Will the Financial Responsibility Act live up to its name? Deal gets mixed reviews from unhappy holdouts

Will the Financial Responsibility Act live up to its name? Deal gets mixed reviews from unhappy holdouts

Will the Financial Responsibility Act live up to its name? Deal gets mixed reviews from unhappy holdouts

With a deadline looming for a debt ceiling deal, and Republicans under immense pressure to compromise, opinions vary greatly on whether the Financial Responsibility Act has lived up to its name.

Over the Memorial Day weekend, House Speaker Kevin McCarthy reached the agreement with President Joe Biden. It must still be passed by both chambers of Congress before it becomes official, and now some House Freedom Caucus Republicans are openly opposing the agreement. 

“It’s not a good deal," Rep. Chip Roy (R-TX) said in a tweet. "Some $4 trillion in debt for - at best - a two-year spending freeze and no serious substantive policy reforms." 

At a press conference earlier this week, deal critic Rep. Byron Donalds (R-FL) said Democrats are showing "crocodile tears" in front of TV cameras but they intend to support the deal.

Roy, Rep. Chip (R-Texas) Roy

"You're know why they're going to do that?" Donalds said. "Because none of their policy is changed. They get to keep all of their spending." 

CNN called it a win for McCarthy when the House passed the debt ceiling bill in April. Back then, four Republicans – the maximum number McCarthy could lose and still pass the bill – voted against the measure and it appears more are openly opposing it this week. 

Conservative broadcaster Chris Salcedo doesn’t call it a win. What began as a modest proposal, he says, lost its modesty and ended with a plan he says is unacceptable.

“No matter what anybody tells you, this wasn’t cuts,” Salcedo, a Newsmax host, told American Family Radio in a Tuesday interview. 

A Trafalgar Group survey conducted May 5-12 found that 60% of 1,000 likely general election voters opposed raising the debt ceiling without spending cuts.

Among Republican voters, only 9.8 percent were willing to raise the debt ceiling without spending cuts.

“The new deal is this, folks, not only do we not save any money, reduce any rate of spending, we freeze our level of spending next year at Joe Biden's already unacceptably high level, and then the year after that there's a 1% increase," Salcedo explained. "So we not only didn't get any reductions in the rate of spending, we actually either stayed flat or increased the rate of spending, which this government spends too much money as it is."

In another AFR interview, on the "Washington Watch" program, Rep. Michael Cloud (R-TX) said debate among Republicans is "very fluid" because lawmakers are studying the figures and considering amendments. 

Cloud, a member of the House Appropriations Committee, is among the unhappy GOP lawmakers. Some of them met with Speaker McCarthy on Tuesday because they believe the bill gives too much ground to Democrats.

“It’s unfortunate that we are where we are. I liked where we were a week ago,” Cloud said. “We were in a very strong negotiating standpoint. Seventy-five percent of the American people were with us. We expected a little stronger deal out of this.”

No more $600 checks in your mailbox

The agreement recovered $20 billion in unspent COVID relief money and prohibits the IRS from hiring additional agents past those employed on Aug. 16, 2022 – the date President Joe Biden signed his administration’s Inflation Reduction Act.

Salcedo challenges the idea that the Fiscal Responsibility Act, in its current form, will thwart IRS harassment plans.

“As to the IRS agents $20 billion was clawed back, but the 87,000 IRS agents, with the $60 billion that are left, will still be hired to target middle America,” he said.

There have now been calls on social media to go after Speaker McCarthy with a “vacate the chair” vote, including from of conservative commentator Todd Starnes.

Restoring the ability of a single member of the House to call for a vote of no-confidence was one of the concessions made by McCarthy to win his hotly contested bid to become Speaker in January.

“I can tell you the conservative movement isn’t happy with the capitulation because that's all Republicans know how to do is capitulate,” Salcedo complained. 

Not all conservatives agree with Salcedo, however. Financial news journalist and talk show host Trish Regan told AFR host Jenna Ellis that McCarthy, up against the clock, had few options. Any work to bring down "insane levels" of government spending is an issue for later, she said. 

“There are a lot of good things in there, but most importantly, default is not an option," Regan insisted. "And anyone who can get out there and grandstand and say, ‘Oh, you know, well we didn't get this. We didn't get that.’ Let's just keep in mind it's all about compromise."

Two competing views of 'Banana Republic' 

Regan began her career at Goldman Sachs, the famous world-wide financial institution, working in “emerging markets” like Venezuela, Argentina, Mexico, Brazil and others. She sees worrisome parallels to todays. 

“There was a consistency that you always saw there. I mean, how many times did we have to go and restructure Argentina because Argentina didn't pay its bills?” Regan said. “We have a lot of reasons for sounding and being like a Banana Republic right now. The last thing we can possibly afford is to make financial mistakes that will literally ruin us forever.”

Regan says daily advantages and comforts that many Americans take for granted are fully dependent on the country’s ability to pay its bills.

“All of the things that we enjoy, our standard of living, all come from the fact that we've got liquid outstanding capital markets which are based on the credit worthiness of the United States of America. We are like literally the gold standard. We cannot risk that,” Regan said.

Meanwhile, Salcedo believes the current spending levels – where we will remain if the McCarthy-Biden agreement passes -- will drop America to Banana Republic levels. That’s why he says not enacting cuts was a dangerous mistake.

“I don't have to point out that it's economic theory because it's happened in places like Spain, in places like Greece," he commented. "This level of spending didn't need to be agreed to. We didn't turn the tide back down to a more, how shall I say, a pro-American mode of spending where the government actually spends the money, we, the people give it." 

Without requiring cuts as part of the agreement, Americans should not expect lower costs for gas and groceries as inflation continues unchecked.

Salcedo says damage from the agreement will be long-lasting because, for example, there is no reduction is spending which drives inflation. 

"Right now, with the Republicans’ blessings, we are on track for $52 trillion in debt by the time we reach the next decade," he warned. "So, in a decade's time, the Republicans have put their stamp of approval, if this goes through, on irresponsible feckless spending and, yes, an existential threat to the existence of the United States.”