Chicken-or-Egg Game is On as Congress Barrels Toward Debt Limit

Chair of the House Budget Committee Rep. Jodey Arrington (R-TX) speaks a news conference after a budget briefing at the U.S. Capitol March 8, 2023, in Washington, DC. (Drew Angerer/Getty Images/TNS)

WASHINGTON (TNS) — A House budget resolution will be delayed in part to allow for negotiations with President Joe Biden on a debt limit increase paired with some sort of concessions on spending and other policies acceptable to Republicans, according to House Budget Chairman Jodey C. Arrington.

But that raises an interesting chicken-or-egg question for the two parties. Biden says he won’t negotiate at all over the debt ceiling, and even if he were to agree to talk about fiscal policy, it won’t be until Republicans produce their own budget blueprint.

There are several months left to figure something out. The Congressional Budget Office and other analysts say lawmakers and the White House have until sometime between June and September to figure out a debt limit resolution or the economy could tip right over into recession.

But if neither side blinks first, there’s a real risk talks could get dangerously close to going past the “x date” when the Treasury Department could miss payments on U.S. obligations.

House Republicans need more time for drafting a fiscal 2024 budget resolution partly because Biden was a month late in submitting his budget request, which was not delivered until March 9, Arrington said in an interview Monday at the House GOP’s annual policy conference in Orlando, Fla.

But a delay is also designed to give Speaker Kevin McCarthy, R-Calif., more flexibility in negotiating terms for a debt ceiling increase that is needed by summer to ensure the Treasury can keep paying all its bills, Arrington said.

“I can only tell you that I’m committed to getting this budget out, and so is the speaker,” the Texas Republican said. “But we also, remember, want to give [McCarthy] the space to negotiate on the debt ceiling, and you just don’t want too many things in the pot at one time.”

Deadlines? What deadlines?

The 1974 budget law set the first Monday in February as the deadline for presidential budget submissions, but there’s no penalty for missing it, which has occurred frequently.

Similarly, the 1974 law says April 15 is the deadline for lawmakers to complete action on a budget resolution, but that’s another oft-missed, nonbinding deadline, and oddsmakers give the divided Congress virtually no chance of agreeing on a joint budget this year anyway.

A budget resolution lays out spending, revenue and deficit targets for a period of years, usually a decade. It’s nonbinding and isn’t signed into law by the president, but if adopted by both chambers it creates enforceable spending caps for appropriations and gives lawmakers the option to use reconciliation procedures to create a filibuster-proof fiscal package.

Given this year’s political dynamics, a House-only budget resolution would serve little purpose other than to broadcast GOP fiscal priorities but could make some party lawmakers cast tough votes that could be used against them in the 2024 campaign. It also could expose cracks in party unity, which is needed if Republicans hope to extract any policy concessions out of the debt limit talks.

At the same time, there’s nothing more “must-pass” than a debt limit increase — or at least a temporary suspension of the borrowing cap — to prevent Treasury from having to delay payments on federal obligations, spending incurred under laws enacted by both parties.

McCarthy and Biden met initially in February and agreed to keep talking, but no further meetings have been scheduled, as Biden has maintained the position that Republicans need to first show their budget plans.

“I told the speaker, as soon as he’s about ready to lay out his budget, I’m willing to sit down,” Biden said earlier this month at the White House. “And now I’m hearing things like, well, we’re not going to have our budget till April or May, maybe even June. … It doesn’t sound like it’s on the level yet.”

Speaking to reporters in Orlando on Sunday, McCarthy said there was no reason why debt limit talks couldn’t happen first. “Why do we have to have a budget out to sit down and talk about the debt ceiling?” he said.

McCarthy said he spoke with Biden on Friday at the annual Friends of Ireland lunch at the Capitol. He told the president he was wasting time not negotiating on the debt limit; Biden reiterated his demand for a “clean” debt limit increase, which McCarthy said his members wouldn’t support. Other than tax increases, all policy attachments are on the table, the speaker said.

In a separate interview, House Majority Leader Steve Scalise accused Biden of “playing games with the debt ceiling” and questioned why the president took so long to get his own budget out.

“If the budget was such a priority to have debt ceiling talks done, then the president would have filed his budget on time instead of having it delayed by a month,” Scalise, R-La., said. “That shouldn’t hold up talks over how we can actually address the debt ceiling. That’s got to happen sooner rather than later.”

On Tuesday, McCarthy cited the latest banking crisis as an example of the financial instability wrought by spending-fueled inflation over the past few years. Silicon Valley Bank and others bought up large amounts of supposedly safe government bonds, only to be exposed to heavy losses when interest rates rose sharply and customers wanted to withdraw funds.

“Why are we having a banking crisis? Because government spent too much and created inflation,” McCarthy said. “Should we do exactly what the president is saying, just lift the debt ceiling and create more inflation and more banking problems? I mean, this should be a wake-up call to everybody and say… we’ve got to do something about this debt ceiling.’”

High hopes

The new House Republican majority began the year with hopes of producing a budget that would eliminate deficits over 10 years. But that task has grown more daunting after lawmakers promised not to cut Social Security or Medicare and not to gut the military, while pushing to extend the 2017 GOP tax cuts that are set to expire after 2025.

The Congressional Budget Office laid out the math challenge last week in an analysis prepared at the request of Senate Budget Chairman Sheldon Whitehouse, D-R.I., and Senate Finance Chairman Ron Wyden, D-Ore.

The analysis showed that if the tax cuts are extended and Social Security, Medicare, defense and veterans’ benefits are taken off the table, all other discretionary programs would have to be cut by 100 percent by the final year of the 10-year budget window. And even then, the deficit in fiscal 2033 wouldn’t be wiped entirely clean; there’d still be a modest $20 billion shortfall.

Arrington said Monday that a balanced budget is more “aspirational” than an immediate focus of a narrow GOP House majority that has only four votes to spare to reach the 218-vote threshold for passage, assuming united Democratic opposition.

“The focus is, the next year or two, what we can do to reduce spending and get real spending cuts accomplished, and then how do we leverage the debt ceiling negotiation to achieve those spending limitations,” Arrington said.

In the interview, Arrington said he wants to produce a budget “that reins in spending, reduces the debt-to-GDP [ratio], and restores fiscal responsibility to our nation’s capital and to Congress.”

He said the House budget was likely to hold discretionary spending to a 1 percent annual increase over 10 years, which he said would produce about $2.7 trillion in deficit reduction. The hard-right House Freedom Caucus proposed a similar plan in recent weeks.

Democrats are using the CBO analysis to argue that a GOP push for a balanced budget is unrealistic and would impose devastating cuts to vital programs.

But Arrington said the CBO study doesn’t use “dynamic scoring” to take account of the additional revenue that can be produced by lowering taxes and reducing regulations.

He said he would like the CBO to start using that scoring method “because [economic] growth is a part of reducing our debt to GDP.”

If a bipartisan commitment is needed for the CBO to use that methodology, Arrington said, he would push for legislation to make that happen. “I’m committed to all of the above,” he said.

But ultimately, Arrington said, balancing the budget will require “a significant amount of mandatory spending reduction,” apart from Social Security and Medicare. He has pushed for work requirements for welfare programs and requiring Social Security numbers for receiving the child tax credit to reduce improper payments.

While discretionary spending must be cut, he said, entitlement programs make up the lion’s share of the federal budget. “There’s just no other way around it,” he said.

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