The House Speaker vote foreshadows a nastier fight on the U.S. debt limit

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Republicans in the U.S. House of Representatives have now got down to business, if you want to call it that, after last week staging their version of the Lucy-yanking-the-football-away-from-Charlie-Brown prank a humiliating 14 times before allowing Kevin McCarthy to become Speaker.

Mr. McCarthy finally got to drink from the (poisoned) chalice he has long coveted, though not before granting a series of concessions to the most radical members of the GOP caucus that will make governing much harder. The GOP radicals – a motley crew of Donald Trump sycophants, anti-government libertarians and grandstanding opportunists – will continue to exact a heavy ransom from Mr. McCarthy on every vote.

One of the House GOP’s first acts this week was to create the Orwellian-sounding Select Subcommittee on the Weaponization of Government to investigate alleged interference in federal law enforcement agencies by President Joe Biden’s administration. The new committee will seek to show that last summer’s F.B.I. raid on Mr. Trump’s Mar-a-Lago estate in search of classified documents was politically motivated.

This spectacle will serve as a mere appetizer for the main course later this year, when Congress must raise the U.S. debt ceiling to avoid a default by the Treasury. The current US$31.4-trillion limit on federal borrowing is likely to be reached by August. Unless Congress raises the ceiling, the Treasury department would be unable to issue new bonds or pay interest on outstanding ones. No one can rule that out right now.

Washington is bracing for the most contentious debt-ceiling showdown since 2011, when Tea Party Republicans (the precursors to today’s Trumpists) refused to vote to raise the borrowing limit. The federal deficit had surged under then-president Barack Obama in the wake of the 2008-2009 bank bailouts and recession. For weeks during the summer of 2011, a default looked imminent, as then-GOP speaker John Boehner scrambled to negotiate a compromise with the White House.

An 11th-hour deal emerged that allowed for a US$2.1-trillion increase in the debt ceiling in exchange for US$917-billion in specific deficit reduction measures and the creation of a bipartisan committee to come up with another US$1.2-trillion in spending cuts over 10 years. The committee ultimately failed to come to an agreement, forcing a series of painful automatic cuts to the military budget and discretionary spending programs.

Most important, the episode spooked financial markets, which could no longer take it to the bank that the government would pay its bills. Standard & Poor’s cut the U.S. government’s triple-A credit rating, saying “the brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective and less predictable.”

In the end, Mr. Boehner was only able to cobble together a majority to raise the debt-ceiling by getting 95 Democrats to vote for the compromise deal. In all, 66 Republicans voted against it. Mr. McCarthy could conceivably also rely on moderate Democrats to support a debt-ceiling increase later this year, but he would do so at his own peril.

Republican hardliners today would seize on any such move by the Speaker as a betrayal and undertake efforts to take back his gavel. Wall Street is already biting its nails as analysts issue red alerts about the looming debt battle in the House. A prolonged debt-ceiling fight could exacerbate a recession this year by further undermining investor confidence and preventing Congress from adopting any new spending measures.

Some Republicans think that is exactly what needs to happen in Washington. In 2011, the U.S. federal debt stood at US$14.3-trillion. It is now more than double that level. The debt-to-gross-domestic-product ratio has surged to 96 per cent from 70 per cent. It is on track to reach 110 per cent of GDP within a decade. Hardline Republicans now insist they would shut down the government unless Congress agrees to slash spending.

Campaigning for the White House in 2016, Mr. Trump bragged he would eliminate the federal debt, which then stood at about US$19-trillion, “over a period of eight years.” Instead, most of the surge in federal debt that occurred after Mr. Obama left the White House happened on Mr. Trump’s watch. The massive rescue packages passed by Congress during the pandemic had a lot to do with that. But so did the huge tax cuts that Mr. Trump’s administration implemented during the first two years of his presidency. The U.S. deficit rose as tax revenues fell.

Though no president outside wartime increased the debt more than their man, MAGA Republicans are now vowing to prevent Congress from raising the debt ceiling. Their own hypocrisy is lost on them as they prepare to sow more chaos in Washington.