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Who wins debt ceiling deal, Biden or McCarthy? Fmr. Trump adviser says both

Jun 01, 2023

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The debt ceiling deal cleared its biggest hurdle in the Republican-controlled House Wednesday night, May 31. The deal passed 314-117, with 71 Republicans and 46 Democrats voting against the bill. The Senate now has until Monday, June 5, to sign off on the deal before the dreaded X-date, when the Treasury runs out of funds.

The Senate, which moves slow by design, will need to speed through any objections and amendment proposals over the next few days to avoid default. Multiple senators have come out against the debt deal on the table and have promised to push for changes.

“The thing has to pass as is,” said economist Kevin Hassett, former senior adviser to President Donald Trump. “We’re running against the clock here.”

If the Senate were to pass amendments, it would have to go back to the House before heading to President Joe Biden’s desk.

“Everybody knows it’s gonna pass just like everybody knew it was gonna pass the House yesterday,” Hassett said.

Readying for a victory lap

House Speaker Kevin McCarthy didn’t get the steep spending cuts he initially sought. Biden didn’t get a clean debt ceiling hike he and Democrats pushed for. Still, Hassett said both are winners in the debt deal.

“For President Biden, as he heads into the general, I think Americans are desperate for a candidate that can work well with others that isn’t so extreme, as extreme as perhaps Biden has been in the first couple of years,” Hassett said. “Having a moderate compromise bill that’s supported by Republicans and Democrats will help Biden tell the story that he’s the guy who can work with the other side.”

And although some more conservative members of the Republican Party are calling for McCarthy’s firing as house speaker over the debt deal, Hassett said there are a “whole bunch of wins” in the deal for the GOP, including spending reductions and expanded work requirements for government assistance.

While many Democrats took issue with the expanded work requirements for government assistance programs like SNAP, they conceded to the GOP on the issue in order to pass the deal.

“There’s something that never, ever, ever would have passed a Democratic Congress if you put it as a standalone bill, but by combining it with the debt limit, they were able to get it through,” Hassett said. “That’s really why, when you and I talked about this a while ago, I was saying for sure they should bargain over it because they’re going to get some policy concessions from the Democrats and sure enough, here we are.”

Not all wins for McCarthy

Estimates on spending cuts over the next 10 years range from around $1 trillion to $2 trillion, with the Congressional Budget Office sitting at around $1.5 trillion in deficit cuts. Republicans originally passed a bill that the CBO determined would cut deficits by $4.8 trillion over 10 years.

“The spending reduction is pretty darn small and spending is really out of control,” Hassett said. “And so it’s a step in the right direction, but the Republicans that are voting against it are arguing that McCarthy had a lot more leverage than this and he should have been able to get more spending concessions than he did.”

One particular example is the increased funding earmarked for the IRS. Republicans had vowed to revoke all $80 billion. The debt ceiling deal strips about 25% of it away. Hassett also dismissed the impact of conservatives calling for McCarthy’s job.

“I think most House members understand that in a narrow majority, you need a speaker who can get the best deal possible and McCarthy’s deal is really quite a bit better than even I anticipated a few weeks ago,” he said.

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SIMONE DEL ROSARIO: The debt ceiling deal cleared its biggest hurdle in the Republican-controlled House Wednesday night, passing 314 to 117, with 71 Republicans and 46 Democrats voting against the bill. It’s now off to the Senate, which has until Monday to sign off. I want to bring in economist Kevin Hassett. He’s a former senior adviser to President Donald Trump. Kevin, always good to have you.

 

KEVIN HASSETT: Great to be here.

 

SIMONE DEL ROSARIO: We know the Senate moves slow by design. And we also know that there are a few senators at least who want to propose amendments. What are your predictions on how this plays out?

 

KEVIN HASSETT: Right. Well, I think that the thing has to pass as is. If they were to amend the bill, then they would have to go back to a conference committee in the House which would then split the difference between the House and the Senate Bill. And you know, we’re running against the clock here with the debt limit. My view is there won’t be any amendments and it’s going to pass and that everybody knows it’s gonna pass just like everybody knew it was gonna pass the House yesterday. And the reason why that’s relevant is that if you know something’s gonna pass, then you know, basically the speaker or the majority leader will basically, or minority leader, I mean, will look the other way if you vote against the bill. The bottom line is it’s going to pass and so if you need to, you know, cover your right side as you’re going into a primary challenge or something and you want to vote against it, then nobody begrudges that. And so I think that the media has been making a whole lot out of all the no votes, and then even the people like Lindsey Graham, who say they’re not going to vote for it in the Senate, but that’s just like kabuki theater. You know, everybody knows that things could have passed and the people who are saying no, we’re just doing so for political reasons that said, if we really needed their vote to get the bill through, then we would probably get it.

 

SIMONE DEL ROSARIO: Taking the bill as it is, what would you say goes in the win column for the GOP?

 

KEVIN HASSETT: Sure, there are a whole bunch of wins in this for the GOP. I think that the biggest win is that they’re cutting spending by, there have been various estimates, but it looks like it’s going to be about $2 trillion over 10 years, smaller deficit. And you know, if Kevin McCarthy had proposed a $2 trillion debt reduction bill all by itself, then it would have a zero chance of passing, zero, with the Democrats in the Senate and Biden in the White House. And so to take something that had to happen, the debt limit, and use it as a vehicle to get a policy win of $2 trillion reduction in spending, it’s a big win for him. The other big win is work requirements that they’ve pretty heavily strengthened work requirements for people who are getting food stamps, and it’s basically how we’re going to help get people reattached to society. There’s a lot of evidence that work requirements that make people actually better off because they’re happier once they get back and get a job. And so the work requirements again, there’s something that never, ever, ever would have passed a Democratic Congress if you put it as a standalone bill, but by combining it with the debt limit, then they were able to get it through and that’s really why, like when you and I talked about this a while ago, I was saying yeah, for sure they should bargain over the tail of it because they’re gonna get some policy concessions from the Democrats. And sure enough, here we are.

 

SIMONE DEL ROSARIO: Yeah, we would put the work requirements into the loss column for Democrats especially, what would you say goes in the loss column for the GOP on this one?

 

KEVIN HASSETT: You know, I don’t think that there are a lot of losses really. But I guess one thing is that the spending reduction is pretty darn small and spending is really out of control. And so it’s a step in the right direction, but the Republicans that are voting against it, are arguing that McCarthy had a lot more leverage than this, and he should have been able to get more spending concessions that he did. So for example, you know, something that a lot of people are talking about, is there’s this massive increase in funding for the IRS to hire auditors to come around and harass us all and it was a top priority for many Republicans to pull those funds out. And McCarthy wasn’t able to do that. And so I guess you would call that a win for the Democrats, they want to harass you with IRS agents of audits, they’re still going to be able to do that.

 

SIMONE DEL ROSARIO: Well, Kevin, we’re still talking about you know, the national debt here. And we know that the CBO says that increased funding for the IRS is going to decrease deficits. So that would be good for the overall conversation of trying to bring down this debt issue. Correct?

 

KEVIN HASSETT: You know, if you think that that’s what’s going to happen, but there’s this thing that’s called the tax gap, that everybody in Washington that does policy knows about. The tax gap is an estimate by the joint tax committee of how much tax we collect compared to how much tax is owed. And every year they say we collect about a trillion dollars less than is owed because people are doing things, you know, that they’re not really adhering to the law and so on. But whenever people go after closing the tax gap, they fail. There’s a long record of that. And so sure, we’re gonna have, what, 80,000 new IRS agents trying to close the tax gap, but if they do close the tax gap, then they’ll be the first ones to be successful. You know, it’s sort of like closing the tax gap is successfully as likely as sort of, I don’t know, invading Russia in winter, so the classic, you know, blunders, it’s just like you can spend a lot of money on it. But it turns out that when you take a close look, then the people don’t actually owe the taxes that the IRS thought and they waste a lot of time on the audit.

 

SIMONE DEL ROSARIO: Compromise has become a bit of a bad word in Washington. I would say this bill proves that compromise is still alive and well, at least when the fate of the country’s economy is at risk. Does this come at a cost for President Biden or McCarthy though? 

 

KEVIN HASSETT: No, not at all. In fact, everybody kind of knows that this is one of those things that you’ve got to compromise on and people have done so over and over and over again. I would say that the winners here are both McCarthy and Biden, which is what happens when there’s a compromise. For McCarthy, the victory is that he showed that he can navigate a difficult, you know, House of Representatives with a small majority and then get something done, get some real policy concessions that showed really great leadership on his part. And for President Biden, you know, as he heads into the general, I think Americans are desperate for a candidate that can work well with others that, you know, isn’t so extreme, as extreme as perhaps Biden has been in the first couple of years. And so having a kind of moderate compromise bill that’s supported by Republicans and Democrats, will help Biden tell the story that he’s the guy who can work with the other side and you know, not just run fire to the left. The problem is his record for the first two years was opposite that, but this kind of switch is something that we’ve seen before. You might recall that Bill Clinton, you know, basically lost the house because of Hillary care. And because he took over and the first two years was running away to the left. And then Newt Gingrich came in and you know, made a lot of compromise bills with Clinton that made Clinton look like a reasonable moderate, and Clinton won re-election in a landslide. So I think that Biden is probably looking at that, you know, Clinton-Gingrich history and thinking that this is kind of a win for me too.

 

SIMONE DEL ROSARIO: Multiple members of the conservative wing are still calling for McCarthy’s job over this, do you think that has any steam at this point?

 

KEVIN HASSETT: I think that they’ll continue to call for his job but they don’t have a replacement and so McCarthy is safe. And you know, again, there’s gonna be a small number of people who have very extreme negative views like we should have, you know, just like if you go past the debt limit, then the US you know, has a balanced budget amendment basically effectively because there’s no increase the debt limit they can’t borrow. But what that means is that you were defaulting on our debt, we can’t make interest payments and so on. It’s a risk to global financial markets, that’s really unfathomable and it seems like there are a few radicals that kind of wants to test the waters on that, and they’re gonna be disappointed if we don’t, but I think most House members understand that in a narrow majority, you need a speaker who can get the best deal possible and McCarthy’s deal is really quite a bit better than even I anticipated a few weeks ago.

 

SIMONE DEL ROSARIO: Kevin Hassett, former senior advisor to President Donald Trump, it’s always a pleasure having you on. Thank you. 

 

KEVIN HASSETT: Thanks Simone, it’s great to be back.