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House Republicans Debate Whether to Shoot Themselves in the Foot
Plus: House moderates flesh out a debt-ceiling endgame.
I have a lot to say about the debt ceiling today, and I also have some follow-up thoughts about Substack Notes. But first, a couple of announcements.
In a few hours, I’ll be recording my semi-annual cocktail podcast withwho writes the excellent newsletter. If you haven’t listened to the other episodes I’ve recorded with Peter, they’re a lot of fun and very informative — you can find the one from last spring here and our episode from the fall is here. If you have questions about cocktails, please email them now to email@example.com or leave a comment below so we can consider them for the episode.
We need to talk about Kevin.
As I wrote last week, House Speaker Kevin McCarthy is trying to get his party to agree on a proposal that sets overall caps on discretionary spending in exchange for raising the debt ceiling.
Even though such a bill wouldn’t become law in anywhere close to the form Republicans would initially pass it in, McCarthy wants to pass it because it could help him with a political problem — he wants a negotiation with President Biden over terms for raising the debt limit, Biden keeps responding that Republicans haven’t even proposed terms to negotiate over, and a House-passed bill would constitute proposed terms. Plus, by structuring the bill around caps on a very broad category of spending, McCarthy would avoid having Republicans say exactly what they want to cut spending on. Spending cuts are more popular in the abstract than the particular, so it’s best to stay abstract.
The big challenge for McCarthy is that he can only lose a handful of votes from within his own party because his majority is so narrow. And yesterday, after he pitched his plan to his conference, he got immediate pushback from his rightmost members, who said his list of demands (which went beyond spending caps to include things like Republican proposals to restrict regulations) wasn’t long enough.
Rep. Scott Perry, who leads the right-wing House Freedom Caucus, said if the debt ceiling plan is going to pass, it would need to contain a repeal of the Inflation Reduction Act, the major taxing-and-spending bill that Democrats passed last year. The political problem with this is that it involves getting specific: If you repeal the IRA, you cut specific taxes, you cut specific spending, and you repeal specific rules over drug pricing in Medicare. And some of those specific ideas will create great attack-ad fodder for Democrats.
For example, the IRA capped Medicare co-payments for insulin at $35 per month, and it capped seniors’ out-of-pocket annual prescription costs at $2,000. It imposed a complex minimum tax on large corporations that is supposed to raise hundreds of billions of dollars in revenue over a decade. It imposed a tax on stock buybacks. It created a wide variety of subsidies and rebates that lower the cost of investments in energy efficiency by businesses and consumers. And it extended subsidies that reduce the cost to buy subsidized health insurance through the Affordable Care Act exchanges.
McCarthy didn’t want to include IRA repeal in the debt ceiling package, and his public reasoning about why not to do so was fairly technical. Jake Sherman of Punchbowl News reports McCarthy raised certain specific concerns concerns in a closed meeting of Republican House members on Tuesday. If they try to repeal the IRA’s boost to spending at the IRS, he noted, the Congressional Budget Office will score that as materially increasing future budget deficits because of lower expected tax compliance. And if they try to repeal its green energy tax credits, that will make the debt ceiling bill into a revenue bill. The Constitution requires that revenue bills originate in the House, and the House hasn’t sent any to the Senate this year. If they did send one, that would give the Senate a vehicle it could theoretically amend to include tax increases.
Perry and some other House conservatives weren’t convinced by these objections, and frankly I’m not convinced either. Why should they care about the CBO score of a bill that isn’t going to become law? How are Senate Democrats going to get nine Republicans to vote with them to raise taxes? Even if the Senate did amend the bill to raise taxes and then pass it, they couldn’t force the House to vote on it, let alone pass it.
I suspect GOP leadership’s real hesitation is a practical, political one: They don’t want to put their vulnerable members on record voting to make insulin more expensive, especially when the proposal to do that has no chance of passing the Senate. I’m under no illusion that the Inflation Reduction Act is viewed massively favorably as a whole by voters, and I especially don’t think the public buys the idea that the act will reduce — or has been reducing — inflation. But if House Republicans vote to repeal the entire IRA, Democrats won’t have to talk about it as a whole. They can say Republicans voted to raise the cost of seniors’ insulin and other drugs in order to boost profits for pharmaceutical companies and cut taxes on the biggest corporations, and that will all be true. Not great!
And my suspicion about McCarthy’s real concerns was borne out by the bill text he produced on Wednesday: it includes repeal of the IRA’s green tax credits and its IRS spending — the two specific provisions he raised procedural concerns about — but would not repeal certain other provisions, including the insulin and drug price caps, the insurance subsides, and the new taxes on corporations.
The main question I now have is whether this package will pass the House. A lot of hard-line conservatives wanted even more spending cuts than this, and they wanted to repeal the whole IRA — they don’t like the prescription drug price controls and they don’t like higher corporate taxes. But if repeal of those provisions gets rolled in, the attack ads against moderate Republicans representing Biden-won districts will write themselves: You voted to hike the price of grandma’s insulin to help big pharma companies make more profit and pay less tax on that profit.
There is also the issue that, the more you load up the proposal with provisions Democrats will feel very politically comfortable rejecting, the less useful it is as a way to say “see, now we’ve made our offer.” Biden has been trying to goad Republicans into making a politically unpalatable offer — he’s attacking this plan as cutting deep into programs Americans care about, including food stamps, and that’s a decent line of attack, but not as good as an attack over the price of prescription drugs. If even a few hard-line conservatives remain intransigent, Republicans may end up having to choose between passing a bill that’s great attack-ad fodder and passing nothing. And even after that all, Biden may well say this bill doesn’t constitute a real offer and he’s still unwilling to negotiate.
A moderate way toward a deal?
While Joe Biden and Kevin McCarthy have stood far apart on fiscal issues and the debt ceiling for months, there has been a parallel effort by the centrist House Problem Solvers Caucus to chart a bipartisan course toward agreement. This has been met with skepticism by mainstream politicians in both political parties — most Republicans don’t want a moderate deal and most Democrats don’t want a negotiation at all. But today, the caucus leaders — Republican Brian Fitzpatrick and Democrat Josh Gottheimer — released a more detailed proposal, and I have to say it’s something at least Democrats should get pretty comfortable with.
Here’s the one-pager:
Step 1 is basically what the president has been asking for: An unconditional suspension of the debt limit, albeit for a significantly shorter time period than either he or McCarthy have been discussing. Pushing out the debt limit deadline until the end of the calendar year would address a problem I’ve been writing about: An agreement over spending levels will likely be necessary in order to gain an agreement over a longer-term debt limit increase, but it will be very difficult to get an agreement on spending levels before the appropriations bills passed last year expire on September 30. We’ll probably need to endure a government shutdown before heads get knocked together and the parties agree on spending levels. As such, we’d be in much better shape if the debt limit deadline were a bit after the government shutdown deadline instead of a bit before it. This interim increase would fix that problem.
Step 3 (I’ll come back to Step 2) is for Congress to reach an agreement on spending levels. I actually think this is doable, because it’s something Congress does every year on a bipartisan basis. Even when one party controls both chambers, you need 60 votes to pass appropriations bills through the Senate, and that ensures both parties have a seat at the table. The main snag here is that last year’s appropriations bills were only bipartisan in one chamber: House and Senate Democrats sat down with Senate Republicans and reached a deal over the objections of House Republicans. Now that House Republicans are in the majority, they’ll need to assent to appropriations bills — that means the negotiation is going to be harder, and it means there is going to need to be some significant spending restraint. Still, prolonged government shutdowns wreak havoc on programs that are priorities for both parties, so I expect Democrats will eventually swallow material cuts to discretionary spending — a reflection that elections have consequences, and not such a bad idea anyway given overheated macroeconomic conditions — and Republicans will eventually find their way to approving a fiscal agreement with those cuts.
Step 4 is easy: Everyone will lie and say they’ll start using regular order for the appropriations process, and various agencies will produce various paperwork that lawmakers will ignore at will.
The rub here is Step 2, the creation of a “fiscal commission” to produce budget reforms on which Congress will have to vote up or down. This is basically a repeat of the Supercommittee created by the 2011 Budget Control Act, which was intended to produce a bipartisan “grand bargain” on deficit reduction. The Supercommittee deadlocked because of a condition that still applies today: Republicans won't be amenable to a deal that raises taxes, and Democrats won’t be amenable to one that doesn’t raise taxes. And this framework doesn’t even include the hammer that was intended to force the Supercommittee into a deal — automatic “sequestration” spending cuts that were designed to be unpalatable to both parties — though in theory, lawmakers could create that hammer in Step 3 with the way they design spending controls “for the FY 2024 budget and appropriations cycle and beyond” (emphasis added).
My main takeaway about this proposal is that it doesn’t yet include nearly enough for Republicans to make it viable. I think Republicans are going to need to feel they’re getting something, even for the interim debt ceiling suspension — this might be a good opportunity to tack on permitting reform; and/or to kill the Biden administration’s wasteful, inflationary and illegal student debt cancellation plan — and I think a binding constraint on future year spending levels is going to need to be fleshed out in order to get agreement on the longer-term debt limit increase.
On this latter point: Rep. Jared Golden, a moderate Democrat from Maine, has advanced some spending restraint ideas that are probably too restrictive to draw widespread Democratic support. But the kind of structure he’s talking about, even if at different levels, may be what’s needed in order to raise the debt ceiling and fund the government through the remainder of Biden’s first term.
I am enjoying Substack Notes.
I encourage you to join me on Substack Notes if you haven’t yet.
I wrote about Notes earlier this month before it launched to the public; a bit more than a week on from the launch, I’m finding it’s replicating and improving on the parts of the Twitter experience that I value most, and the engagements I’m having with readers and with other Substack writers are of a higher quality and more civil than is typical on Twitter.
For me, the main day-to-day usefulness of Twitter is not the mass audience I can reach there. Over the long term, the mass audience has been important — it’s helped me get jobs, and it’s a key reason my move to Substack was financially viable. But Twitter does not do much to drive traffic to any individual issue of this newsletter, and I’m not really posting there to get eyeballs for individual pieces. Most of my daily use of Twitter is really about being able to talk to a few hundred other power users — for me, it’s kind of like a public Slack for reporters and commentators and operatives and elected officials and some prominent businesspeople.
A lot of the people I care about talking with have already moved over to Notes — in some cases entirely, and in some cases in combination with still using Twitter. Since Substack Notes is a place I can talk to Matt Yglesias and Ben Dreyfuss and Noah Smith, it’s already halfway to replacing Twitter for my purposes. And if Notes continues to foster interesting conversation among the people I want to talk with, it should eventually draw along the mass crowds who are there to watch us, like they are on Twitter, as well as drawing along more reporters and columnists who work for traditional media outlets.
A funny thing about this situation is that the section of Twitter where I sit — the part that’s there to comment on political and business news — does not necessarily make up a large portion of Twitter’s overall daily usage. But it does make up a disproportionately large portion of what made Elon Musk think Twitter was important in the first place. Not only is Notes drawing in Twitter users who talk about topics Musk cares about, it’s drawing in users who are on his side on debates over those topics, because Substack’s existing base of power users is already ideologically diverse. (This is different from Mastodon, which isn’t picking up any users Elon will miss.)
So while Notes may not pose a large financial threat to Twitter, it does threaten to make Twitter less interesting in ways Musk may care about personally, which might be why he got so mad.
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