A cadre of far-right Republicans announced Friday that they may only vote to raise the debt ceiling if Congress agrees to cut hundreds of billions of dollars in social spending, limit federal agencies' future budgets, and abandon progressive elements of President Joe Biden's economic agenda.
Since Washington's arbitrary and arguably unconstitutional borrowing limit was breached in January, the Treasury Department has implemented "extraordinary measures" enabling the U.S. government to meet its obligations for a few additional months. Unless the Biden administration takes unilateral action to disarm the debt ceiling, Congress has until sometime between July and September to increase or suspend the nation's borrowing cap. If Republicans refuse to do so, the U.S. is poised to suffer a catastrophic default.
Led by Rep. Scott Perry (R-Pa.), the House Freedom Caucus said Friday in a statement that its 45 members would "consider voting" to raise the debt limit if their colleagues in the House and Senate agree to:
- Eliminate Biden's $400 billion student debt cancellation plan;
- Rescind unspent Covid-19 relief funds;
- Nix nearly $400 billion worth of clean energy investments approved in the Inflation Reduction Act (IRA);
- Repeal the IRA's roughly $80 billion funding boost for the Internal Revenue Service (IRS);
- Restore Clinton-era work requirements on welfare recipients;
- Require congressional approval before any major federal regulations can take effect;
- Cap future federal spending at 2022 levels for the next 10 years; and
- Find "every dollar spent by Democrats that can be reclaimed for the American taxpayer."
Although Capitol Hill's deficit hawks are eager to attack the poor and slash popular programs, they don't support reducing the ever-expanding U.S. military budget or hiking taxes on corporations and the rich to increase revenue. Rescinding the IRS funding boost, meanwhile, would help wealthy households evade taxes and add an estimated $114 billion to the federal deficit.
"These power-hungry lawmakers are so determined to keep the Biden administration from rebuilding the middle class that they're willing to tank the economy to do it," Zelnick continued.
With Republicans possessing a five-seat House majority and the ability of any party member to introduce a motion to remove the House speaker—a new rule the Freedom Caucus secured in exchange for electing Rep. Kevin McCarthy (R-Calif.) to the role—a few dozen of the GOP's most right-wing members have significant leverage over the fate of the U.S. and world economy.
"They demand sacrifice only from everyday Americans while they insist on preserving or even expanding wasteful tax breaks for billionaires and greedy corporations," said Zelnick. "They're playing a dangerous game of chicken with the economy and the lives of millions of working families."
"The MAGA extremists running the House... demand sacrifice only from everyday Americans while they insist on preserving or even expanding wasteful tax breaks for billionaires and greedy corporations."
A 2011 debt ceiling standoff—when Biden was vice president—enabled congressional Republicans to impose austerity and also resulted in a historic downgrading of the U.S. government's credit rating, but the country has never defaulted on its debt. Economists warned during the last standoff in 2021 that a default would trigger enough chaos in global financial markets to destroy almost six million jobs and roughly $15 trillion in household wealth in the U.S. alone.
Fully aware of the stakes, GOP lawmakers have threatened on multiple occasions over the past few months to unleash economic pain on a mass scale unless they succeed in gutting the relatively underdeveloped U.S. welfare state.
"Speaker McCarthy is not going to cut a deal with Democrats," Perry said Friday at a press conference. "We're not assuming that leadership is opposed to these thing[s]... this is all reasonable stuff."
The latest ultimatum from the Freedom Caucus "appeared to complicate efforts to clinch a deal and avert a looming fiscal calamity," The Washington Post reported.
Biden has repeatedly denounced Republicans for taking the economy hostage in a bid to force through harmful changes, declining to entertain what he calls their "gut punch to the middle class." The president on Friday reiterated his refusal to consider the GOP's proposed cuts, saying, "I don't know [if] there's much to negotiate on."
On Thursday, the White House released its budget request for fiscal year 2024. Notwithstanding Biden's attempt to further increase Pentagon spending, the framework has been hailed by progressives for proposing tax hikes on corporations and the wealthy to expand a range of public goods, including substantial funding for climate action, childcare, education, healthcare, housing, and more.
Although Biden's proposal would reduce the federal deficit by nearly $3 trillion over the next decade—the same amount mentioned in the Freedom Caucus' austerity blueprint—Perry said Friday that the White House's progressive tax and investment plan is "not happening."
In an ominous sign, "Republicans readied a bill earlier this week that would prepare the government in the event of a default," the Post reported. "The measure, which the tax-focused Ways and Means Committee sent to the full House, essentially would prioritize some federal payments over others in the event the United States no longer had the authority to borrow."
Notably, this entire episode of fiscal brinkmanship could have been avoided had Democrats listened to Sen. Elizabeth Warren(D-Mass.) and other progressives who urged the party to raise the debt ceiling—or abolish it altogether—when it still controlled both chambers of Congress last year.
Conservative Democrats refused to act during the lame-duck session despite Warren's warning that GOP lawmakers desperate to win the White House in 2024 will "blow up the economy" and run ads blaming Biden for it.