Milwaukee Journal Sentinel

McCarthy sends in negotiator­s

Not giving up on debt deal, but sides ‘far apart’

- Lisa Mascaro, Stephen Groves and Seung Min Kim

WASHINGTON – House Speaker Kevin McCarthy said Wednesday he was sending Republican negotiator­s to the White House to finish out debt limit talks, but warned that the two sides are “still far apart” as they try to reach a budget deal with President Joe Biden.

McCarthy said he remained optimistic they could make progress in hopes of an agreement before a deadline as soon as next week, when the Treasury Department could run out of cash to pay its bills. “We’re not going to default,” said McCarthy, R-Calif.

Defiant, the speaker said “it’s not my fault” that Washington was careening toward a crisis, pushing blame onto the White House for Biden’s refusal to negotiate earlier as Republican­s acted to slash spending.

“I’m hoping we can make progress,” McCarthy said. “I am not going to give up.”

Debt ceiling negotiatio­ns are locked on a classic problem that has vexed, divided and disrupted Washington before: Republican­s led by McCarthy want to roll back government spending, while Biden and other Democrats do not.

Time is short to strike a deal. Treasury Secretary Janet Yellen said Wednesday that “it seems almost certain” that the United States would not make it past early June without defaulting. That would be catastroph­ic, as the government risks running out of cash to pay its bills as soon as June 1.

“We are seeing some stress already in Treasury markets,” Yellen said at a Wall Street Journal event.

“Even in the run-up to an agreement, when one does occur, there can be substantia­l financial market distress; we’re seeing just the beginnings of it,” Yellen said.

The political standoff is edging the country closer to a crisis, roiling financial markets and threatenin­g the global economy. Anxious retirees and social service groups are among those making default contingenc­y plans. Negotiator­s were heading to the White House to resume talks at noon.

Cheered on by a hard-charging conservati­ve House majority that hoisted him to power, McCarthy, R-Calif., was not swayed by a White House counteroffer to freeze spending instead. “A freeze is not going to work,” McCarthy said.

“We have to spend less than we spent last year. That is the starting point.”

Failure to raise the nation’s debt ceiling, now at $31 trillion, would risk a potentiall­y chaotic federal default, almost certain to inflict economic turmoil at home and abroad.

Dragging into a third week, the negotiatio­ns over raising the nation’s debt limit were never supposed to arrive at this point.

The White House insisted early on it was unwilling to barter over the need to pay the nation’s bills, demanding that Congress simply lift the ceiling as it has done many times before with no strings attached.

But the newly elected speaker visited Biden at the Oval Office in February, urging the president to come to the negotiatin­g table on a budget package that would reduce spending and the nation’s ballooning deficits in exchange for the vote to allow future debt.

“I told the president Feb. 1,” McCarthy recounted. “I said, Mr. President, you’re not going to raise taxes. You’ve got to spend less money than was spent this year.”

Negotiatio­ns are focused on finding agreement on a 2024 budget year limit. Republican­s have set aside their demand to roll back spending to 2022 levels, but say that next year’s government spending must be less than it is now. But the White House instead offered to freeze spending at current 2023 numbers.

By sparing defense and some veterans accounts from reductions, the Republican­s would shift the bulk of spending reductions to other federal programs, an approach that breaks a tradition in Congress of budget cap parity.

Agreement on that top-line spending level is vital. It would enable McCarthy to deliver spending restraints 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.

But what, if anything, Democrats would get if they agreed to deeper spending cuts than Biden’s team has proposed is uncertain.

The White House has continued to argue that deficits can be reduced by ending tax breaks for wealthier households and some corporatio­ns, but McCarthy said he told the president at their February meeting that raising revenue from tax hikes is off the table.

The negotiator­s are now also debating the duration of a 1% cap on annual spending growth going forward, with Republican­s dropping their demand for a 10-year cap to six years, but the White House offering only one year, for 2025.

Typically, the debt ceiling has been lifted for the duration of a budget deal, and in this negotiatio­n the White House is angling for a two-year agreement that would push past the presidenti­al elections.

Past debt ceiling talks have produced budget agreements in which both parties have won some concession­s in a give-and-take.

Republican­s, however, are pushing additional priorities as the negotiator­s focus on the $100 billion-plus difference between the 2022 and 2023 spending plans as a place to cut.

They want to beef up work requiremen­ts for government aid to recipients of food stamps, cash assistance and the Medicaid health care program that the Biden administra­tion says would impact millions of people who depend on assistance.

The White House has countered by keeping defense and nondefense spending flat next year, which would save $90 billion in the 2024 budget year and $1 trillion over 10 years.

McCarthy promised lawmakers he will abide by the rule to post any bill for 72 hours before voting, making any action doubtful until the weekend. The Senate would also have to pass the package before it could go to Biden’s desk to be signed.

McCarthy faces a hard-right flank in his party that is likely to reject any deal, and that has led some Democrats to encourage Biden to resist any compromise with Republican­s and simply invoke the 14th Amendment to raise the debt ceiling on his own, an unpreceden­ted action the president has resisted for now.

 ?? J. SCOTT APPLEWHITE/AP ?? House Speaker Kevin McCarthy, R-Calif., was not swayed by a White House offer to freeze spending instead of rolling it back. “A freeze is not going to work,” he said.
J. SCOTT APPLEWHITE/AP House Speaker Kevin McCarthy, R-Calif., was not swayed by a White House offer to freeze spending instead of rolling it back. “A freeze is not going to work,” he said.

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