A senior House Republican who is both an ally to Speaker Kevin McCarthy and a trusted negotiator in the fractured party is emerging as a potential savior in Washington from debt-ceiling economic disaster.
(Bloomberg) — A senior House Republican who is both an ally to Speaker Kevin McCarthy and a trusted negotiator in the fractured party is emerging as a potential savior in Washington from debt-ceiling economic disaster.
Patrick McHenry stood out as one of McCarthy’s most influential advocates in the intra-party battle to elect the California Republican as speaker earlier this month. He also proved key in persuading a handful of conservative holdouts to clear the way for McCarthy to win after 15 rounds of voting.
That experience could be pivotal in crafting a legislative solution to raise the federal debt limit. Treasury Secretary Janet Yellen has signaled the government could run out of cash after early June, and while the the clock ticks toward a crippling payments default later this year, an emboldened GOP right flank is eager to use the debt ceiling as leverage to extract federal spending cuts.
“He’s absolutely indispensable,” said Representative Tom Cole, who chairs the House Rules Committee. “He is a guy that everybody in every corner of the conference trusts, and somebody that is exceptionally skilled at brokering a deal.”
McHenry chairs the House Financial Services Committee, giving him a deep understanding of financial markets, which face major turmoil in the event of any default.
Even McCarthy skeptics laud McHenry’s efforts: “Chairman McHenry’s voice in our conference is a major one and I’m excited to see where he’s going to take it,” said Representative Byron Donalds, a Florida Republican who was one of the holdouts on McCarthy becoming speaker.
For now, no negotiations on the debt limit appear in the offing. The speaker on Tuesday called on President Joe Biden and congressional Democrats to enage in talks to boost the ceiling, tying those to demands to rein in federal spending. And the White House reiterated its position that the limit should be raised without conditions.
But with Democrats controlling the Senate, and the House in Republicans’ hands, talks between the two camps will be needed if the government is to be funded and debt limit hiked.
Last month, McHenry said he preferred keeping spending issues apart from the debt ceiling, which would allow the US government to make payments on debt that has already been incurred from previous spending deals.
He said in the December interview that he intended to discuss federal spending on the one hand, “and then understand the consequences if we connect that with the question of the debt ceiling.” He also said, “I’m going to advocate for a separation of those two issues so that we can have a proper debate.”
Trouble is, ultra-conservative Republicans as part of the deal to back McCarthy for speaker, won agreement to tie the debt ceiling increase to a budget agreement or other fiscal reforms.
A spokesperson for McHenry didn’t respond to a request for comment on where his position now is on linking the debt-limit increase to specific fiscal-policy conditions.
McHenry, 47, opted against a formal role in McCarthy’s leadership team, opting instead to go for chairing the House finance panel, where the focus is on issues including banking and cryptocurrency policy.
Treasuries Market
Even so, the relationships he’s built and negotiating skills will put him at the center of the action as Biden, House Republicans and Senate majority leader Chuck Schumer and GOP leader Mitch McConnell begin to figure a way to raise the debt ceiling.
McHenry comes at it with an appreciation for potential disruption to the US Treasury market, where kinks typically emerge in pricing even before any potential payments default.
Treasuries are “the lifeblood” of US capital markets, and vital to the exchange of goods and services across the globe, McHenry said.
Others in his caucus see the looming debt-limit deadline as leverage for ensuring Congress sets US fiscal policy on a more sustainable trajectory. Federal debt ballooned during the Covid crisis, and while deficits have shrunk since then, they remain notably larger than before the Trump administration’s tax cuts.
McCarthy says he wants to begin talks with Democrats soon to avoid spooking markets by taking negotiations up to the brink of a default.
“Let’s sit down and find a place where we can protect Medicare and Social Security for the future generations, let’s put our house in order in how we are going to spend,” McCarthy said. “And let’s make the investments we need to make America stronger.”
White House Press Secretary Karine Jean-Pierre said Tuesday, “Congressional Republicans are threatening to hold the nation’s full faith and credit — a mandate of the Constitution — hostage to their demands to cut Social Security to cut Medicare and to cut Medicaid — brinksmanship that threatens the global economy.”
McHenry first came to Congress in 2005 as a 29-year-old who was at the time the youngest lawmaker. He came in with an aggressive style, looking to change how Washington operated. He’s now at the inner circle of power and will be facing a new generation of young upstarts who want to claw power from the Republican establishment.
“I think he’s capable of doing anything he puts his mind to,” Representative John Carter, a Texas Republican, said.
–With assistance from Madison Mills.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.
