McCarthy’s budget cuts face Senate obstacle.

Republicans Pledge to Rein in Federal Budget with Debt Ceiling Bill

When the House passed a bill to raise the debt ceiling on Wednesday night, Republican leaders made a pledge: The legislation was just a “down payment” on reining in the federal budget.

The deal brokered with the White House was a win for the speaker, Kevin McCarthy, who got President Joe Biden to agree to debt ceiling bill.”>modest spending cuts under divided government. However, the bill fell trillions short of the savings conservatives in his conference were hoping for.

The Difficult Road Ahead for McCarthy

McCarthy has staked his early speakership on cutting the size of government, in no small part because the hard-liners threatening to oust him demand it. But the backroom deal-cutting on display Thursday as the Senate took up the debt ceiling bill shows the difficult road ahead for McCarthy as lawmakers eye ways around the legislation’s budget caps.

• Most Republicans voted against the bill
• Some fiscal hawks were upset the bill didn’t go further in its cuts
• China hawks were unable to stomach the amount budgeted for defense

The deal grows defense spending to $886 billion, a 3% increase over this year’s levels, but when adjusted for inflation, that growth is actually a cut. Enough Republicans voted “yes” to get the bill to the president’s desk, but even as the chamber agreed to the caps, Senate leadership was promising a supplemental bill for Ukraine aid that could be stuffed with more money for defense.

The Intractable Problem for McCarthy

The pledge to work around the caps at a time when the conservative Freedom Caucus is demanding deep cuts illustrates a perhaps intractable problem for McCarthy, whose speakership may very well depend on his ability to deliver further fiscal reforms. Most prominently, it put on display a tension within the Republican Party itself. Even defense hawks want to pare back government spending, but they’re unwilling to compromise the Pentagon budget to do it.

The political dynamic does not bode well for McCarthy, who only became speaker in January after agreeing to conservative demands to slash the federal budget. He failed to roll back discretionary spending to fiscal 2022 levels in the debt ceiling fight, one of his promises to the Freedom Caucus. Those members are now looking to see how he handles the appropriations process later this year as they weigh whether to hold a “no confidence” vote against him.

How he navigates those demands, understanding that Republicans are limited in what they can do without control of the Senate or White House, will determine the trajectory of his speakership.

The Future of Spending Agreements

Sen. Susan Collins (R-ME), the ranking member of the Appropriations Committee, expressed hope that Congress operating under regular order will ease some of the frustration felt by conservatives over the back-room omnibuses that have been crafted in recent years. Yet she acknowledged there could be trouble ahead of an Oct. 1 deadline to fund the government.

Rounds, for his part, expects the Freedom Caucus will use every tool at its disposal to extract spending cuts. “That’s part of the process,” he said. But he sees the debt ceiling hike McCarthy brokered as a template for future spending agreements.

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