New debt talks aim to break stalemate
Biden, McCarthy get no deal but sides still negotiating
WASHINGTON — President Joe Biden and House Speaker Kevin McCarthy declared they had a productive debt ceiling discussion late Monday at the White House, but there was no agreement and neither side appeared to be giving ground as Washington strained to raise the nation’s borrowing limit in time to avert a potentially chaotic federal default.
It’s a crucial moment for the Democratic president and the Republican speaker, just 10 days before a deadline to raise the debt limit.
As soon as June 1, Treasury Secretary Janet Yellen said in a letter to Congress, “it is highly likely” the government will be unable to pay all of the nation’s bills.
Such an unprecedented default would be financially damaging for many Americans and others around the world relying on U.S. stability, sending shockwaves through the global economy.
Both sides praised the other’s seriousness, but basic differences remained. A prime example is how to trim annual budget deficits. Biden wants to increase some taxes on the wealthiest Americans and some big companies, but McCarthy opposes that.
The speaker said Republicans are determined to cut spending while Biden wants to increase it.
“That has got to stop, and it’s got to end now,” McCarthy said after the Oval Office meeting.
In a brief post-meeting statement, Biden called the session productive and said he, McCarthy and their lead negotiators “will continue to discuss the path forward.” McCarthy said their teams would work “through the night.”
Biden said all agreed that “default is not really on the table.”
The contours of an agreement appear within reach, and the negotiations have narrowed on a 2024 budget year cap that would be key to resolving the standoff. Republicans have insisted next year’s spending cannot be more than current 2023 levels, but Democrats have refused to accept the steeper cuts that McCarthy’s team proposed, and the White House instead offered to hold spending flat.
A budget deal would unlock a separate vote to lift the debt ceiling, now $31 trillion, to allow more borrowing. Yellen said Sunday that June 1 is a “hard deadline.”
McCarthy told reporters midday Monday at the Capitol that “decisions have to start being made” since “we’re 10 days out” from the deadline.
“We have to spend less next year than we spent this year,” McCarthy reiterated and pointed to the House’s spending cuts as the “framework” for a deal.
“I’m hopeful,” he added.
After a weekend of start-stop talks, both Biden and McCarthy have declared a need to close out a compromise deal.
Negotiators for the White House met for nearly three hours with McCarthy’s team at the Capitol ahead of the session.
Biden and McCarthy spoke by phone Sunday while the president was returning home on Air Force One after the Group of Seven summit in Japan.
The call revived talks, and negotiators met for about 2½ hours at the Capitol late Sunday, saying little as they left.
Financial markets turned down last week after talks stalled.
“We’ll keep working,” said Steve Ricchetti, counselor to the president, as the White House team exited talks late Sunday.
McCarthy, R-Calif., told reporters earlier Sunday that the call with Biden was “productive,” and Biden told a news conference before departing from Japan: “I think that we can reach an agreement.”
But McCarthy continued to blame Biden for having refused to engage earlier on annual federal spending, a separate issue but linked to the nation’s debt.
After the Monday morning’s threehour session with the White House team, Republican Rep. Patrick McHenry of North Carolina told reporters: “We’re at a very sensitive point here, and the goal is to get something that can be legislated into law.”
Over the weekend, Biden used his concluding news conference in Hiroshima, Japan, to say he had done his part by agreeing to spending cuts and to warn, “It’s time for Republicans to accept that there is no deal to be made solely, solely, on their partisan terms.”
“Now it’s time for the other side to move from their extreme position,” he said.
GOP lawmakers have been holding tight to demands for sharper spending cuts with
caps on future spending, rejecting the alternatives proposed by the White House that call for reducing deficits in part with new revenue from taxes.
McCarthy has insisted personally in his conversations with Biden that tax hikes are off the table.
Republicans want to roll back next year’s spending to 2022 levels, but the White House has proposed keeping 2024 the same as it is now, in the 2023 budget year.
Republicans initially sought to impose spending caps for 10 years, though the latest proposal narrowed that to about six.
The White House wants a two-year budget deal.
A compromise on those topline spending levels would enable McCarthy to deliver for conservatives, while not being so severe that it would chase off the Democratic votes that would be needed in the divided Congress to pass any bill.
Republicans also want work requirements on the Medicaid health care program, though the Biden administration has countered that millions of people could lose coverage. The GOP additionally introduced new cuts to food aid by restricting states’ ability to waive work requirements in places with high joblessness. But Democrats have said any changes to work requirements for government aid recipients are nonstarters.
GOP lawmakers are also seeking cuts in IRS money and, by sparing Defense and Veterans accounts from reductions, would shift the bulk of spending reductions to other federal programs.
The White House has countered by keeping defense and nondefense spending flat next year, which would save $90 billion in the 2024 budget year and $1 trillion over 10 years.
All sides have been eyeing the potential for the package to include a framework to ease federal regulations and speed energy project developments. They are all but certain to claw back some $30 billion in unspent COVID-19 funds now that the pandemic emergency has officially lifted.
For months, Biden had refused to engage in talks over the debt limit, contending that Republicans in Congress were trying to use the borrowing limit vote as leverage to extract administration concessions on other policy priorities.
But with June nearing and Republicans putting their own spending legislation on the table, the White House launched talks on a budget deal that could accompany an increase in the debt limit.