In announcing their compromise agreement to extend the debt ceiling and avert a potential economic catastrophe, both President Joe Biden and Speaker Kevin McCarthy claimed victory.
But Biden’s triumph is likely to prove more significant because the deal removes a major impediment to the continued economic growth on which the president is counting in his reelection campaign.
When the deal becomes law, said economist Mark Zandi of Moody Analytics, “it will help avoid a recession.”
The president said the plan reduces spending but “protects critical programs for working people” as well as “my and congressional Democrats’ key priorities and legislative accomplishments.” It’s “good news for the American people,” he added.
McCarthy went one step further, declaring Republicans were now “poised to deliver (the) big consequential change in Washington” that they promised, and had “stopped Democrats’ reckless spending,” even though the bill only makes more modest spending cuts than the GOP had sought.
On Fox News Sunday, the speaker pressed the GOP victory claim. He said the Democrats are “very upset” and that their leader, Rep. Hakeem Jeffries, told him “There’s not one thing in the bill for Democrats,” something Jeffries denied.
Though McCarthy later acknowledged, “There’s a lot in here for both sides,” he continued to push the line that Republicans had won, perhaps to ensure the votes of the more hesitant members of his caucus.
McCarthy crowed again on Wednesday night after the package sailed through the House by an unexpectedly large 314-117 vote, attracting two of every three Republicans and more than three of every four Democrats.
“Tonight, we all made history,” the exultant speaker declared, calling the measure “the greatest savings in American history” and vowing this would be just the start of GOP efforts to trim back the federal government.
The vote showed again that, despite his narrow victory on the 15th ballot for speaker, McCarthy was able again to hold together the disparate factions in the coalition that comprises the House GOP majority.
Still, when the Senate joins the House in approving the measure, the big winners will be Biden and the Democrats.
It’s not so much because of what’s in the package itself, though the White House did a pretty good job of minimizing damage to domestic programs and limiting the extent of additional work requirements for those receiving aid.
But by extending the debt ceiling past the 2024 election, it eliminates the possibility of both a catastrophic default and a preelection confrontation that could have tanked the economy. Either could have threatened Biden’s reelection by causing a recession either later this year or early next year.
But avoiding a default does not mean Biden is home free. There remains the danger that the Federal Reserve Board’s drive to squeeze inflation out of the economy by raising interest rates will produce a recession.
That’s the last thing Biden and the Democrats need at a time when polls show a very close race is probable against his most likely Republican challengers, Donald Trump and Florida Gov. Ron DeSantis.
The parameters of the deal also justified Biden’s strategy of resisting direct negotiations with House Republicans until the threat of a default was at hand. Once again, the onset of a deadline proved the best motivator for the two parties to break a deadlock on must-pass legislation like the debt ceiling or funding the federal government.
It seems unlikely that either McCarthy or Biden would have backed off their initial positions – sweeping budget cuts for the Republicans, no negotiations for the Democrats – without that prod.
Unsurprisingly, the bulk of the opposing votes came from conservative Republicans, who were the driving force behind the budget that Republicans pushed through the House by two votes, and progressive Democrats, who rejected any cuts and said Biden was making a mistake by negotiating with the GOP at all.
Prominent Democrats opposing the measure included Rep. Pramila Jayapal, chair of the Congressional Progressive Caucus, Rep. Alexandria Ocasio-Cortez and most fellow members of the progressive group known as the Squad, Rep. Nanette Barragan, chair of the Congressional Hispanic Caucus, and Rep. Rosa DeLauro, top Democrat on the Appropriations Committee.
Republicans said the modest domestic spending cuts in the bill didn’t go far enough and the increase in defense spending was too small.
On the other hand, the congressional leadership of both parties joined Biden and McCarthy in supporting the compromise plan, recognizing this was the best – and perhaps only – chance to get the debt ceiling issue behind them.
Interestingly, the financial markets and the broader economic community have been calm as the deadline for extending the debt ceiling approached, perhaps recognizing the likelihood that the threat of a confrontation would end, as it has, with a negotiated bipartisan agreement.
Biden has staked a substantial degree of his presidency on showing that he can work across the bitter partisan boundaries of recent years, already producing the massive bipartisan infrastructure law and measures to spur domestic chip production and protect the health of veterans.
This week’s agreement adds to that record, providing both a political and an economic plus for a president who has had difficulty convincing Americans of his economic successes.