Splits emerge as U.S. House Republicans demand Biden negotiate on debt limit

By David Morgan

WASHINGTON, Jan 25 (Reuters) – Republicans who control
the U.S. House of Representatives are divided over how hard a
line to take on the debt ceiling, but were united on Wednesday
in demanding that Democratic President Joe Biden agree to
negotiate on spending as part of any deal.

Hard-line Republican conservatives, who have the power to
block any deal in the narrowly divided House, want to force deep
spending cuts on Biden and the Democratic-led Senate in exchange
for an agreement to avoid default on the $31.4 trillion debt.

Some moderates want to tread more carefully and avoid any
potential damage to the U.S. economy, but even they contend
their party will not support a debt agreement without
negotiations on spending.

“I know we can’t ask for the moon,” said Representative Don
Bacon, a moderate Republican whose Nebraska district Biden won
by 6 percentage points in 2020.

“But the president also can’t refuse to negotiate. I mean,
if he refuses to negotiate, you’re not going to get any
Republican support for anything,” Bacon told Reuters.

The federal government on Jan. 19 came close to its $31.4
trillion borrowing limit set by Congress, and the Treasury
Department has warned that it may only be able to pay all the
government’s bills through early June, at which point the
world’s biggest economy could be at risk of failing to meet its
obligations, including on its debt securities.

Brinkmanship could panic investors, potentially sending
markets slumping and shaking the global economy. A downgrade of
the United States’ debt could result — as occurred in
protracted 2011 debt-ceiling battle that also led to years of
forced domestic and military spending cuts.

Congress raised the debt limit three times during Republican
Donald Trump’s presidency. But Republicans are now seizing the
issue as leverage in their first major act since winning a
narrow 222-212 House majority.

House Speaker Kevin McCarthy and Biden are expected to meet
and discuss the debt ceiling among other issues. But no meeting
has yet been scheduled.

SENATE STANDS BACK

White House spokesperson Karine Jean-Pierre reiterated on
Wednesday that Biden is open to hearing ideas on how to cut the
debt, despite his opposition to debt ceiling negotiations.

“If folks have ideas on how to deal with the national debt
and lower the debt, he’s happy to hear that,” Jean-Pierre told
reporters at the White House.

“When it comes to default, we see this as a separate
matter.”

Senate Republican leader Mitch McConnell, who played an
integral role in past debt talks, predicted that any solution
would have to come from McCarthy and Biden, saying the
Republican-controlled House was unlikely to accept solutions
from the Democratic-led Senate.

“The point everybody is making is that the White House needs
to negotiate with the speaker. They can’t just circumvent the
House of Representatives,” said Republican Representative Mike
Lawler, whose New York district Biden won by 10 points.

“There needs to be a serious understanding that we need to
rein in spending,” Lawler added.

Pressure for agreement is already mounting, with Treasury
Secretary Janet Yellen calling for prompt action from Congress.

McCarthy is expected to open any negotiations by demanding
that discretionary funding be reset to 2022 levels to achieve a
balanced federal budget over the next decade.

But Republican hard-liners, who used McCarthy’s stormy
election as speaker to exact concessions that weakened his
position, have begun calling for deeper cuts in non-defense
spending while awaiting talks.

“We can spend at defense spending levels for the ’23
omnibus. We can return to pre-COVID spending levels for the rest
of the bureaucratic state, and you can get to better than ’22
levels,” Representative Chip Roy, a leading conservative, told
reporters.

But moderates say Republicans should adopt a different tack
to find an agreement that can pass the Senate and be signed into
law by Biden.

“You’re not going to pass this stuff through the Senate, so
let’s be real,” Bacon said.

He proposed keeping spending in line with inflation instead.
“It’s reasonable. It’s not draconian. It bends the curve in the
right direction,” Bacon said.

Another moderate, Representative Brian Fitzpatrick,
advocates a bipartisan proposal that would change the nation’s
borrowing limit from a fixed dollar amount to a percentage of
national economic output.

Representative Chris Stewart, a Utah conservative, described
hard-liner and moderate proposals alike as opening salvos that
would ultimately lead to an agreement with Biden.

“When we get into details about someone further to the right
or some of the moderates, there may be some disagreement. But
that’s why we negotiate and try to determine, you know, where
the middle ground is,” Stewart told Reuters.

(Reporting by David Morgan; additional reporting by Nandita
Bose and Jason Lange; Editing by Scott Malone and Jonathan
Oatis)