Scoop: GOP leaders prepare for 2023 debt limit "nightmare"

• "Speaker [John] Boehner and a hypothetical Speaker McCarthy are different animals," a former House Republican who served during the 2011 crisis told Axios. "Boehner was convinced of the necessity [of raising the debt limit] and was willing to twist arms. I just don't know about a Speaker McCarthy."
• Current estimates put the deadline for dealing with the fiscal cliff in fall 2023.

Driving the news: The topic has already come up in several private conversations with Senate Minority Leader Mitch McConnell (R-Ky.) — who will play a key facilitating role in debt limit negotiations next year, multiple people familiar with the closed-door discussions tell Axios.

• Remember, McConnell was the one who cut a deal with then-Vice President Biden in 2011 to avoid a default.
• "I expect this will be one of the first conversations McConnell has with McCarthy," one Senate GOP aide told Axios.
• Asked whether this will indeed be among the first orders of business he’d raise with a Speaker McCarthy, McConnell smirked.

What to watch: Business leaders and Republican strategists say a key indicator of McCarthy's approach will be who he and the GOP steering committee back to chair the powerful House Ways and Means Committee, given the debt limit talks fall under the panel's jurisdiction.

• As of now, the top two contenders to lead the committee are Rep. Jason Smith (R-Mo.), ranking Republican of the House Budget Committee, and Rep. Vern Buchanan (R-Fla.), who is seen as the Republican next in line.
• Smith is more of a political firebrand and a close friend of McCarthy, while Buchanan is seen as a more mainstream Republican. The business community is more wary of how Smith would handle a debt limit fight, multiple sources tell Axios.

Smith told Axios in a phone interview he thinks Republicans should leverage debt limit negotiations to "reverse" the administration's "radical" policies — including by sending a bill gutting the Democratic agenda to President Biden's desk and daring him to reject it.

• "If Republicans are trying to cut spending, surely he wouldn't try to default. If we were trying to bring down inflation ... trying to secure our border, surely he wouldn't default," Smith said.
• Rohit Kumar, McConnell's former deputy chief of staff during the 2011 debt limit fight and now PwC’s national tax services co-leader, countered: "Thinking that you can credibly threaten the full faith and credit of the federal government in exchange for some collateral demand is just wish casting."

Between the lines: The debt limit turning into a "political football" has become a "pattern in divided government," particularly with a Democratic president, Neil Bradley, chief policy officer for the U.S. Chamber of Commerce, told Axios.

• Both Bradley and Kumar say that as the midterms approach, the threat of a standoff is increasingly coming up in conversations on and off the Hill.
• Raising the debt limit is "this weird, toxic mix of being really politically unpopular, but really economically necessary," Kumar said, calling a 2011-style battle a "nightmare scenario."
• "That's what always causes me, constantly, so much angst about this issue. The absolute necessity of it juxtaposed with the zero political upside for doing it."

Zoom out: Business leaders, lobbyists, congressional aides and GOP strategists Axios spoke with worry the current political climate is worse now than it was in 2011, when former President Obama was in power.

• Both Bradley and Kumar, in separate interviews, raised the issue of how Republicans in both chambers have repeatedly voted against raising the debt limit and will have to flip their votes in 2023.
• "If Republicans do win the majority, how many seats they have will be really important to this," said former Obama deputy press secretary Eric Schultz, who criticized Republicans for electing "more irresponsible members of their caucus."
• Many of the Senate Republicans whom McConnell had convinced to vote in favor of his debt limit escape hatch in 2021 are retiring.

The bottom line: "There's always this argument and debate about whether the debt limit is leverage. The reality is it's a hostage you can't shoot," Bradley told Axios.

• "The sequester is like touching a hot stove and pulling your hand away. … A government shutdown is like putting your hand on the hot stove and holding it there until the government reopens. Defaulting on the debt is a thermo-nuclear act that destroys all of Western civilization."