News

Aug 07, 2023

VA delegation pushes back at parts of debt ceiling deal

Scott McFarland reports on criticism leveled from both sides of the aisle

Scott McFarland reports on criticism leveled from both sides of the aisle against debt limit bill (5-29-2023)

The deal President Joe Biden and House Speaker Kevin McCarthy, R-Calif., reached to raise the limit on U.S. debt faces challenges from both political flanks in Virginia's congressional delegation on the eve of a scheduled vote Wednesday in the House of Representatives.

In a Memorial Day interview, Rep. Bob Good, R-5th, accused McCarthy of "surrender" to Democrats by backing off House Republican demands for steep cuts in federal spending. Rep. Jennifer McClellan, D-4th, is leading a push by all six Virginia Democrats in the House to strip a provision from the proposed Fiscal Responsibility Act that would order the government to issue all federal permits for the embattled Mountain Valley Pipeline in Southwest Virginia.

"We are incredibly disappointed the Mountain Valley Pipeline was included in the bipartisan budget agreement," said a statement from McClellan and Reps. Bobby Scott, D-3rd; Abigail Spanberger, D-7th; Don Beyer, D-8th; Jennifer Wexton, D-10th; and Gerry Connolly, D-11th.

Rep. Jennifer McClellan, D-4th, voted for the measure after unsuccessfully seeking to strip out provisions that would greenlight the Mountain Valley Pipeline.

"Permitting for the Mountain Valley Pipeline has nothing to do with our nation's spending and should not be included in the budget agreement," they said. "This provision is a free pass for the pipeline and sidesteps our nation's environmental laws and judicial review processes."

Sen. Tim Kaine, D-Va., who helped to block a similar effort in the Inflation Reduction Act last year, already had announced that he would seek to remove pipeline provision from the bill in the Senate. He has not said whether he will support the bill if it includes the pipeline provision, but Sen. Mark Warner, D-Va., indicated on Tuesday that he would vote for the bill, even if the permit requirement survives the challenge, to avoid a potential default on the nation's debt.

"The stakes of default are catastrophic," Warner said in a statement on Twitter on Tuesday. "I wish many aspects of the deal were different, but it's time to get it done so we can protect Americans' savings and the entire global economy."

The House Rules Committee was scheduled to review the debt ceiling compromise on Tuesday afternoon to decide whether it — and McClellan's proposed amendment — will go to the House floor for votes. In an interview on Tuesday, McClellan would not commit to supporting the bill if it includes the pipeline provision, but she said, "At the end of the day, I'll have to ask myself if the ultimate deal is better than a default. It would be hard to swallow default."

On the Republican side, the deal, which Biden and McCarthy announced on Saturday, could spark a new revolt by the House Freedom Caucus, for which Good has become a prominent spokesman.

Rep. Bob Good, R-5th, whose district includes western Hanover County and several of Richmond's western outer suburbs, voted against the measure.

Good never supported McCarthy, but voted "present" on the last of 15 rounds of balloting that elected the Speaker in January. He would not say whether the debt ceiling deal will lead to a fresh challenge to the House Republican leader, but he called the deal "very disappointing."

"To talk tough for two to three months and then just surrender is worse than surrendering in January or February," he told the Richmond Times-Dispatch in an interview on Monday evening.

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Asked whether Republicans will use their new power to call for a no-confidence vote in the Speaker, he said, "It's a fair question."

Good said his focus now is trying to derail the deal, scheduled for a House vote on Wednesday and possible action by the Senate at the end of the week.

"Certainly I am trying to expose what's wrong with the bill to build public pressure on the Republican side. ... My hope is it will all fall apart because it's not good for the country," he said.

Good never approved of the negotiations with the White House over demands in the "Limit, Save, Grow Act," which passed the House last month on a party-line vote with provisions to cut federal domestic spending deeply over the next decade. He said earlier this month that the only negotiations that mattered were those among House Republicans over the two months before the House narrowly passed the bill on April 26.

He also linked the House position on the debt ceiling to the battle over electing a Speaker in January. "It we had not went through the Speaker battle ... we would have seen a deal already cut with Democrats to raise the debt limit," he said.

Now, McCarthy is behind a deal with Biden that Good said would eliminate most of the proposed cuts in spending — especially on clean energy tax credits and additional funding for the IRS to enforce tax laws — that were the foundation of the House Republican legislation.

The stakes of default are catastrophic. I wish many aspects of the deal were different, but it's time for us to get it done so we can protect Americans' savings and the entire global economy.

"In my view, this is a bill that could have passed with a Democrat majority," he said Monday. "Democrats didn't get any new spending or new programs to celebrate, but they didn't take any cuts."

Instead of raising the debt ceiling by $1.5 trillion in exchange for caps on domestic spending for 10 years, the proposed agreement would raise the debt limit by about $4 trillion , with spending caps for two years to push the issue beyond the presidential election next year. It would preserve provisions of the Inflation Reduction Act, adopted last year by a Democratic House majority, that would invest billions of dollars in clean energy and efforts to reduce pollution linked to climate change.

The proposal would cut $20 billion of the $80 billion in new funding for the IRS in the Inflation Reduction Act. It also would not block Biden's executive order to forgive up to $20,000 in student loans, now under appeal at the U.S. Supreme Court, or require that Congress review and approve any new administrative regulations.

"A Republican House majority has surrendered to the Democrat starting point with ... very little meaningful reform," Good said.

Democrats say the "Limit Save Grow Act" was negotiated only by House Republicans, with the Freedom Caucus using its leverage from the fight over electing a Speaker. McClellan, who was sworn into office in March to succeed the late Rep. Donald McEachin, D-4th, called the legislation "the House Republicans’ ransom note for our economy."

All five of Virginia's congressional Republicans supported the House bill, but, aside from Good, they have had little to say publicly about the deal with Biden. Rep. Rob Wittman, R-1st, who represents part of the Richmond area, could not be reached for comment.

Rep. Jen Kiggans, R-2nd, a former state senator elected to Congress last fall, tweeted two days ago that she was "encouraged to hear we finally have a #debtceiling deal that prioritizes American taxpayers, avoids a catastrophic default and protects the economic future of our country."

The Constitution gives Congress the power to borrow money on the United States’ credit and it has imposed a cap or ceiling on how much debt the Treasury can assume to pay for programs already approved. In the past, congressional votes to increase borrowing was a bipartisan affair, but in today's highly partisan atmosphere, battles over the debt ceiling have brought the country to the brink of default.

By 2012, Republicans had raised the debt ceiling 54 times, and Democrats had upped it 40 times, according to an analysis by the Guardian. Ronald Reagan boosted the debt ceiling 18 times, and Jimmy Carter and Lyndon Johnson each raised it 10 times.

Economists warn of severe consequences if the United States does not resolve a debt ceiling crisis. Stock prices could tumble, interest rates could soar, and the country's financial reputation could end in tatters. Domestic programs such as Medicare could be in jeopardy.

Stacker compiled a list of 10 key moments defining how the country's debt ceiling affects its spending by reviewing news articles, government reports, and academic papers. Here is a look at how we got to where we are and how the crisis might be eased.

Before 1917, Congress permitted the U.S. Treasury to borrow for specific programs, with each loan needing Congressional authorization in separate legislation. But when the country entered World War I, Congress began to allow the Treasury to sell war bonds, aka Liberty Bonds, as needed. The Second Liberty Bond Act of 1917 established a debt ceiling of $11.5 billion. Congress continued to permit the Treasury more latitude during the 1920s and 1930s until imposing an overall limit on federal debt in 1939 of $45 billion. That was about 10% above the total debt, according to the Committee for a Responsible Federal Budget.

The debt limit has been revised about 100 times since the end of World War II. It increased three-fold in the 1980s, from less than $1 trillion to nearly $3 trillion, then doubled in the next decade, to nearly $6 trillion in the 1990s, according to the Committee for a Responsible Federal Budget. The ceiling doubled again in the 2000s to more than $12 trillion. The Budget Control Act of 2011 increased it by $900 billion and in addition, authorized the president to raise it by another $1.2 trillion. Separately legislators have suspended the ceiling seven times since 2013, and on a few occasions it has gone down.

Among major Western countries, only Denmark has a ceiling on its debt and it is relatively much higher to its spending. After its debt neared 75% of the ceiling in 2010, the limit was more than doubled, the Council on Foreign Relations noted. Denmark put the limit in place in the 1990s when it delegated the country's finances to its central bank. Unlike the U.S., Denmark does not let political drama interfere.

When Ronald Reagan ran for president in 1980, he blasted the size of the federal debt, then about $1 trillion. "So-called temporary increases or extensions in the debt ceiling have been allowed 21 times in these 10 years, and now I've been forced to ask for another increase in the debt ceiling or the government will be unable to function past the middle of February," he said in a speech in February 1981 after taking office. "And I've only been here 16 days." But far from falling, the national debt tripled over the decade to $3 trillion, and President Reagan ended up raising the ceiling 18 times. He blamed Congress.

Georgia's Newt Gingrich became speaker of the House in 1994 when Republicans gained the majority, and the fiscal conservative zeroed in on trying to enact the deep budget cuts he favored. He refused to schedule a vote on increasing the limit until President Clinton agreed to the Republicans’ balanced budget. The result? A partial government shutdown that roiled the country over 21 days at the end of 1995 and the beginning of 1996, until the GOP gave way in the face of public opposition.

Republican opposition to the Affordable Care Act led to an impasse over the debt limit in 2011, and spurred Standard & Poor's to downgrade the U.S. credit rating. President Barack Obama and Congress came together on the Budget Control Act of 2011, which boosted the debt ceiling by $900 billion and authorized the president to raise it by another $1.2 trillion.

During the debt ceiling crisis of 2013, the limit was suspended for a time and the Treasury took what is known as extraordinary measures, which typically include suspending new investments or payments to federal employees’ retirement accounts. The Government Accounting Office found there was nevertheless a cost to taxpayers. As the date neared when the Treasury would have no other options, some investors eschewed Treasury securities, worried they would not be paid on time. Others insisted on a greater return for the risk they faced.

The debt ceiling was suspended until July 31, 2021, under the Bipartisan Budget Act of 2019. The ceiling stood at $22 trillion when Congress passed the bill and since then the government has borrowed $6.5 trillion as of June 30, 2021. When it was reimposed in August, and the debt had climbed to $28.5 trillion, the Treasury again was faced with taking extraordinary measures to avoid defaulting on its loans. In October 2021, Democrats who control the House temporarily raised the borrowing limit to $28.9 trillion. The vote delayed the deadline for a default only until December 2021.

As the December 2021 deadline approaches for another debt ceiling crisis, Senate Majority Leader Chuck Schumer of New York and the Senate Minority Leader Mitch McConnell of Kentucky held discussions on how to avert a default. The Treasury Department warned of a Dec. 15 deadline, after which it will be unable to meet its financial obligations. Senator Joe Manchin of West Virginia suggested there may be a way to pass legislation with a simple majority instead of the 60 votes usually required. Meanwhile Treasury Secretary Janet Yellen said she supports discarding the borrowing limit as it's currently structured. Proposals that were introduced in Congress include appealing the limit outright or transferring authority over the borrowing limit to the Treasury Department.

Good

Michael Martz (804) 649-6964

[email protected]

@mmartzrtd on Twitter

INSIDE: McCarthy hunts for GOP votes for deal in time to prevent U.S. default. Page A12

Scott McFarland reports on criticism leveled from both sides of the aisle against debt limit bill (5-29-2023)

Federal budget caps can hurt Virginia's economy because of the state's reliance on the military and defense contracts.