Speaker Kevin McCarthy and House Republicans passed their hard-fought debt ceiling proposal Wednesday evening by the exceedingly narrow margin of 217 to 215.

In the end 4 GOP lawmakers - Reps. Matt Gaetz (R-FL), Ken Buck (R-CO), Andy Biggs (R-AZ), and Tim Burchett (R-TN) - voted no on the bill but it wasn’t enough to defeat it. The vast majority of McCarthy's conference lined up behind him after days of arm twisting and last minute amendments to secure the required votes.

In a joint statement immediately after the vote, the House GOP Leadership said the vote "sends a clear message to President Biden – continuing to ignore the problem is not an option. The President must come to the table to negotiate."

Formally the bill now heads to the Senate where Majority Leader Chuck Schumer (D-NY) has promised it will be dead on arrival. But even without a path in the upper chamber observers hope that the victory - with Republicans now able to say they are unified behind a plan - will open the door to negotiations with the White House in the weeks ahead.

The Republican bill includes a promise to lift the debt limit by $1.5 trillion or until March 31, 2024 — whichever comes first — but that comes with a host of other measures that are anathema to Democrats. That makes it unclear how the two sides will come together before a point of default - which would have far-reaching consequences for world markets and, many fear, immediately tip the U.S. economy into a recession - is reached.

Nonetheless, the signs of even limited progress are likely to give many hope that Washington will be able to find a way to avoid a government default that could come as early as June.

Here’s some highlights of the GOP plan.

Caps on spending and ‘clawing back’ COVID-19 money

The centerpiece of the bill, which has been dubbed the “Limit, Save, Grow Act of 2023,” is the caps on government spending, with a proposal to return discretionary spending to FY2022 levels and then impose a 1% increase limit on government spending after that.

These measures, Republicans say, would impose fiscal discipline on Washington that has been lacking in recent years. Meanwhile, critics say the plan would disproportionately place the responsibility for lowering the deficit on social programs, while skirting major cuts to politically popular programs like the Pentagon and veteran services that McCarthy has said will largely be spared.

The plan also includes provisions to claw back unspent money from the flurry of COVID-19 relief bills passed in recent years that would be projected to return additional billions of dollars to government coffers if enacted.

In total, the package could drop the nation's deficit by $4.8 trillion over the next 10 years, according to an estimate by the Congressional Budget Office. Democrats has been quick to point out that the reduction could come at a cost, pointing to a recent Moody’s Analytics report that found the bill would cut into near-term economic growth if enacted.

Taking aim at the Biden legacy

The bill also seeks to reverse some of the central accomplishments of the Biden administration's early years in office, including large chunks of the Inflation Reduction Act — perhaps the president's most cherished accomplishment.

First, it would undo a host of what the bill calls “market distorting green energy tax credits” that are focused on amplifying the US government’s ability to respond to climate change.

One of the tax credits that McCarthy had initially proposed slashing was around ethanol, the renewable fuel made from corn and other plant materials. But those provisions proved controversial for lawmakers from Iowa and other corn producing states, and that credit was removed in a last-minute amendment early Wednesday morning.

The bill would also reverse $80 billion in new funding set to go to the Internal Revenue Service in the coming decade intended to close the tax gap and pay for better service. Republicans say they fear the IRS funding would lead to an “army" of 87,000 IRS agents while Democrats and outside analysts counter that the funds are projected to deliver a hefty return on investment and return over $200 billion to the Treasury in increased tax revenue over the coming decade.

The GOP proposal would also kill President Biden’s recent push via executive action to forgive student loan debt. That effort though is already tied up in legal challenges, with the Supreme Court expected to decide its fate in the coming months.

Another measure included in the package is called the “REINS act,” which targets what Republicans describe as Biden’s executive overreach.

A focus on energy and controversial new work requirements

There is also a large swath of the bill devoted to energy.

In March, the House passed HR1 — what Republicans dubbed their top priority — around a suite of energy reforms. The law sought to open up new areas of America for fossil fuel production and for mining as well as speeding up the permitting process for energy projects.

Finally, the bill seeks to impose controversial new work requirements on low-income Americans who participate in federal programs like food stamps and Medicaid. These benefits would continue, but only in exchange for a requirement that these recipients work longer hours.

McCarthy has called them common sense measures that would help “rebuild the workforce” but it was another provision that found critics within his conference.

A bloc of conservative Republicans said the initial provisions requiring adults to work or look for work beginning in 2025 wasn’t strong enough so a second last minute revision would bring the requirements into effect earlier, in 2024.

The White House has already promised a veto of the measure with President Biden saying Wednesday “I'm happy to meet with McCarthy, but not on whether or not the debt limit gets extended. That's not negotiable.”

Nevertheless, McCarthy’s victory this week will increase the political pressure on Biden to sit down for negotiations and - both Washington and Wall Street hope - increase the chances that perhaps Washington can find it’s way back from the brink of default.

Immediately after the vote, a combative McCarthy spoke to reporters and at one point turned to address Biden directly. "It's up to you now because Republicans have raised the debt limit, you have not," he said.

Ben Werschkul is Washington correspondent for Yahoo Finance.

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