Republicans Draw Up Debt Limit Demands

Republicans Draw Up Debt Limit Demands

House Budget Chair Jodey Arrington
By Yuval Rosenberg and Michael Rainey
Friday, March 24, 2023

Happy Friday! The Sweet Sixteen in the NCAA men’s basketball tournament gets cut down to the Elite Eight tonight. The Florida Atlantic University Owls, the ninth seed in the East region, advanced last night and Princeton, the 15th seed in the South, is still alive. Will we have two Cinderella stories this year?

Here’s what else we’re watching.

House Republicans Finalizing Their Debt Limit Demands

House Republicans said Thursday that they are preparing a “term sheet” of conditions they want met by President Joe Biden and congressional Democrats before they agree to raise the federal borrowing limit and avert what would be a calamitous debt default.

Rep. Jodey Arrington (R-TX), the chair of the House Budget Committee, told reporters that Republicans are finalizing a list of spending cuts they will demand and that Speaker Kevin McCarthy (R-CA) has prioritized finishing that “deal sheet” so that the GOP can extend a first offer in debt limit negotiations.

The $31.4 trillion limit needs to be raised to cover outlays previously authorized by Congress, and the Treasury Department is currently employing “extraordinary measures” to avoid breaching the limit and defaulting on its debt. The White House insists that Congress needs to raise the limit without conditions. Republicans say the government isn’t going to default and are pushing a plan to prioritize federal payments, an idea that the Biden administration has said won’t truly avert a default or the economic turmoil it would bring.

There hasn’t been much movement in this standoff since Biden and McCarthy met on February 1.

“If we're going to negotiate, we're going to have to have something on paper that gets the support of at least 218 of our members,” Arrington said, according to Reuters. Republicans hold a slim 222-213 majority in the House, but getting near unanimity in their caucus for debt and budget proposals, let alone Democratic support, is likely to prove challenging.

The GOP proposal reportedly will entail $130 billion in cuts to domestic agency funding next year, with growth in those accounts then capped at 1% a year for a decade.

The push to finalize a term sheet to present to Biden means that the House Republican budget will be delayed past the April 15 target. “Arrington said he still aims to write a plan that balances the budget in 10 years, a herculean task that would require cutting either defense spending or entitlement spending if the Trump-era tax cuts are extended,” Bloomberg’s Erik Wasson notes.

The bottom line: The Congressional Budget Office projects that the Treasury Department will be unable to meet its obligations at some point between July and September. Given the recent concerns about the banking sector, the pressure is building to avoid any further financial scare — and some Republicans are starting to feel it.

“The standoff is raising concerns among Senate Republicans in particular, who worry about the lack of a contingency plan if there’s no agreement soon between Biden and McCarthy,” Punchbowl News reports. “Some GOP senators believe that the longer this drags on, the more likely it becomes that they’ll have to accept a clean debt limit hike in order to stave off a catastrophic default.”

All States Became Net Beneficiaries of Federal Funds During Pandemic

Under normal conditions, wealthy states like New York and California are net revenue donors to the federal government, sending more in taxes to the Treasury than they receive back in various kinds of spending, while poorer states like West Virginia and Mississippi are net beneficiaries. The Covid-19 pandemic eliminated that distinction, according to a new study from the Rockefeller Institute of Government. High levels of spending in response to the health crisis meant that all states got more than they gave to the federal government.

The report found that 2021 marked the second consecutive year in which there were no net donor states in terms of revenues. Overall, the balance of payments between the states and the federal government was $2.8 trillion in the states’ favor. This was the second largest net deficit in history, second only to the $3.1 trillion gap recorded in 2020.

On average, states received $8,122 per capita from the federal government in 2021. But some states received far more, while others received far less. The state that received the highest level of per capita spending was Virginia, with a positive balance of payments of $20,078. (The large number of federal employees who live in Virginia, outside of Washington, D.C., plays a role in the size of that positive balance.) Kentucky ($18,743), Alaska ($18,423), New Mexico ($15,772) and Maryland ($14,253) round out the top five in the list of net beneficiaries.

“All of the top five states benefited from larger-than-average levels of Federal spending,” the report says. “Kentucky, Alaska, and New Mexico also benefitted from lower-than average tax burdens.”

Connecticut, on the other hand, received the least, bringing in just $921 per capita in net benefits from the federal government. New Hampshire ($3,575), Massachusetts ($3,153), Washington ($3,101) and Utah ($3,075) round out the list of the five that received the least.

“For all of the bottom five states but Massachusetts, Federal spending was below the national average,” the report says. “For all but Utah, relatively low balance of payments were also driven by their significantly higher-than-average tax payments. The residents of Connecticut, Massachusetts, New Jersey, and New York made the largest per capita contributions to the Federal government in 2021, $5,796, $5,548, $3,615, and $3,445 above the national average, respectively.”

What comes next: Experts expect state-level balance of payments to revert to their previous pattern as pandemic spending programs come to an end, with 2022 serving as a transitional year. By 2023, states like New York and California will likely once again serve as net donors to the federal coffers, paying more in than they take out, usually by a considerable margin.


White House Will Disband Covid Response Team: Reports

The public health emergency for Covid-19 will end in May and the White House will reportedly disband its pandemic response team along with it.

“The move to disband the White House covid team, created in February 2020 and expanded to about three dozen staffers under President Biden, comes as the pandemic has receded from U.S. hospitals and in voters’ minds,” The Washington Post’s Dan Diamond and Tyler Pager reported this week. White House COVID-19 Response Coordinator Ashish Jha may leave the administration, though his departure is reportedly not certain.

The Centers for Disease Control and Prevention says Covid is still responsible for about 2,000 deaths a week, but the death toll is far below the peak levels of the past three years. The Biden administration is transitioning the public health response away from emergency status. “Covid is not over, fighting it remains an administration priority, and transitioning out of the emergency phase is the natural evolution of the covid response,” an administration official told the Post.

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