McCarthy Blasts Biden Over Debt Limit

Reuters
By Yuval Rosenberg

Happy Monday! Congress is back in session, but House Speaker Kevin McCarthy kicked off the week in New York City, where he blasted President Joe Biden for not negotiating about raising the debt limit.

McCarthy Slams Biden, Outlines GOP Debt Limit Plan

Speaker Kevin McCarthy on Monday excoriated President Joe Biden for failing to negotiate over raising the debt limit and for proposing a budget that seeks to have the federal government spend more next year than it did at the height of the Covid-19 pandemic.

McCarthy marked his 100th day as speaker of the House Monday by delivering a speech at the New York Stock Exchange in which he sought to ramp up pressure on Biden and pitch Wall Street on a House Republican plan that would extend the debt limit into next year and cut trillions in spending.

“Without exaggeration, America’s debt is a ticking time bomb that will detonate unless we take serious responsible action,” he said, later adding, “Defaulting on our debt is not an option. But neither is a future of higher taxes, higher interest rates, higher inflation, more dependence on China, and an economy that doesn’t work for working Americans. Let me be clear: a no-strings-attached debt limit increase cannot pass. But since the President continues to hide, House Republicans will take action.”

McCarthy said that House Republicans would move forward on their own to vote on a bill that would raise the debt ceiling into next year and cut trillions in spending by going back to 2022 levels and capping annual growth at 1% over the next decade. The plan would also rescind unspent pandemic funding and introduce new work requirements for Medicaid. McCarthy pledged that the package would not touch Social Security or Medicare.

The plan McCarthy outlined has no chance of being approved by Democrats in the Senate majority or by Biden, meaning that it would still leave the government hurtling toward a high-stakes fiscal showdown without a clear path to avoiding economic calamity. A debt default, analysts warn, would raise interest rates, send the economy into recession and cost millions of jobs. Some economists also warn that the Republican plan would hamper the economy and worsen a potential recession.

The White House, meanwhile, said that McCarthy failed to lay out the full details of his plan and warned that the GOP approach would take food assistance and health care coverage from millions of Americans. "There is one responsible solution to the debt limit: addressing it promptly, without brinksmanship or hostage taking — as Republicans did three times in the last administration and as Presidents Trump and Reagan argued for in office," White House deputy press secretary Andrew Bates said in a statement. "Speaker McCarthy is holding the full faith and credit of the United States hostage, threatening our economy and hardworking Americans’ retirement.”

Biden has said he is open to reducing the deficit and the budget plan he released last month, even as it takes spending to new highs, would cut deficits by nearly $3 trillion over 10 years, largely by raising taxes on the wealthy and corporations — an approach Republicans reject.

What it means: McCarthy continues to walk a fine line on the debt limit, trying to force the issue without taking any blame for the risk he’s raising. He insists that Republicans will not allow the United States to default while also looking to pin the blame for a potential default on Biden. He wants to demonstrate that Republicans are serious about not raising the debt limit without spending cuts while painting Biden as irresponsible for arguing that Congress should simply raise the limit and that the full faith and credit of the United States should not be put at risk.

“Make no mistake: The longer President Biden waits to be sensible, to find agreement, the more likely it becomes that his administration will bumble into the first default in our nation’s history,” McCarthy warned. He later added a plea for the public to line up behind the GOP effort. “If you agree, don’t sit back — join us,” he said. “Join us in demanding a reasonable negotiation, a responsible debt ceiling, an agreement that brings spending under control.”

Can McCarthy get 218 Republican votes? That’s been a key question all along. “He can’t present a detailed list of negotiating stances to try to coerce the administration into forking over concessions, because he can’t come up with any that the whole Republican House (much less their Senate counterparts) would support,” TPM’s Kate Riga writes.

Even Republican acknowledge that getting to 218 may be the biggest challenge regarding McCarthy’s plan. Already, the idea of shrinking the food stamps program is being met with some pushback from some Republicans, particularly in the Senate. The speaker can only afford to lose four of his GOP House members, since no Democrats are likely to support the Republican bill. The White House will be watching. If the House does pass a bill to raise the debt limit and cut spending, Biden would be open to another meeting with McCarthy, a senior White House official told CNN.

The showdown will go on: Senate Majority Leader Chuck Schumer called McCarthy’s plan for a one-year extension of the debt limit a “terrible idea” and panned the speaker’s speech. “No more facts, no new information at all,” Schumer said. “I’ll be blunt. If Speaker McCarthy continues in this direction, we are headed to default.”

With both sides dug in, there isn’t likely to be any progress for quite some time. “This could be the most intractable debt limit stare down thus far,” Jake Sherman of Punchbowl News wrote.

The Politics of Food Stamps

House Republicans want to impose stricter work requirements on those receiving benefits through the Supplemental Nutrition Assistance Program, commonly known as food stamps and referred to by the acronym SNAP.

“Our proposal will … restore work requirements that ensure able-bodied adults without dependents earn a paycheck and learn new skills that will grow our economy and help the supply chain,” McCarthy said Monday. “It's time to get Americans back to work,” he added.

Stricter requirements, however, can involve higher costs for states as they monitor beneficiaries for compliance. The Washington Post’s Kyle Swenson looked at the recent effort to tighten the SNAP rules in Iowa, raising questions about both the cost and the ultimate purpose of cracking down on participation in the program.

Concerns about costs: Although the state had a budget surplus of $1.9 billion last year, Republicans in Iowa say they are worried about the cost of running the SNAP program. While the federal government covers the full cost of the food aid, the cost of monitoring the program is shared at the state and federal levels.

Thirty-nine Republicans in the state House have sponsored a bill that would impose an asset test on those participating in SNAP as well as Medicaid and other assistance programs, and would require more paperwork from beneficiaries. (An earlier version of the bill proposed to ban the purchase of certain foods including soda, baked beans, fresh meat and American cheese for those using SNAP cards, but those provisions were stripped out after lobbying by groups including the Iowa Association of Business and Industry and Tyson Foods.)

According to the Post, the state currently pays $2.2 million a year to administer the SNAP program, which distributed $60.4 million in food aid in Iowa in 2022. If the bill were to be signed into law, that cost would rise significantly, to an estimated $17 million over three years, driven by the need to hire workers and build systems to monitor beneficiaries.

The bill’s opponents maintain that it makes little fiscal sense. “This bill makes poor use of state resources, ramping up administration costs in order to take federal resources out of Iowa’s economy,” said Rep. Jeff Cooling (D). “This bill will also grow the size of government. … this bill is neither efficient government nor fiscally responsible government.”

Political motivations: Some critics say the effort to crack down on food and other kinds of government assistance is motivated by political ideology as much as it is by fiscal concerns. The Iowa bill has been supported by the Opportunity Solutions Project, a think tank based in Florida that is the lobbying arm of the Foundation for Government Accountability.

Both groups have received money from the State Policy Network, which the Post says is “a major funder for right-wing think tanks and organizations that has been linked to conservative superdonors such as Charles Koch and the DeVos family.” The FGA is dedicated to reducing social welfare spending of all kinds, including Medicaid. According to its website, its goal is to “free individuals from the trap of government dependence.”

Some food aid experts say the politically motivated effort is misguided and could backfire. “There are pockets where you are seeing a movement toward more restrictions to kick people off SNAP,” Diane Schanzenbach, a professor at Northwestern University’s School of Education and Social Policy, told the Post. “But the SNAP program is really well-designed. It’s effective and efficient, and it does a tremendous amount of good. Generally, proposals to change it usually are going to make it worse.”

Number of the Day: 4

The average wait time for callers looking for help from the IRS has fallen to four minutes this year, the Treasury Department said Monday. The average wait time was 27 minutes last year, when the tax agency earned its worst customer service ratings on record.

The Treasury Department attributed the improvement to the additional funding it received from Congress this year. “Thanks to the 5,000 new hires made possible by Inflation Reduction Act resources, IRS customer service representatives answered more than 6.5 million taxpayer calls this year, 2.4 million more calls with live assistance since the start of the year through April 7, compared to the same period in 2022,” the department said in a press release.

Fewer Electric Vehicles Qualify for EV Tax Credit

Starting Tuesday, more than a dozen electric vehicles will qualify for tax breaks designed to encourage American drivers to abandon their gas-powered cars and trucks.

The new rules governing those tax credits, announced by the Biden administration last month and taking effect this week, have sharply reduced the number of vehicles that qualify for the tax credit worth up to $7,500 per vehicle. U.S. consumers can choose from as many as 91 electric and hybrid vehicles on the market, but less than 20 will deliver the full value of that tax credit, per Bloomberg. Others will qualify for a half credit of $3,750.

Overall, the new rules are designed to boost the domestic production of clean-energy products. Qualifying vehicles must use batteries and components that are sourced from North America, or from certain trade partners.

General Motors is one of the biggest winners under the new rules, producing five models that qualify for the full credit. (Some of those vehicles, such as the Chevrolet Silverado EV, won’t be available until later this year.) Some Ford and Tesla models qualify, as well, along with one Chrysler. But models made by companies that currently qualify, including Volkswagen, Hyundai, Nissan and Volvo, will no longer do so.

The rules are complicated. In addition to the sourcing requirements, the tax credit applies only to vehicles sold under defined price levels. And consumers face income limits for claiming the credit.

For more information, see the Department of Energy for a rundown on the tax credits.

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