With the CBO warning that the Treasury is on track to run out of cash in less than four months, Republicans are facing a difficult internecine struggle to raise the debt limits as both conservatives and moderates demand riders that stipulate how the money can be spent. And while the Trump administration has sought to play down this conflict, as the Hill reports, support for a “clean” debt-ceiling hike – that is, raising the debt ceiling with no strings attached – is dwindling as only a handful of the 16 remaining House Republicans who backed the last clean hike say they would back another. Yet, though Democratic support for a clean bill is far from assured, the Republicans’ much narrower majority in the Senate increases the likelihood of a clean hike.
Only 16 House Republicans who are currently in office backed the last “clean” debt hike, and few of them will say they are certain to support it this year. If the debt ceiling is raised with a clean hike — a distinct possibility given Democratic demands and the narrow, 52-seat majority for the GOP in the Senate, Republicans will need at least 24 members of their own conference to back a clean debt bill in the House.
That could be a tall order. Only four of the 16 Republicans who voted for the clean debt hike in 2014 suggest they will or are open to doing so this fall.
Even Paul Ryan voted against the last debt-ceiling bill in 2014 when he was Chairman of the House Ways and Means Committee. And in the Senate, every Republican opposed the bill the last time around. Given these odds, the chances of another round of downgrade-inducing gridlock are high – and the possibility of raising the US borrowing limit before Congress’s August recess, as Treasury Secretary Steven Mnuchin has repeatedly urged, are looking increasingly remote. The problem is compounded by the fact that this is the first time in 11 years that the GOP will be in charge of raising the debt ceiling while controlling both chambers of Congress AND the White House, meaning that the optics surrounding who “owns” the bill will complicate the voting process.
Furthermore, the Democratic leadership appears to be standing by its policy of obstructionism, unwilling to do President Donald Trump any political favors, according to the Hill.
That political dynamic puts all of the responsibility for raising the debt ceiling on the GOP, and little if any on Democrats. House Minority Leader Nancy Pelosi (D-Calif.) will not want to give slack to vulnerable Republicans who don’t want to back the debt ceiling hike for their own party’s president.
“I don’t see Democrats bailing out Republicans, just like Republicans didn’t bail out Democrats,” said Steve Bell, senior advisor for the Bipartisan Policy Center and a former staff director of the Senate Budget Committee. “They’ll say ‘we’re going to give you the same amount of help you gave us.’”
In the spring, Pelosi and Senate Minority Leader Chuck Schumer (D-N.Y.) suggested that Democrats could withhold support from a clean debt hike if Republicans separately press for legislation cutting taxes on the wealthy.
They later said that Democrats would back a clean debt hike, but Pelosi will want as many Republicans as possible to support it since their party controls the White House. And the tax talk has given an argument to any liberal who chooses to oppose a debt ceiling hike.
So far, only four of the 16 House Republicans who backed the clean debt ceiling in 2014 suggested they would consider voting for a clean hike – far below the 24 votes needed to pass such a bill. They are: Charlie Dent (Pa.), Darrel Issa (Calif.), Peter King (N.Y.) and David Valadao (Calif.).
Members of the Trump administration have expressed conflicting views on the debt ceiling. Mnuchin supports a clean bill, while Mick Mulvaney, a former House Republican who voted against the last clean debt-ceiling bill, has said there should not be a clean debt hike vote.
Conservative Republicans are already pressing Ryan to tie spending cuts or budgetary reforms to a debt-limit bill, signaling they do not plan on changing their strategy with fellow Republican Donald Trump in the White House. Meanwhile, the official Democratic position is to support a clean bill. If the House could pass a debt ceiling bill that includes provisions backed by conservatives, the Senate would need at least eight Democrats to back it in the Senate to overcome an expected filibuster.
The last time the US infamously shut down due to passing its debt ceiling was in August 2011, when S&P downgraded the US, formerly at a AAA rating, for the first time ever prompting a furious response from then-Treasury secretary Tim Geithner.
Of course, raising the debt ceiling is hardly the only issue where Republicans remain deeply divided. With Congress observing the July 4 holiday, they’re likely to get an earful from governors in the 31 states that expanded Medicaid, who say the Republican plan to repeal and replace Obamacare goes too far, according to the Wall Street Journal. Nine Republicans oppose the legislation in its current form – seven more than Senate Majority Leader Mitch McConnell can afford to lose.
Most vocal are governors of states that expanded their Medicaid eligibility under the Affordable Care Act. The bill would phase out that expansion and transform the state-federal safety-net program into one in which the federal government’s share would be capped. In all, the bill would cut $772 billion in funding for the program over a decade.
“It’s a pretty big deal, because in most cases these states have had bitter battles inside the state legislature and [with the] governor about [Medicaid], and it’s been settled in favor of expansion,” said Stewart Verdery, a former GOP Senate aide and founder of Monument Policy Group, a lobbying and public-affairs firm.
For any Republican senator “to blow that up from afar is really dicey,” Mr. Verdery said.
In Nevada, Republican Sen. Dean Heller, who faces a tough re-election fight next year, appeared with GOP Gov. Brian Sandoval at a news conference recently and said he opposes the health bill. Republican Gov. John Kasich of Ohio has said the bill’s opioid-addiction measures don’t go far enough, and he said he has conveyed his worries to the state’s GOP senator, Rob Portman. Arkansas Republican Gov. Asa Hutchinson said he has spoken to his state’s GOP senators, Tom Cotton and John Boozman, almost daily about his concerns with the bill.
And as we noted earlier, Bannon and the populist wing of the Trump administration is considering pushing for higher taxes on the wealthy – an issue that’s anathema to Republicans. With gridlock remaining the status quo in Washington, the Treasury has already begun holding larger cash balances in anticipation of deadlock, hoping to forestall the inevitable market shock should Congress blow past the CBO’s mid-October deadline.
The Treasury breached its debt limit on March 16, when the debt ceiling was reset to $19.8 trillion, however, so far there has been no new borrowing authority to surpass it. Since then the Treasury has been using so-called “extraordinary measures,” to pay bills without technically adding to the debt amount However, as Mnuchin has warned, many worry that waiting until the last minute to act on the debt ceiling could provoke a dramatic selloff in US stocks. Who knows? Maybe the debt-ceiling fight will be the straw that finally breaks the back of our ridiculously overvalued equity market.
This post originally appeared on Zero Hedge