Debt limit deal passes House, heads to Senate as June 5 default looms

WASHINGTON − The House on Wednesday voted overwhelmingly to approve an agreement by President Joe Biden and Speaker Kevin McCarthy to suspend the nation's debt ceiling and avoid a catastrophic default on the nation’s debt with a package that also includes spending cuts pushed by Republicans.

The "Fiscal Responsibility Act" passed by a wide 314-117 vote-margin, with majorities from both parties pushing the legislation past opposition from liberal Democrats and hardline conservative Republicans.

The bill now heads to the Senate, where Majority Leader Chuck Schumer wants a vote Friday. Congress needs to send an agreement to Biden’s desk before Monday, June 5 or the government won’t be able to pay bills coming due, Treasury Secretary Janet Yellen has warned.

"Washington's spending addiction is both irresponsible and just wrong," McCarthy said in a floor speech before the vote. "I'll be honest, tonight's bill doesn't stop it, but for the first time, we begin to turn the ship."

More Democratic House members, 165, voted for the bill than Republicans, 149, despite the deal being negotiated by McCarthy. Seventy-one Republicans voted against the bill, compared to 46 Democrats.

The legislation would suspend the limit on how much the federal government can borrow until Jan. 2025.

It would also keep nondefense spending discretionary spending – which does not include Social Security and Medicare – roughly flat for 2024 and raise it by 1% in 2025. About $30 billion in unspent coronavirus relief money would be rescinded. Billions of dollars in recently approved funding for the IRS to improve customer service and go after tax cheats would be redirected to other areas.
 

Biden: 'One step closer' to averting default

Biden, who departed Wednesday afternoon on Air Force One for Colorado Springs, Colo., told reporters beforehand that “God willing,” the House will have approved the deal by the time he lands and “we’ll be one step closer.”

The compromise between McCarthy and Biden followed a rollercoaster set of negotiations that lasted weeks as House Republicans used the looming deadline for default to achieve policy demands opposed by the White House.

"We stopped the Democrats from writing a blank check for more spending after the largest spending binge in American history," McCarthy said. "We used the power we had to force the president to negotiate."

Democrats who voted for the bill held their noses, saying they weren't happy with the policy changes but wanted to avoid a default. They accused Republicans of manufacturing a crisis. Rep. Richard Neal, D-Mass., said the Republican majority was prepared to take the country to "the precipice of default."

"We find ourselves tonight with an agreement that we might not love because it's not about perfection," Neal said. "There is give and take to negotiation."
 

Rep. Nancy Pelosi, the former Democratic House Speaker from California, said, "While I find this legislation objectionable, it will avert unprecedented default, which would bring devastation to America's families."

House Democratic Leader Hakeem Jeffries said House Democrats helped former President Donald Trump avoid a default three times by raising the debt ceiling "without gamesmanship, partisanship or brinksmanship."

"House Democrats were there to make sure that America did not default," Jeffries said. "We were there then and we are there today to put people over politics."

McCarthy overcomes revolt from right flank

McCarthy and other Republican leaders touted "historic" spending with a Democrat in the White House. The nonpartisan Congressional Budget Office projected the bill will cut $1.5 trillion in federal spending over the next 10 years.

"This is the most conservative spending package during my time in Congress," said Rep. Patrick McHenry, R-N.C., one of the Republicans who negotiated the deal. "This legislation, though, is a product of divided government. Republicans only control the House of Representatives, not the Senate, not the White House."

McCarthy faced a rebellion from conservative Republicans who make up the House Freedom Caucus, who said the spending cuts don't go far enough and accused McCarthy of betraying power-sharing commitments he made to them to secure the speakership.

"It is a bad deal. No one sent us here to borrow an additional $4 trillion to get absolutely nothing in return," said Rep. Chip Roy, R-Texas, at a Tuesday news conference with other Freedom Caucus members, warning of a "reckoning" to come over House leadership.
 

The intra-party revolt presented the biggest test for McCarthy since he won his speakership in January on the 15th ballot.

"I've heard the detractors," McCarthy said during his floor speech. "But I'm an optimist. You have to be to sit there 15 rounds."

But the fight might not be over. Rep. Ken Buck, R-Colo., said members of the Freedom Caucus upset with McCarthy will have "discussions about whether there should be a motion to vacate" McCarthy from the speakership for abandoning an agreement with Republicans to reduce spending even further to 2022 levels.

"I think he should be concerned," Buck said, though added: "I'm not suggesting the votes are there to remove the speaker."

Work requirements, permitting reform concerns liberals

Progressive Democrats criticized new stricter work requirements for certain recipients of food stamps under the bill − although the elimination of work requirements for homeless and veterans would mean an additional 78,000 Americans are covered by the Supplemental Nutritional Assistance Program. States would also have tighter restrictions on how to apply work rules to the cash welfare assistance program.

Liberals also opposed a provision in the bill that expedites permitting for oil and gas drilling by fast-tracking environmental reviews and creating new deadlines for litigation that often hold up such projects. The bill green-lights the Mountain Valley Pipeline, a controversial 300-mile natural gas pipeline in West Virginia backed by Sen. Joe Manchin, D-W.Va.

Student loan borrowers, who have been granted pauses from their monthly payments during the pandemic, would have to resume payments after August, a deadline consistent with the Biden administration's plans.

"The debt ceiling agreement will cause millions of Americans to suffer so Republicans can score political points," said Rep. Ro Khanna, D-Calif., whip of the Progressive Caucus, who voted against the bill.

Khanna said he couldn't support "taking away food stamps from older Americans," unloading "mountains of debt" on students and "sacrificing our water and our air to fast-track the Mountain Valley Pipeline – a project completely unrelated to the national debt."

But Rep. Lloyd Doggett, D-Texas, suggested going into default would be worse than the concessions Democrats gave up in the bill. "Protecting our country's full faith and credit requires accepting some unacceptable Republican demands," he said.
 

Schumer eyes quick vote in Senate: 'No margin for error'

Still, the White House was able to intact Biden's Inflation Reduction Act − his signature climate and prescription drug law − and program to forgive student loan debt for millions of Americans. House Republicans sought to eliminate both in their own legislation that passed the Republican-controlled House last month.

"We believe we protected the economic gains this president made," White House press secretary Karine Jean-Pierre said. "Here's the reality: When you negotiate in this way, no one's going to get everything that they want."

Markets barely reacted to the vote despite the growing prospect of a deal that would avert global financial turmoil and an all but certain recession. S&P 500 futures were virtually flat. The Nikkei stock index rose 0.56%. And gold, which serves as a haven in uncertain times, was largely unchanged.

That’s because stocks never fell in the lead-up to the vote based on expectations that Congress ultimately would reach an agreement to avoid default, says Jason Ware, chief investment officer of Albion Financial Group. Also, he says, the legislation still awaits passage by the Senate in coming days.

The Treasury borrows money to pay all its bills because the government spends more than it collects in revenues. The amount the government can borrow is set in statute, making that a separate process from the decisions made in annual spending bills and policy measures that determine how much funding goes out the door and how much is collected in taxes and other revenues.

In the Senate, the debt ceiling bill has the support of both Schumer and Senate Minority Leader Mitch McConnell.

"I think Speaker McCarthy should be congratulated on capturing a number of priorities," McConnell said, pushing back at the criticism that McCarthy has garnered from fellow Republicans.

Schumer said senators should be prepared to move on the bill quickly.

"I cannot stress enough that we have no margin, no margin, for error," Schumer said. "Either we proceed quickly and send this bipartisan agreement to the president’s desk, or the federal government will default for the first time ever."

Contributing: Paul Davidson

Reach Joey Garrison on Twitter @joeygarrison.