Kevin McCarthy and House GOP weigh debt ceiling demands ahead of Biden meeting

By Manu Raju, Melanie Zanona and Lauren Fox, CNN

Speaker Kevin McCarthy and his House GOP allies are hashing out their initial demands to raise the national debt limit, discussing steep cuts to domestic programs and a trim to defense spending — all the while steering clear of two programs to avoid voter blowback: Medicare and Social Security.

McCarthy has been hearing suggestions from key players in his conference as he prepares for his first face-to-face meeting with President Joe Biden on Wednesday, even as White House officials insist that they will not negotiate with House Republicans on the need for Congress to raise the $31.4 trillion borrowing limit and avoid the first-ever debt default, potentially by this summer.

For McCarthy, the challenge will be in balancing the interests of House Republicans eager to use their leverage on the debt ceiling to enact priorities that would otherwise be ignored by the White House and the Senate — but also finding a deal with Democrats without being seen as caving into their demands. Hanging over all of it: The ability of one member to call for a vote seeking McCarthy’s ouster from the speakership.

It’s a recipe that — some fear — could take the nation to the brink of a potentially cataclysmic default, especially since some positions against raising the limit at all seem intractable.

“No,” Rep. Greg Pence, an Indiana Republican, said when asked by CNN if he would vote for a debt ceiling increase if it included “every” one of his priorities. “That’s what I hear back home.”

While McCarthy has not settled on any individual proposal and is unlikely to make a specific offer at the Wednesday meeting, he and other House Republicans are roundly rejecting the White House’s position to raise the borrowing limit without strings attached, even as it was suspended three times when Donald Trump was president and is intended to pay for bills already incurred.

“I don’t think (Biden) would ever want to be irresponsible and childish, and not sit and negotiate, especially when you think about the ramifications to the economics of our country,” McCarthy told reporters on Monday. “So we’ve got a timeline here, let’s sit down, let’s not play political games. We both know we have certain positions, and let’s find where we can have savings for the American people.”

Privately, Republicans have floated a range of ideas in exchange for an increase in the debt limit, including capping domestic spending at fiscal 2019 levels and bringing defense programs down to 2023 spending levels, GOP sources say — something that budget experts estimate could save $1.7 trillion over the next decade.

But Democrats view such cuts as draconian, while some Republicans say they hardly go far enough.

Even as House Republicans are hoping to strengthen their negotiating hand with the White House by uniting around a proposal, finding conference-wide consensus on spending cuts will be easier said than done. Republican appropriators are vowing to protect defense programs and GOP moderates are uneasy about slashing popular domestic spending programs, all of which can be easy fodder for Democratic attack ads.

“You are always going to have a handful that will vote ‘no’ on everything. So expect those people to exist,” said Rep. Nancy Mace, a South Carolina Republican. “That’s why it’s important to negotiate. We are a divided Congress, and we got to act that way.”

Speaking to CBS on Sunday, McCarthy promised to take Social Security and Medicare cuts “off the table.” And he left open the possibility of cuts to defense programs, saying: “I want to make sure we’re protected in our defense spending, but I want to make sure it’s effective and efficient.”

By steering clear of cuts to entitlement programs, Republicans may not be able to achieve a level of deficit savings that conservatives are seeking.

Indeed, Social Security takes up about 21% of the $5.8 trillion the federal government spent in the last fiscal year, while health care programs — namely Medicare, Medicaid, the children’s health insurance program and Affordable Care Act subsidies — account for about 25% of the budget, according to the nonpartisan Center on Budget and Policy Priorities. The rest of the budget goes to a range of discretionary domestic programs, including 13% for defense and national security.

“Heck no,” Rep. Mark Green, a Tennessee Republican and Freedom Caucus member, said when asked about potential cuts to entitlements.

McCarthy holdouts take active role in talks

Behind the scenes, Republicans are lobbying McCarthy to take a firm stand against the White House.

A bloc of 20 House Republicans who initially voted against McCarthy for speaker are hoping to play a prominent role in the debate, after they made the debt ceiling a central part of their speakership negotiations. As part of those talks, McCarthy indicated he would not take up a debt ceiling increase without “commensurate fiscal reforms” or a budget agreement, according to a slide presentation obtained by CNN.

The conservative crew met Friday morning and Monday to discuss ideas for spending cuts that could achieve a balanced budget within 10 years, and plan to unveil a blueprint outlining their vision in the coming weeks, according to a member involved in the talks.

Ringleaders of the group like Rep. Chip Roy of Texas have been in regular communication with McCarthy, and the group wants to meet with GOP leaders and House Budget Chairman Jodey Arrington of Texas as discussions intensify.

Even some of the most hardline conservatives say they don’t plan to propose cuts to Social Security or Medicare — something Trump has been encouraging Republicans not to do — and insist their plan will only focus on the discretionary side of spending.

“What we will have is a blueprint of what we will be fighting for,” South Carolina Rep. Ralph Norman, a member of the far-right House Freedom Caucus, told CNN. “Not touching Social Security, not touching Medicare … Every agency is being looked at on discretionary. We’re going to put it out for the American people. And it will shock people. … I think people will like what they see.”

Rep. Thomas Massie of Kentucky, a libertarian-leaning Republican, acknowledged that cuts to entitlement programs would be a non-starter in the Senate.

“It’s sort of a moot point,” Massie told reporters. “What could you do here that the Senate would pass and the president would sign? Why would you even start the discussion and let people distort what you’re trying to do when there’s no possible positive outcome?”

Yet with GOP defense hawks and appropriators vowing to protect defense spending, that limits the pool of money on the discretionary side of the budget where they can cut from.

While McCarthy is trying to build conference-wide consensus on what they will propose in exchange for raising the nation’s borrowing limit, some appropriators acknowledged they may wind up on the sidelines of the debate.

“I will be either the beneficiary, or victim, of however that comes out, because we will be getting a (topline spending number) for my subcommittee,” Rep. Chuck Fleischmann of Tennessee, who sits on the House Appropriations Committee, told CNN. “And I’ll be directly affected.”

“I won’t say I’m worried, but I’ll be watching the process, and we’ll adjust accordingly,” he added.

Further complicating matters, some Republicans like Pence, Reps. Tim Burchett of Tennessee and Andy Biggs of Arizona all have signaled they will not raise the debt ceiling under any circumstances.

Other Republicans, however, disagree.

“I think most everyone is in the camp of ‘can’t default.’ The full faith and credit of the country is important, terribly important,” said Rep. Steve Womack of Arkansas, a member of the House Budget Committee. “But just to say we’re going to raise the debt ceiling without any spending restraint is just not an acceptable outcome.”

In his quest to become speaker, McCarthy promised to put a bill on the floor before the end of March that would direct the Treasury Department over which payments to prioritize if the debt ceiling is breached — essentially an emergency contingency plan.

Massie said one idea he has been advocating for is passing a continuing resolution “as soon as possible” that funds the government at 99% of its current levels and pairs it with a debt ceiling increase, just so they have a backup plan in case they are unable to come to an agreement on the debt ceiling or funding the government.

“I want us to be the adults in the room. We’ve got two things that could be a crisis,” Massie told reporters. “Take that off the table. … It would give you the time and space, and it would take the pressure off.”

Others are looking at possible contingency plans as well. The House’s bipartisan Problem Solvers Caucus is working on a proposal that would in part try to set a ratio for the allowable amount of US debt compared to the country’s gross domestic product — and develop a plan for budget cuts if that level is breached. The group is consulting outside budget experts to help draft the proposal.

Rep. Brian Fitzpatrick, a Pennsylvania Republican involved in that effort, said that their plan would be a fallback in case talks between the White House and McCarthy collapse.

“Everyone’s got to compromise,” Fitzpatrick said.

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CNN’s Morgan Rimmer contributed to this report.