McCarthy Faces Pressure From Conservatives Vital to His Job as Debt Talks Resume

(Bloomberg) -- House conservatives ratcheted up pressure on Speaker Kevin McCarthy to hold firm in talks over raising the debt ceiling just days before a potentially catastrophic US default.

The campaign from his right flank thrusts McCarthy into a politically tenuous position that threatens his speakership as the US veers closer to June 1, the date by which Treasury Secretary Janet Yellen says the US could run out of money to pay all its bills. 

Representative Chip Roy of Texas wrote a letter to fellow Republicans urging them to keep up demands that any increase in the debt ceiling must come with promises of significant spending cuts. He said all the elements of their proposal, passed last month, “are critical and none should be abandoned solely for the quest of a ‘deal.’”

“President Biden and Democrats have been dragging their feet for weeks to fight for rich liberal elitists who want more spending, more government, more corporate subsidies, and less freedom,” Roy said. 

McCarthy, who controls a narrow and fractious majority, never had broad latitude to carve out a deal with the White House and congressional Democrats. Roy’s letter signals that the room he did have may be shrinking, if he wants to both keep his job and avoid default.

While any debt ceiling deal could pass the House without support of conservatives, McCarthy could face a campaign to remove him from the speaker’s chair if they are unhappy. 

As part of the drawn-out effort to become speaker in January which he won on the 15th ballot by only one vote, McCarthy agreed to a rule that allows a single member to oust him, leaving him open to a renewed — and potentially humiliating — battle to remain in power.  

If a default did occur, economists project it could send the US into a recession, with widespread job losses and higher consumer borrowing costs spilling into the coming election year. But some Republicans, including Roy, have questioned the urgency of the situation. 

That’s a problem for McCarthy. Roy, who has called the debt limit a “manufactured crisis,” helped negotiate the deal that ultimately won McCarthy the speakership.

McCarthy’s allies on Thursday advised him that any retreat from the House-passed bill’s Medicaid work requirements or demands for stringent spending caps would provoke a backlash from fellow Republicans, a person familiar with the ongoing talks said. 

For now, McCarthy isn’t disclosing any compromises he has offered. People familiar with the talks say the GOP has lowered its demand for 10 years of caps to six and sidelined attempts to repeal Biden climate change subsidies.

“The off ramp here is to solve the problem, to spend less than we spent last year,” he told reporters on Wednesday, just before talks between GOP negotiators and the White House resumed. 

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