This week marks the biggest test yet for the speakership of House Speaker Kevin McCarthy, R-Calif. McCarthy needs to show that he can keep his members together to approve the Republican version of a debt ceiling plan. 

This is not a zero-sum game for the Speaker.

Passage of the bill would mark a significant win for the California Republican. McCarthy would show he could keep his narrow majority and pass a big piece of legislation. But the political chits McCarthy banks with a prospective win are not equivalent to the points he could lose if Republicans struggle to pass the bill.

A stumble would represent a major loss for McCarthy. Moreover, failure by Republicans to move their own plan could rattle the markets and send an ominous signal about what to expect later this summer as the sides fight over the debt ceiling.

President Biden remains on the sidelines for now. Even some Democrats question the wisdom of that – especially considering how close the nation is creeping to a still unknown debt ceiling deadline. It is generally believed the date will hit sooner rather than later – meaning early to mid-June. That’s because the early read is that receipts for this tax season are down as well as revenue from capital gains. There is also increasing jitteriness about "credit default swaps." That’s where the cost of insuring against potential losses in U.S. Treasuries is beginning to be a factor.

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Fox is told that Mr. Biden will stay away from the bargaining table until House Republicans show this week whether they can approve their own debt ceiling bill.

It’s all about that math.

McCarthy can lose no more than five votes on his side of the aisle to pass the bill without help from Democrats. If not, McCarthy must develop another plan – or punt.

"We will keep trying until we figure something out," said one senior House Republican leadership source when asked about ‘Plan B.’

Interestingly, most conservatives appear more willing to support McCarthy’s package right now. Some moderates are skeptical about people falling through the cracks.

There’s worry about cuts to emergency food assistance and Medicaid.

The current proposal requires able-bodied adults with no dependents to work 20 hours a week to qualify for benefits. Some conservatives want to bolster that to 30 hours. The definition of work requirements are fairly liberal. "Working" could actually mean someone being on the job. But it also means seeking work, receiving formal training for work or even volunteering.

Some midwestern members fret about reductions in ethanol tax credits and assistance which is part of the Democrats’ Inflation Reduction Act (IRA) approved last summer. 

"The ethanol piece has been a Bob Dole problem since 1988," groused one Republican close to the talks. "I’m not really sure that setting your food on fire is a good energy policy. But here we are."

All House Republicans opposed the IRA. But many Republicans like various "ala carte" items in the IRA. Republicans talk doom about the IRA constantly. However, they are unable to muster the votes to repeal the IRA. So, plucking off various parts of the IRA in McCarthy’s bill is the next best thing. The ethanol issue could cause heartburn for some midwestern Republicans.

But so far, passage appears within reach.

"The Speaker has done a good job of finding the sweet spot here," said one Republican House member who asked not to be identified.

"This package is so conservative, you can’t vote against it," observed another Republican, noting that various right-wing interest groups will ‘score’ or issue or mark this as a ‘key vote’ documenting which Members supported the plan and who didn’t. 

Keep in mind that this measure will not be the final bill. The Senate won’t consider this particular package. One knowledgeable source said that McCarthy had to cobble together a measure just "to get the monkey off our back" that Republicans weren’t engaged.

However, passing the bill presents the Senate a debt ceiling "legislative vehicle" with which to work over the next few weeks. The Senate could potentially take the bill and strip out the House language. Senators could then drop in their own provisions which can overcome a filibuster and send it back to the House when the nation approaches the deadline. In essence, having a legislative vehicle available on the debt ceiling helps both sides in the long run – even if they disagree with the policy. It just makes things easier parliamentarily.

But here’s the real problem.

The ultimate bill which raises the debt ceiling must garner 60 yeas to break a filibuster in the Senate. We’re weeks away from that. And no one knows what that bill looks like. Members from the conservative House Freedom Caucus will likely balk because a final piece of legislation on the debt ceiling won’t mirror what they agreed to in McCarthy’s bill.

That’s where things could get dicey for McCarthy.

"Either he takes the Senate bill and faces a (no confidence vote) or we default," said one House Republican. "That’s quite a choice."

That’s why there are increasing worries about a market shock or one of the ratings agencies knocking down the credit worthiness of the U.S.

"Every day that goes by that we do not get this resolved is not a good day," said Fox Business Contributor Gary Kaltbaum. "And you never know what's going to be the tipping point. But there eventually will be a tipping point."

A senior GOP source familiar with the timing of the bill says the Republican brass plans to put the McCarthy measure on the floor Wednesday. House Republican leaders aim for Wednesday so they have Thursday and Friday as backstops if the votes aren’t there and the legislation requires more massaging.

"We’ll pass this by the skin of our teeth," said one veteran Republican. "We never do it the easy way. We’re Republicans."

The bigger issue will be when the House is forced to vote on the "real" bill in a few weeks. Fox is told that Freedom Caucus members succeeded in securing many of their demands. It’s unclear if they could swallow changes down the road. It’s possible that anything short of the McCarthy bill gives those conservative members enough of a reason to vote no

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Also on the table is a possible move by House Democrats and some Republicans to go over the head of the Speaker and deposit a separate debt ceiling bill on the floor. This is called a "discharge petition." It’s a rarely-successful gambit to force the House to go against the wishes of the leadership and vote on a bill engineered by the rank and file. It takes 218 members of the House to successfully advance a discharge petition. That means if all Democrats stick together to avoid an economic calamity, they’d only need to nab five Republicans to support the maneuver. However, only two discharge petitions have been successful in the House in more than two decades.

That’s why everyone is starting to monitor Wall Street.

"Markets will rule. Politicians will follow the market," observed Kaltbalm.

In other words, a market crash could compel everyone in Washington to find religion on the debt ceiling. 

Fast.

Kaltbaum says he could envision a scenario where the market drops three percent one day. Then two percent the next day. Then four percent the day after that "until they finally get their act together" in Washington.

So here’s what to watch for in the coming days: McCarthy likely notches a win by the end of the week. But that "win" could spell trouble for McCarthy himself when it comes to the "actual" debt ceiling bill this summer. 

And that’s where the true standoff over the debt ceiling may unfold.