinson, Zach Nunn and Randy Feenstra, all of whom are Republicans.

“Since this proposal was unveiled, our delegation has stood united for Iowa’s farmers and producers fighting to amend the bill to protect biofuels tax credits,” the Iowa Republicans said in a joint statement. “Having successfully amended the bill to protect funding for these tax credits, our delegation will vote for this legislation, which is a starting point to avoid a default and cut wasteful spending.”

Restoring the biofuel credit would add $38.6 billion to the federal deficit over 10 years, the CBO estimated.

Less tax enforcement, more work requirements

The bill would also rescind most of the $80 billion in new funding included in the IRA to modernize the Internal Revenue Service.

While the Committee for a Responsible Federal Budget, a nonpartisan group that analyzes federal fiscal policy, largely supports the bill, the organization said it “strongly oppose(s)” cutting funding meant to improve tax collection.

According to the CBO, slashing the IRS funding would add to the deficit by $120 billion over the next decade.

The federal deficit would be reduced by the same amount, $120 billion over 10 years, if the bill’s additional work requirements for safety net programs go into effect, according to the CBO.

About $109 billion of that would come from stricter work rules on recipients of Medicaid, which provides health coverage for roughly 85.2 million low-income households nationwide. 

The Biden administration warned that 21 million participants would see “draconian” changes, including increased documentation requirements that if not met could result in coverage termination, Centers for Medicare and Medicaid, or CMS, officials told reporters on a call Wednesday afternoon.

The administration pointed to the case study of Arkansas, where in 2018 state officials began enforcing 80 hours per month of work or qualifying activities, requiring enrollees to report work hours or exemption reason in an online portal by the fifth of each month.

“The evidence was really clear (that) the barriers to finding all sorts of documents and sending it in were real, and people lost coverage not because they weren’t working or didn’t meet some exceptions, but simply because they could not get through all the administrative red tape,” said Daniel Tsai, CMS deputy director for the Children’s Health Insurance Program.

In a state-by-state breakdown, the left-leaning Committee on Budget and Policy Priorities estimates that Pennsylvania and Ohio — two of the most populous states that expanded Medicaid under the Affordable Care Act — could respectively see benefits at risk for 519,000 and 421,000 enrollees. The CBO estimates that once requirements are in place, about 1.5 million low-income people across the U.S. could lose their federal health insurance.

Regarding Supplemental Nutrition Assistance Program, or SNAP, formerly called food stamps, the CBO estimates $11 billion would be cut from the low-income food aid program by 2033 as roughly 275,000 individuals per month drop from the program because new rules could not be met.

Another safety net program, known as Temporary Assistance for Needy Families, or TANF, which provides cash to some of the poorest families in the U.S., could see $6 billion pulled from federal funds allocated to the states by 2033, the CBO says.

Middle-of-the-night jockeying after the six-hour Rules Committee debate led to McCarthy budging from his opposition to any changes. The bill was changed to expedite the effective dates for safety net work requirements — from 2025 to 2024 for SNAP, and from 2026 to 2025 for TANF — to satisfy far-right conservatives, like Rep. Matt Gaetz of Florida, who vowed a “no” vote if the new rules weren’t hastened.

A late Wednesday updated CBO score found that moving the work requirements a year earlier for both programs would “reduce direct spending by an insignificant amount” in the coming years.

Veterans’ health benefits fate unclear

The bill’s spending cap at fiscal 2022 funding levels would mean a 22% decrease in non-defense discretionary spending, including veterans programs, Democrats said.

Republican leaders have said they do not plan to include cuts to veterans programs, but the bill as written does not require that. Reducing cuts to veterans programs under the law would require deeper cuts in other domestic spending.

“There are zero guarantees that veterans care is protected in the bill,” Allison Jaslow, the CEO of Iraq and Afghanistan Veterans of America, said in a statement.

“This is unacceptable,” Jaslow added. The bill “should explicitly protect benefits and care for veterans.”

Other veterans groups, including Veterans of Foreign Wars and Paralyzed Veterans of America, raised similar concerns.

VFW Washington Office Executive Director Ryan Gallucci noted an additional potential flaw in the bill: It could undermine last year’s bipartisan law to expand protections for veterans affected by fumes from burn pits of toxic waste in Iraq and Afghanistan.

That law was enacted after fiscal 2022 funding levels were set, he wrote in an open letter to McCarthy. 

The VFW is “gravely concerned” the bill “missed the mark by not protecting the advances in care and benefits for toxic-exposed veterans,” he wrote. “This could set our collective hard work back years and make veterans once again have to fight for the care and benefits they have earned.”

The provisions in the debt limit bill to rescind unspent money from coronavirus relief laws and other large spending laws since 2020 would cost veterans’ programs $2 billion, according to a fact sheet from House Appropriations ranking Democrat Rosa DeLauro of Connecticut.

“This bill is a betrayal of the obligation this country has to everyone who’s served,” Pennsylvania Democrat Chris Deluzio said in a Wednesday floor speech.

In an animated floor speech, House Veterans’ Affairs Committee Chairman Mike Bost, an Illinois Republican, accused Democrats of lying about the impact on veterans’ programs.

“You better believe that I’m dead serious that we’re not cutting veterans and I mean it,” he said.

Massachusetts Democrat Richard E. Neal, the ranking member of the House Ways and Means Committee, responded that both parties voted to expand veterans’ benefits. That bill provides an additional $15 billion for a fund to pay for toxic exposure claims.

“The bill is due,” Neal said.  

A starting point?

Though Republicans began Wednesday with a blustery morning press conference where GOP leadership placed all spending blame on Democrats and Biden, who they say “has maxed out the nation’s credit card” with “reckless spending,” the reality of what will happen to the bill in the Senate began to show.

Rules Committee Chair Tom Cole, an Oklahoma Republican, said on the floor the measure was merely “an opening offer” from House Republicans in the absence of proposals from congressional Democrats or the White House about how to raise the debt limit.

“We’re going to put the ball over and see what you guys are actually going to do with it,” he said.