(Bloomberg) -- House conservatives are split over how to approach the upcoming debate over the nation’s debt limit, with some resigned to raising it with little drama and others gearing up for a standoff over federal spending levels that could result in an unprecedented default.
David Schweikert, a member of the conservative House Freedom Caucus, says he doesn’t want to risk a showdown that analysts warn could shake markets and faith in the credit-worthiness of the U.S. The Arizona Republican, who sits on the House Ways and Means Committee, said he believes a clean debt limit hike can "absolutely" pass Congress and that he could see himself voting for such a measure.
“There’s an understanding of, structurally, where we’re at, and not wanting to create the theatrical stress,” Schweikert said this week in an interview.
But Representative Jim Jordan of Ohio, a founder of the Freedom Caucus, said he’s worried about the rumors he’s heard regarding Republicans moving toward a debt limit hike without any related spending cuts.
“I hope they’re not moving in that direction,” Jordan said Friday in an interview. “I just would be shocked if Paul Ryan would go in that direction. The speaker understands the gravity of our debt situation.”
“There’s going to be strong opposition from lots of Freedom Caucus members, and my guess is lots of members of the House Republican conference” if the GOP doesn’t include some kind of spending cuts as conditions, he said.
The split could lead to a rocky period next month, when Congress returns from its summer recess. Lawmakers will have only a few weeks to act, and GOP leaders may find it harder than they expect to shepherd through a debt ceiling hike without spooking the markets.
The Treasury Department, which is already employing extraordinary measures to avoid a default, hasn’t said exactly when the final deadline is for raising the debt limit. Treasury Secretary Steve Mnuchin told House Speaker Paul Ryan that Congress needs to act before Sept. 29 to raise the debt limit, and Mnuchin has said he prefers a bill without strings attached.
Since a deal to raise the debt ceiling will need at least eight Democrats in the Senate, the minority party has leverage to block any spending cuts or other policy changes that Republicans may try to add. Even in the House, where the GOP has a wider majority, there will be enough Republican holdouts who are ideologically opposed to raising the debt limit to force leaders to rely on Democratic votes.
One likely scenario is that leaders decide to add the debt ceiling measure to a stopgap spending bill that will be needed to keep the government funded after Sept. 30. This, however, would mean that it could get tied up with President Donald Trump’s demands to fund his border wall with Mexico, something most Democrats have rejected.
On the debt ceiling, members of the House Freedom Caucus have long demanded cuts to spending on mandatory programs like Social Security be part of any debt bill.
Some Republicans have also suggested that the debt ceiling debate isn’t that urgent because the government could prioritize payments to bondholders, the military and Social Security over other government obligations, such as the salaries of some federal workers. Many economists warn that any kind of breach would be treated by the market as akin to a default, although a similar plan was secretly considered by the Obama administration when the country almost breached the debt limit in 2011. Congress reached a deal before that theory was tested.
That earlier showdown led S&P Global Ratings to downgrade U.S. sovereign debt for the first time.
The 2011 deal that averted that default was the last time Republicans were able to extract fiscal concessions for a debt limit hike. Since then, they’ve been forced to raise the debt ceiling without strings attached at every deadline, as Democrats take a resolute position against what they describe as hostage-taking by the far right.
Mark Meadows, the North Carolina Republican who chairs the Freedom Caucus, earlier this month sought to reassure bondholders that the U.S. won’t default on its debt. He said while he’s “bullish” on raising the debt limit, he still preferred to attach some reforms to bend the trajectory of the federal deficit.
“I think we ought to attach something to it, we always have, why should we change this time?” Meadows told reporters after a tax event on Aug. 2. “Either that will get done or a clean debt ceiling will get done. We will raise the debt ceiling and there shouldn’t be any fear of that.”
Senator Rand Paul of Kentucky urged his fellow lawmakers to not heed the “alarmists that insist that limit must be extended outright.” Citing the unsustainable pace of borrowing and the cost of interest payments, he said Congress has an obligation to future generations to be more fiscally responsible.
“In reality, those of us demanding fiscal sanity are simply calling to slice up the big spenders’ credit card,” Paul wrote Thursday in an editorial on the news website Rare. “I urge legislators in the U.S. House to support the House Freedom Caucus’ push to change how government operates, which would allow us to avoid hitting the debt ceiling in the future while still meeting our obligations.”
Raising the debt ceiling allows the Treasury to make payments that have already been authorized by Congress. It doesn’t allow the government to commit to spending additional money Congress hasn’t approved.