Kevin McCarthy Shores Up GOP Lines as Debt-Ceiling Battle Looms

In a victory for the speaker, Republicans last week narrowly passed a bill pairing an increase in the nation’s borrowing limit with deep cuts in spending. They say the passage of the bill means the Democratic-controlled Senate and President Biden are the ones standing in the way of preventing a default. Democrats say the debt ceiling must be raised with no conditions and that any talks on fiscal policy need to be held separately.

While the two parties are at an impasse now, the U.S. Treasury is expected to provide new guidance soon on when the U.S. could default on payments to bondholders and other obligations, a deadline that could stir the White House and lawmakers to action. The Treasury is currently using so-called extraordinary measures to keep the nation’s bills paid, but such maneuvers are expected to run out this summer, perhaps as early as June. 

If talks begin, Mr. McCarthy will need to weigh the demands of hard-line fiscal conservatives with more moderate members to reach a deal with Democrats. Any debt-ceiling deal would need to clear the House—where the Republicans’ opening bid almost failed because it wasn’t sufficiently conservative—and the Senate, where 10 or so Republicans would be needed to join all Democrats. If Mr. McCarthy alienates his party in the process, he could lose the speakership.

Mr. McCarthy “deserves a lot of credit for getting [the bill] through,” said Doug Heye, a onetime deputy chief of staff to former House Majority Leader Eric Cantor, but “now the really hard work begins.”

The bill’s passage has bolstered the speaker’s hand for the moment, with members lining up behind him. 

“I have full confidence” in Mr. McCarthy, said Rep. Byron Donalds (R., Fla.), a member of the far-right Freedom Caucus who once opposed Mr. McCarthy’s speakership. “He has the backing of the Republican members to go and negotiate,” said Rep. Carlos A. Giménez (R., Fla.), a member of the more moderate Republican Governance Group. 

Democrats said the bill wasn’t a real offer. “They produced a ransom note and said, ‘Pass our irresponsible Default on America Act or else we’re going to default.’ That’s not serious,” said House Minority Leader Hakeem Jeffries

Behind the scenes, lawmakers and people who have met with Mr. McCarthy say he is adamant that the U.S. won’t default, even as he uses the debt limit as leverage to seek spending reductions. Even getting close to a default could rattle financial markets. The president and Mr. McCarthy met in February and haven’t engaged on the issue since.

“I sent him a bill that lifted the debt ceiling,” Mr. McCarthy told reporters. Asked if negotiations with Mr. Biden or the Senate would water the bill down, potentially losing Republican support, Mr. McCarthy acknowledged likely changes. “You know how Congress works, the House passes a bill, the Senate passes a bill, we go to a conference.” 

The White House, which released its own budget earlier this year that relies on tax increases to reduce the deficit, said Mr. Biden wouldn’t engage in talks tying fiscal policy to the debt ceiling and that Congress needed to pass a “clean” debt limit increase.

“That is not negotiable,” said press secretary Karine Jean-Pierre.

Senate Majority Leader Chuck Schumer (D., N.Y.) pronounced the GOP bill dead on arrival in the Senate. Still, he needs 60 votes to advance any plan of his own, and there isn’t enough support for a clean increase at this moment. Senate Republicans have pointed to the House bill as a starting point.

“The House measure will not pass in the Senate,” said Sen. John Kennedy (R., La.). “But I’m hoping that the House having done its job will cause the president to sit down and have an adult conversation with the speaker.”

Rep. Garret Graves (R., La.), who played a top role in developing the Republican bill, said House Republicans would wait for a response before looking for alternatives. 

“Look, we don’t negotiate with ourselves. I mean, at this point, it’s up to the Senate. It’s up to the White House to come to the table,” he said.

The GOP plan would raise the debt ceiling by $1.5 trillion or until March 31, 2024, whichever comes first. In return, it would set discretionary spending levels for the coming year at fiscal 2022 levels and limit spending growth to no more than 1% a year. It would also claw back unspent Covid-19 relief money, impose new work requirements for government benefits, stop the administration’s plan to forgive some student loans and other measures. 

The bill would cut projected government deficits by about $4.8 trillion over 10 years, according to the nonpartisan Congressional Budget Office. 

For Mr. McCarthy, the win on Wednesday was part of a continuation of his grueling battle to win the speakership in January. Mr. McCarthy agreed then to advocate for strict spending cuts in any debt-ceiling increase when he won over detractors.

To craft the bill, Mr. McCarthy and his aides met frequently with the main Republican ideological caucuses, a group the speaker dubbed “The Five Families.” The resulting bill brought on moderates and most of the far right, with only four Republicans voting “no,” and the bill squeaked by, 217-215, with Mr. McCarthy casting a rare vote as speaker.  

Some Republicans signaled potential trouble ahead. Rep. Ralph Norman (R., S.C.), a member of the House Freedom Caucus, said Mr. McCarthy promised late Tuesday night that the debt-ceiling bill was a floor, not a ceiling, for negotiations. 

“If it gets weaker and weaker, you won’t get the four that aren’t in there now, you’re going to lose more and more conservatives, so you’re going to have to depend on Democrats, which puts the vacating the chair in jeopardy,” said a GOP lawmaker of the peril  facing Mr. McCarthy. 

Mr. McCarthy spent the days leading up to the vote calling and meeting with lawmakers. The Iowa delegation marched in and out, upset about cuts to ethanol and biodiesel subsidies. Far-right conservatives asked for changes to the work requirements required for government assistance. Others stressed the bill wasn’t fiscally conservative enough. 

The speaker in those meetings was calm, amenable and also resistant to changing the bill, according to people familiar with the conversations. In the end, a 2 a.m. amendment on Wednesday fixed the ethanol issue and moved the work requirements to all start in 2024. 

“He was in a moment where he needed the vote so we were able to ask for what we wanted,” said a lawmaker familiar with the meetings. 

—Siobhan Hughes and Eric Bazail-Eimil contributed to this article.

Write to Natalie Andrews at [email protected]