The House Freedom Caucus has put forth a proposal for a significant conservative policy overhaul, suggesting a two-year debt ceiling increase, potentially amounting to $4 trillion. This comes as Congressional Republicans gear up for substantial policy changes through the budget reconciliation process, aiming to leverage the lower vote threshold in the Senate.

There's internal debate on the best approach: consolidate all policy goals—border security, defense, spending cuts, tax cuts, and energy—into a single bill, or divide them into two separate pieces of legislation to secure early wins. While President-elect Donald Trump has expressed a preference for a single bill, he's open to considering two. He has also tasked Republicans with addressing the debt limit, given Treasury's projected funding shortfall by mid-June.

The Freedom Caucus, advocating for two separate bills, proposes a first bill addressing border security, defense, and significant spending cuts. This bill would link a debt ceiling increase to a commitment from Congressional leadership for equivalent savings over ten years across reconciliation and appropriations bills. These savings would offset tax breaks in the second bill.

The initial bill outlines approximately $100 billion for border security and up to $200 billion for defense over four years. It also targets repealing certain Biden administration policies, including electric vehicle tax credits, increased IRS funding, and student loan relief programs, as cost-saving measures. The caucus presented this plan to Trump at Mar-a-Lago, but his response remains undisclosed.

Senate Majority Leader John Thune supports the two-bill strategy. However, opponents, including House Ways & Means Committee members, caution that delaying Trump's tax cuts to a second bill risks the expiration of provisions from his previous term, potentially leading to tax increases for many Americans. Committee Chairman Jason Smith highlighted the rarity of passing two reconciliation bills in a single term since the 1990s.

Whether the debt limit will be addressed within the reconciliation bill remains undecided. The Freedom Caucus's proposal offers a potential compromise for fiscal conservatives who traditionally oppose debt ceiling adjustments. They are also concerned that a single, omnibus bill might not yield sufficient spending cuts.

With a narrow House majority, Speaker Mike Johnson faces the challenge of securing enough votes for legislation lacking Democratic support. The situation is further complicated by two House Republicans leaving for the Trump administration, requiring special elections in April.