The debt ceiling talks have resumed their rollercoaster ride, with the most conservative members of Kevin McCarthy’s caucus launching a full-throated push to destroy any bipartisan agreement.
Rep. Chip Roy (R-Texas) told a right-wing host Tuesday night that “my position is to hold the damn line” and put a GOP-only proposal into law, one of several similar remarks made by Republicans in recent hours.
“I don’t even care about the negotiations going on at the White House,” he added. Debt Ceiling Talks Stalled By McCarthy’s Right-Wing Pushback
The internal dynamics of the Republican Party are having a direct impact on the talks. House Speaker Kevin McCarthy dramatically changed his tone Tuesday, just hours after President Donald Trump’s upbeat remarks in the Oval Office.
Late Tuesday night, McCarthy’s senior negotiator warned reporters that his side needed “fundamental change” from the White House.
Then, on Wednesday, Speaker McCarthy declared that talks would resume, saying, “I think we can make progress today,” while dismissing accusations that a compromise is now unattainable given conservative Republican criticism.
The conservative rebellion resembles what President Biden is facing on his left flank, with many Democratic senators similarly skeptical of concessions.
The anger on both sides prompts new concerns about whether a deal can be reached and if it will pass Congress in time to prevent a potential default on June 1.
Treasury Secretary Janet Yellen emphasized on Wednesday that negotiators cannot afford further delays, stating that it is almost inevitable that the US government will be unable to pay its obligations past early June.
“Early June seems almost certain that we will not be able to get past early June, and I intend to provide an update pretty soon,” Yellen said in a virtual chat with the Wall Street Journal’s CEO Council in London. “We no longer believe there is a good chance that we will be able to get to the middle or end of June.”
Yellen claims that there are already early signals of stress in financial markets, pointing to considerably higher yields on Treasury bills due in early to mid-June. Yellen did, however, add that she believes a settlement is achievable.
“They’re working toward an agreement that could command bipartisan support,” she explained.
For the time being, many businesspeople are still planning for compromise. “Most people on Wall Street think that cooler heads will prevail,” CFRA Research Chief Investment Strategist Sam Stovall told Yahoo Finance on Tuesday.
“Should the worst happen, history tells us, watch out because we could enter a new bear market,” he cautioned.
The Outsized Power of The House Freedom Caucus
The conservative disdain erupting online and in person echoes the influential House Freedom Caucus’ official viewpoint.
McCarthy should refuse to engage and push the Senate to enact a vast GOP package that undoes many of Biden’s gains. “There should be no further discussion until the Senate passes the legislation,” stated the group of more than 40 MPs.
The plan is a wish list of Republican demands on matters such as the IRS and energy policy that is unlikely to be addressed by the Democratic-controlled Senate.
However, the group wields enormous power on Capitol Hill — and has a direct line to McCarthy’s office — due to its members’ slow support for the California congressman’s quest for Speaker in January.
Rep. Roy told radio presenter Jesse Kelly that right-wing strength is “a result of the efforts in January.” Roy played an essential role in that 15-vote drama. Roy eventually backed McCarthy on the 12th ballot, but in the process, he landed a seat on the crucial House Rules Committee.
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In the end, McCarthy committed to a series of significant concessions in exchange for Freedom Caucus support, including a stringent rules package that allows only one legislator to force a total vote on the speaker’s ouster.
The question that these Republicans have not addressed openly is whether they would be willing to use their power to remove McCarthy from office if necessary.
“Nobody’s talking about that,” said Freedom Caucus member Rep. Bob Good (R-VA) recently on MSNBC. “We want him to succeed because the country needs him.”
Rep. Matt Gaetz (R-FL) noted on Twitter, “Literally nobody except the press is talking about removing McCarthy right now.”
Literally nobody except the press is talking about removing McCarthy right now. https://t.co/aYMwI0Wfnf
— Matt Gaetz (@mattgaetz) May 22, 2023
Gaetz and Good did not vote for McCarthy in January, but they did vote “present” on the last ballots to help push him over the finish line.
In a memo to House colleagues on Wednesday, Roy emphasized McCarthy and the House Freedom Caucus as critical allies, saying the group’s harsh stance is intended to support McCarthy in negotiations by “giving him the strongest hand.”
Another way hard-line House conservatives could impact the argument in the coming days is to question whether a deal needs to be completed by June 1, as Treasury Secretary Janet Yellen reiterated in a letter this week.
“She’s using June 1st, which everyone knows is false.” Rep. Ralph Norman (R-SC) told on Tuesday, echoing numerous other statements.
The commentary echoes far-right distrust of anything said by a Biden official.
However, the remarks reflect a position of more moderate Republicans and Wall Street analysts. They suggest that if the Treasury Department can pick and choose which payments to make, the economic damage caused by default could be reduced for a few days.
For now, conversations are centered on spending caps as a cornerstone toward a potential bipartisan agreement.
Negotiations are stalled on whether to reverse a $130 billion increase in government spending agreed by Congress late last year from FY2022 to FY2023.
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