San Francisco Chronicle

Sides remain ‘ far apart’ on debt limit talks

- By Lisa Mascaro, and Stephen Groves

WASHINGTON — A defiant House Speaker Kevin McCarthy said Wednesday the debt ceiling standoff was “not my fault” as he sent Republican negotiator­s to the White House to finish out talks, but warned the two sides need more time as they try to reach a budget deal with President Joe Biden.

McCarthy said he remained optimistic they could reach an agreement before a deadline as soon as next week, when the Treasury Department could run out of cash to pay its bills. Financial markets are teetering asWashingt­on edges closer to a debt default crisis that would be unpreceden­ted in modern times, sending shockwaves around the globe.

TheWhiteHo­use blamed the Republican­s led by McCarthy for risking a devastatin­g default that would hit “every single part of the country” as they demand “extreme” spending cuts thatwould hurt millions of Americans.

“We’re not going to default,” McCarthy, R- Calif., assured.

The Republican speaker said the negotiator­s “made some progress” at the White House. “I want to work as hard as we can and not stop.”

Debt ceiling negotiatio­ns are locked on a classic problem that has divided and disrupted Washington before, particular­ly the last time Republican­s used the borrowing limit as leverage to extract priorities a decade ago: Republican­s want to roll back federal government spending, while Biden and other Democrats do not.

From the White House, Press Secretary Karine Jean- Pierre decried what the administra­tion called a “manufactur­ed crisis” set in motion by Republican­s pushing “extreme proposals” that would hurt “every single part of the country, whether you’re in a red state or a blue state.”

Time is short to strike a deal. Treasury Secretary JanetYelle­n 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 aWall Street Journal event.

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

Anxious retirees and social service groups are among those making default contingenc­y plans.

While Biden has ruled out, for now, invoking the 14th Amendment to raise the debt limit on his own, Democrats in the House announced they have all signed on to a legislativ­e “discharge” process that would force a debt ceiling vote. But they need five Republican­s to break with their party and tip the majority to set the plan forward.

“Sign the bill!” Democrats yelled on the House floor after Republican Majority Leader Steve Scalise, R- La., announced lawmakers could keep plans to recess Thursday, but could be called back for votes.

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

The White House insisted early on itwas 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.

The newly elected speaker visited Biden at the Oval Office in February, urging the president to come to the negotiatin­g table on a budget package that would reduce spending and the nation’s ballooning deficits in exchange for the vote to allow future debt.

Cheered on by a hard- charging conservati­ve House majority that hoisted him to power, McCarthy was not swayed by a White House counter- offer 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.”

Negotiatio­ns are focused on finding 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 offered 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 topline 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 thatwould be needed in the divided Congress to pass any bill.

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

“The problem is not the White House. The problem is Kevin McCarthy and the extreme Republican­s,” said Rep. Pramila Jayapal, D- Wash., the chair of the progressiv­e caucus. “They are the ones holding this economy hostage, that are putting all these cuts on the American people.”

TheWhiteHo­use has continued to argue that deficits can be reduced by ending tax breaks for wealthier households and some corporatio­ns, butMcCarth­y 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 a10- year cap to six years, but the White House offering only one year, for 2025.

Republican­s, however, are pushing additional priorities as the negotiator­s focus on the $ 100 billion- plus difference 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.

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 unspentCOV­ID19 funds nowthat the pandemic emergency has officially been lifted.

McCarthy promised lawmakers hewill abideby the rule to post any bill for 72 hours before voting, making any action doubtful until the weekend — just days before the potential deadline.

The Senate would also have to pass the package before it could go to Biden’s desk to be signed.

 ?? Jacquelyn Martin/ Associated Press ?? House Speaker Kevin McCarthy speaks to reporters about debt limit negotiatio­nsWednesda­y on Capitol Hill. A rapidly approachin­g deadline to extend the limit has both sides scrambling.
Jacquelyn Martin/ Associated Press House Speaker Kevin McCarthy speaks to reporters about debt limit negotiatio­nsWednesda­y on Capitol Hill. A rapidly approachin­g deadline to extend the limit has both sides scrambling.

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