Stifel Chief Washington Policy Strategist Brian Gardner joins Yahoo Finance Live to discuss the debt ceiling debate in Washington, D.C.

Video Transcript

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DAVE BRIGGS: Congress is back in session after their spring vacation. And they're already fighting over the debt ceiling as fears of a June deadline mount. Joining us now is Brian Gardner, Stifel Chief Washington Policy Strategist. Good to see you, sir. So Kevin McCarthy was at the New York Stock Exchange yesterday. Some very critical remarks of President Biden, but also saying their plan is to pass legislation in the House that would cut spending, quote, "make us less dependent on China, curb inflation without touching Social Security and Medicare." The president reacted today. I want you to listen.

JOE BIDEN: Yesterday, the Speaker of the House of Representatives Kevin McCarthy went to Wall Street. He did not tell the wealthy or the powerful on Wall Street that it was finally time for them to start paying their fair share of taxes. That didn't come up--

[SCATTERED LAUGHTER]

--other than say they're going to renew the $2 trillion tax cut. Anyway, I won't--

[LAUGHTER]

Instead, he proposed huge cuts to important programs that millions of Americans count on.

DAVE BRIGGS: Brian, before we get to where we're headed, your reaction to the back and forth from McCarthy and now President Biden.

BRIAN GARDNER: I think it's kind of what you would expect, two sides that see the world very differently and are sparring in the public space. They're never going to come to a philosophical agreement on taxing and spending. So with the debt ceiling looming, it just-- it puts their differences front and center.

SEANA SMITH: Brian, when you take into account what we heard from McCarthy saying that his plan is going to include spending cuts, no details on where that would exactly come from, do you have any idea maybe what the GOP is potentially thinking about at this point?

BRIAN GARDNER: Yeah, I mean, there are a couple of items such as clawing back unspent COVID funds, canceling the student debt cancelation proposal by the Biden administration, those are the major cuts. I think a lot of the other items that the GOP is looking at are probably caps on spending, so reducing the rate of growth on spending.

There would be a lot of disagreement within Republican circles on actual cuts because not everybody sees the same way as the Speaker does or as the conservative wing of the Republican Party does. So I think we're looking at a couple of areas of real cuts, what the average person thinks of as cuts. And then a lot of it is going to rely on reducing the rate of growth in spending programs.

DAVE BRIGGS: So McCarthy is talking about '22 levels of spending. Those on the far right that you referenced, the House Freedom Caucus, want 2019 spending levels. What's the likelihood you think he gets a deal out of the House?

BRIAN GARDNER: So I think that illustrates where Republicans are and that there's a lack of agreement among Republicans about what they should be doing. Even freezing in at '22 is difficult, given the rate of inflation. So I think they're going to struggle to get something out of the House. I do think McCarthy can rely on Republicans' sense that they need to have something out there, that they have to be team players, that they're going to put some of their personal preferences and even take a tough vote politically for them, depending on their district, to get an opening bid out there.

But I think it's going to take them a couple of days to kind of work through this. That 2019 number, I don't see any way of that passing. I'd be very, very surprised that passing. The 2022 number is probably not enough for some conservatives. But I think McCarthy can lean on them to keep the process moving and get this bid out, an opening bid out, from the House so they can jumpstart the process.

SEANA SMITH: Yeah, Brian, what do you think the realistic timeline looks like on this? Because from what you're saying, it still sounds like there needs to be significant progress before we get any sort of deal.

BRIAN GARDNER: Yeah, so it all depends on the cash flow of Treasury. And we don't-- we really don't know that definitively yet. There have been some estimates from CBO, Congressional Budget Office, and others that it could be summer, late summer. There was some suggestion earlier today that tax receipts are lagging. And so this X date when Treasury exhausts their extraordinary measures, that could come as early as mid to early June.

I think in the next couple of days or weeks, as we get more clarity on the cash flow issue and tax receipts, that X date will become more front and center. And when it does, I think markets will start to really pay attention to that. Because today, it's been the situation in the banking industry, the Fed, now earnings season. And markets and investors have been discounting these headlines. That's going to change. And when it changes, it's going to change suddenly.

DAVE BRIGGS: Bottom line, when all the political theater is over, would you say we'll get a clean raise?

BRIAN GARDNER: I typically say-- a clean raise? No, I don't think there will be a clean raise for two reasons. One, I think Democrats are going to have to go along with some kind of cuts. Even moderate Republicans want-- and when I say cut, you know, like I said before, reduction in the rate of growth. Even moderate Republicans want some concessions. And I think there are a number of Democrats that will go along with concessions.

So I don't think it's going to be a straightforward hike in the debt ceiling. But-- and the process is going to continue to be messy. Typically, when you get close to the date, I'm usually confident that they'll get a deal at the last moment. I got to say, this time around, I'm less confident in that prediction than normal. These are different times, especially given a very narrow majority that McCarthy has in the House. This is going to be a much more difficult lift than we saw in 2011.

DAVE BRIGGS: Speaking of how different these times are, you've got a potential front runner for the '24 nomination. That's Ron DeSantis, the Florida governor, the top competitor for Donald Trump. Instead of talking about potential spending cuts in Washington, he is continuing to focus on Mickey Mouse, on Disney, on, quote, "building a prison" next to Disney in Florida, and even taking on Bud Light for their controversy, their campaign with social media trans TikToker Dylan Mulvaney. Is this an effective political strategy for a Republican candidate?

BRIAN GARDNER: Very much so, especially in the primary. I think the Republican base has been changing over the years. There's a realignment going on in both parties. The Republican base has become more populist. And so the lines coming out of DeSantis, which are similar to what you would have heard from Donald Trump over the past few years, they're not traditional Republican stances.

But in a Republican primary where the base is heavily populist and you're taking on what voters-- these voters will see as large concentrations of power, I think it's very effective. Then the question is, does it hurt him in the general election? I sense not that much. I think the vote-- I think in the general election, votes will be shifted on policy issues and the economy, not parochial issues down in Florida. So I think it helps them in the primary. I'm not convinced that it really hurts him all that much in the general election.

DAVE BRIGGS: Fascinating. All right, interesting times, indeed. Brian Gardner, good to see you, sir. Thank you.

BRIAN GARDNER: Thank you.