Negotiators from the White House labored Thursday over the U.S. debt limit with House Speaker Kevin McCarthy’s emissaries at the Capitol, grinding through head-to-head talks trying to strike a budget deal to avert a looming economic crisis.
Upbeat, McCarthy said it was important to have an “agreement in principle” by the weekend if they hope to get to a House vote next week. That would leave enough time for the Senate to act, too, ahead of a deadline as soon as June 1.
“Everyone’s working hard.” McCarthy told CNN and others at the Capitol.
The White House team also appeared upbeat as they entered the building, but declined comments and departed two hours later. They were expected to be back at it on Friday and into the weekend.
Biden was briefed on the negotiations on Friday morning in Japan, where he is attending the Group of Seven summit, the White House said, adding that negotiators told the president that “steady progress is being made.”
“This does not have to be a crisis,” Vice President Kamala Harris said during a virtual meeting of community leaders on Thursday.
“A default could trigger a recession, stop military paychecks and raise interest rates for years to come,” Harris said. “America must pay our bills, just like you and your family and other hardworking Americans do every single day.”
Deal Needed to Pay Debts Due Now
All sides are racing devise a budget-cutting deal that Democrats and Republicans can live with, the price to be paid as McCarthy’s newly empowered House Republicans try to extract steep spending reductions. Those cuts would be in exchange for GOP votes to raise the debt limit, which is now $31 trillion, and keep paying the nation’s already-due bills.
Biden and McCarthy have mostly cooled what had been heated rhetoric over the Republican demands. A White House official said Bruce Reed, the deputy chief of staff, is traveling with the president in Japan to keep in contact and keep Biden informed at the G7. Biden cut short the rest of his trip to Papua New Guinea and Australia so he could return early to Washington.
“I’m confident that we’ll get the agreement on the budget and America will not default,” Biden said Wednesday before he departed.
Behind closed doors are the key personnel who could cut a sweeping budget deal. Steve Ricchetti, Biden’s longtime aide who is now counselor to the president, along with Office of Management and Budget Director Shalanda Young and legislative affairs director Louisa Terrell are representing the administration. McCarthy himself said he planned to stop by some of the talks, and has tasked Rep. Garret Graves, R-La., who is a close ally, for the Republicans. Another Republican, Rep. Patrick McHenry of North Carolina, the chairman of the Financial Services team, newly joined Thursday.
“We’ve got a lot more work to do,” McHenry said after Thursday’s session.
At stake is federal spending over the next several years as Republicans use the debt ceiling vote, a routine exercise that’s typically done in a bipartisan way to raise the borrowing capacity and pay the nation’s bills, as a way to push their budgeting priorities.
The contours of a deal that includes some cuts, rescinding unused COVID-19 money and a framework to discuss new permitting rules to more quickly develop energy projects are taking shape, but the details remain daunting.
McCarthy’s Republicans want to roll back spending to fiscal 2022 levels and cap annual increases at just 1% over the next decade — sparing Defense and Veterans accounts — in what Democrats say would be devastating cuts inflicting hardship on many Americans.
The Republicans know their proposal would only make a dent in the nation’s growing debt load, but they argue that spending cuts need to start somewhere to get a handle on what they say are unsustainable annual deficits.
Democrats are resisting, and negotiators are eyeing budget caps for the next several years as an alternative to limits that would extend for a decade.
Notably absent from the negotiating room are they congressional appropriators — the House and Senate chairwomen who run the Appropriations Committees, which actually put the spending plans in place. It’s clear that Democratic appropriators and perhaps even some Republicans would almost certainly balk at the levels of cuts being considered.
Showing the pressure McCarthy faces from his right flank, the conservative House Freedom Caucus said in statement “there should be no further discussion” until the Senate approves the House-passed Republican bill.
With the Senate in Democratic control, that’s highly unlikely. And Biden already said he would veto it.
One area all sides seem more likely to agree on would be the Republican proposal to claw back some $30 billion in unspent COVID-19 funds now that the federal government has declared an official end to the pandemic emergency.
Republicans also want to attach their policy priorities to any deal, and those are a harder sell.
House Democratic Leader Hakeem Jeffries said Thursday the Republican proposal for tougher work requirements on recipients of government aide is a “nonstarter. Period. Full stop.”
Jeffries noted that many House Republicans themselves, including McCarthy, voted against enhanced work requirements for food stamp recipients in the Supplemental Nutrition Assistance Program just a few years ago.
“This is hostage taking,” Jeffries said. “They are trying to extract ransom notes in order to avoid a default.”
But Biden opened the door to some work extra requirements for non-health care programs like Medicaid, and the discussions over food stamps and cash assistance programs are ongoing.
On changes for permitting, Republicans are eager to undo the National Environmental Policy Act, called NEPA, to allow energy projects to be approved and developed more quickly, without years of delays from challenges and lawsuits.
Biden’s own climate adviser John Podesta met this week with some House Democrats as the administration, too, seeks changes that would more quickly unleash clean energy projects and upgrade transmission lines to fight climate change.
But the two sides remain far apart over the size and scope of the permitting reforms, with several prominent lawmakers, including Sen. Joe Manchin, D-W.Va., having their own proposals. It’s unclear if the negotiators will be able to reach a final agreement on the permitting provisions or simply arrive at a framework that could lead to future discussions between the White House and Congress.
Time is short ahead of the deadline as soon as June 1 to raise the debt limit and avoid what economists warn would be a devastating default, the first of its kind, tearing across the economy.
McCarthy has vowed to abide by House rules that require 72 hours notice before voting on any bill, meaning an agreement is needed this weekend if the House wants to vote before it leaves at the end of next week for the Memorial Day recess.
Senate Majority Leader Chuck Schumer told senators Thursday, as they prepared to depart for their own weeklong recess, said they need to be ready to return with 24 hours notice to vote, if needed. More likely, the Senate would be expected to start voting when it returns after Memorial Day.
Democrats in the House and Senate are engaging in other strategies, including trying to force a vote to raise the debt limit without the spending cuts Republicans demand. Progressives are also pushing Biden to invoke the 14th amendment to raise the debt ceiling, something the president has signaled he’s not yet inclined to do.