Senate surprises by overturning Biden’s student loan program — you can thank the debt ceiling debate

Everybody hates the debt ceiling bill, but maybe, just maybe, there will be secondary impacts that could prove beneficial to the country. It may be cutting spending will become popular.

The Senate, in a surprise bipartisan move, voted to overturn President Biden’s signature student loan forgiveness program, set to cost $400 billion. It is almost certain that Biden will veto the Senate measure, but having three Democrats side with the GOP minority to deliver what many see as a slap in the face to the president is somewhat stunning.

Could it be that the wrangling over raising the debt ceiling has focused voters on the perils of Democrat-led over-the-top spending and our mounting national debt?  

That would be a terrific fallout from the agreement struck between House Speaker Kevin McCarthy (R-Calif.) and Biden to raise the amount the country can borrow — and is just one of the benefits that the bill may provide.

Perhaps it will quell some of the carping about McCarthy’s deal, which has come from all quarters.

Conservatives in the House are angry and refused to vote for a bill that, in their estimation, did not go far enough. Rep. Andy Biggs (R-Ariz.), a member of the Freedom Caucus, tweeted, “In simple terms, the McCarthy-Biden monstrosity accelerates America off the fiscal cliff.”  

Meanwhile, progressives in the House like Rep. Jamaal Bowman (N.Y.) cannot understand why the president negotiated with “economic terrorists” in the Republican Party.

Overall, it’s a good sign that people on both ends of the political spectrum despise the deal — that suggests the negotiations exacted compromises on both sides. More broadly, I would argue that Republicans — and McCarthy — emerged victorious in this skirmish, in three important ways.

First, getting Biden to negotiate was itself a victory. The Freedom Caucus seems to forget that for three months he refused to return McCarthy’s phone calls, claiming that he would accept only a “clean” debt ceiling bill with no strings attached. As recently as the beginning of May, Biden would not budge, even as he invited congressional leaders to the White House to be lectured on the sanctity of U.S. obligations — and even as Treasury Secretary Janet Yellen issued a stark warning about the imminent risk of default.

As Politico reported at the time, Biden agreed to talk to McCarthy only after the House GOP passed the Limit, Save, Grow Act, outlining their demands, at the end of April. Up until that moment, the “White House [had] leaned on polling suggesting Republicans will take the lion’s share of the blame” if Congress failed to authorize more debt.  

They were wrong. Suddenly, polls showed voters holding Biden accountable for the impasse as well as the GOP. A survey from CNN reported that 59 percent of respondents thought Biden had not “acted responsibly” in the debt ceiling battle, compared to 64 percent who said the same about the GOP. During the 2011 debt ceiling battle, then-President Obama got much higher marks, while Republicans were slammed in polls.  

More consequential, the CNN poll showed that some 60 percent of the nation wanted the debt ceiling raised only in conjunction with spending cuts. The public understands that U.S. spending spiraled out of control during the COVID era, with trillions spent to keep the economy afloat and trillions more to appease the Democrat-friendly groups that helped elect Biden. They also connect that giant bubble of spending with the punishing inflation that has clobbered consumers and, now, the economy.  

McCarthy’s oft-repeated complaints that the president was not willing to meet or even talk to him took a toll. A majority of Americans were already convinced that Biden was unable to do the job; now they saw him unwilling to do his job.

The White House underestimated the ability of Republicans in the House to come together on a bill. The prolonged battle over electing McCarthy as Speaker convinced them the GOP caucus was unmanageable and not ready for prime time. They were wrong. They also thought that Biden describing GOP demands as “whacko” or the nefarious work of “MAGA extremists” would win the political battle. They were wrong about that, too. Biden’s basement-level approval ratings only got worse. Finally, he capitulated.

The second positive about the bill is that the door has been opened to reforming our welfare programs. That wasn’t an easy win. Biden bitterly denounced efforts to “put a million older adults at risk of losing their food assistance and going hungry.” To be clear, the deal extends the work requirements to people up to 54 years of age — not exactly the geriatric set — and reduces the ability of states to enact laws more lenient than allowed at the federal level.

Progressives are howling about the tragedy about to befall childless able-bodied people who lose some benefits; it is ridiculous. Missouri’s Rep. Cori Bush (D) explains her “no” vote by blaming “chief hostage-taker McCarthy and his MAGA insurrectionist conference” for a bill she calls “harmful.”

Allowing people to opt out of working, in the midst of an extremely strong jobs market, is condemning many to a lifetime of dependency. In 1996, the GOP-led House agreed with then-President Clinton to significant welfare reforms, which had the salubrious effect 10 years later of reducing welfare caseloads by 60 percent. This is politically popular — a majority of Americans think if people can work, they should work.

Finally, wrangling over the debt ceiling issue has alerted Americans to the alarming trajectory of our deficits and debt. Democrats buying votes with taxpayer money by forgiving student loans or in other ways has suddenly become unacceptable — hence the recent Senate vote.

Republicans have lost their credibility on fiscal matters; this deal will allow them to start earning it back. In a recent op-ed, former Speaker Newt Gingrich (R-Ga.) urged House Republicans to support the deal, arguing that this is just the beginning. His success in curbing spending took many steps and patient effort. That’s what we need now.

That, and a successful 2024 election.

Liz Peek is a former partner of major bracket Wall Street firm Wertheim & Company.