Biden Pans McCarthy Debt Plan: 'Huge Cuts' to Americans

House Speaker Kevin McCarthy worked furiously Tuesday to build support for a Republican plan that would demand strict limits to federal spending in return for agreeing to raise the nation's debt limit and stave off an unprecedented U.S. default.

But President Joe Biden, whom Republicans have slammed for not being willing to compromise or negotiate on the issue, swiftly swatted down the plan, which would cap much federal spending at increases of 1% a year, as requiring "huge cuts" to programs helping millions of Americans.

It was just the latest in what is expected to be a protracted debate over how, when and even whether to raise the nation's debt limit, now at $31 trillion, with default and a potentially devastating blow to the economy possible if Congress fails to act.

McCarthy is finding unusual support for his plan from his typically fractured House Republican majority, who view the proposal as a calling card to push Biden into negotiations. The White House has so far refused to engage in debt ceiling talks, doubtful McCarthy can unify Republicans and steer any proposal to passage.

Biden, in his first public remarks on the proposal, said at the White House that McCarthy had effectively proposed "huge cuts to important programs" that millions of U.S. households depend on.

The president said McCarthy has "threatened to be the first one to default on the debt, which would throw us into a gigantic recession and beyond unless he gets what he wants in the budget."

The high-stakes battle comes as Biden confronts this year's newly divided government with Republicans in charge of the House and eager to flex their majority power. McCarthy delivered a high-profile speech to Wall Street on Monday outlining his vision.

If McCarthy succeeds in having the House pass his proposal, he would be able to show he has the backing of his fellow GOP lawmakers as he enters spending talks with the White House. Biden says the Republicans should first reveal their own detailed spending plan — free of any connection to the debt limit. And administration officials have privately expressed doubts about the benefits of negotiating with McCarthy out of skepticism that he can actually deliver conservative Republican votes.

Biden spoke later Tuesday with Senate Majority Leader Chuck Schumer and House Democrat Leader Hakeem Jeffries and discussed Republicans' "brinkmanship over default and how their recklessness could crash the economy," according a readout of the call from the White House.

The president and the Democratic leaders agreed they won't negotiate over default, the White House said. Biden told Schumer and Jeffries that he was ready to have a separate negotiation over the budget once Republicans present their plan.

Jeffries quipped on CNBC that the House Republicans' budget plan is "in the witness protection program."

McCarthy, unable to pass a comprehensive Republican budget plan in the House, instead has been working with his leadership team to unite the "five families" — the often warring factions of Republican caucuses — to join together on his new, more general plan. He convened lawmakers Tuesday for a private meeting to discuss the proposal.

"I'm confident we'll have it and comfortable we'll pass it," said Rep. Tom Cole, R-Okla., chair of the Rules Committee, who said a bill could come up for a vote as soon as next week.

Even some of McCarthy's skeptics from the staunchly conservative House Freedom Caucus — including those who initially refused to back him to be speaker — seemed ready to give his debt ceiling proposal a look. But others remained deeply skeptical, as they started piling on their own conservative priorities, showing the limits of the speaker's grip on his majority.

Rep, Matt Gaetz, R-Fla., who resisted McCarthy's bid for speaker, said Tuesday he was unsold on the plan and suggested changes.

Rep. Clay Higgins, R-La., said as he exited the session: "There is no 'this.' We're discussing what the 'this' will be."

The proposal the Republican speaker outlined is far-reaching — and virtually sure to be rejected by the White House.

It would raise the debt limit into next year — putting it squarely into the 2024 presidential election — in exchange for rolling back spending to fiscal 2022 levels, recouping tens of billions of dollars of unspent COVID-19 relief funds and imposing a 1% cap on future non-defense spending each year for the decade.

The 1% spending cap would not include mandated Social Security and Medicare money.

Additionally, McCarthy's plan would impose new work requirements on recipients of government aid, cutting vast sums from the federal safety net. And it would tack on a sweeping energy package of oil and gas drilling and permit changes that would undo much of Biden's climate change agenda.

Rank-and-file Republicans want to add other priorities, roll back student loan forgiveness and rescind Biden's climate change policies passed last year in the Inflation Reduction Act.

"This is an unfair, unpopular agenda that Americans do not support," said White House press secretary Karine Jean Pierre.

In fact, U.S. adults are of two minds on federal spending, according to a March survey by The Associated Press-NORC Center for Public Affairs Research. A majority want to reduce the overall size of the government, but majorities also back more spending on programs such as infrastructure, health care, Social Security and education.

As for the debt limit, the Treasury Department, for now, is taking "extraordinary measures" to allow continued borrowing to pay off already accrued bills, but that will eventually run out, likely this summer.

In many ways, this is the easy part of a lengthy effort for McCarthy: A vote as soon as next week would hardly be binding since the proposal would be dead on arrival in the Senate.

That political dynamic may make it easier for McCarthy to rally his ranks behind the plan if Republicans see it as merely a starting point in negotiations designed to push Biden to the table.

"Kevin McCarthy is going to get 218 votes on this deal," said Rep. Dusty Johnson, R-S.D., chair of the conservative Main Street Caucus, referring to the majority needed for passage.

Said Rep. Kevin Hern of Oklahoma, chair of the powerful Republican Study Committee, "There's still hard work ahead of us, but I believe we can get 218 votes by the end of next week."

Democrats were not impressed. Schumer said if McCarthy continues down this path of negotiating over the need to raise the debt limit, the U.S. will be headed for a default.

"No one should confuse this wish list as anything more than a recycling of the same bad ideas we've heard about for weeks, and it's still not clear that Speaker McCarthy has the votes to even pass this," Schumer said.