Days after the deadline, President Joe Biden and House Speaker Kevin McCarthy are narrowing a budget deal for two years aimed at reducing the federal deficit in exchange for raising the nation’s debt ceiling and avoiding an economically devastating government default.
The Democratic president and Republican speaker hope to reach a budget compromise this weekend. With Republicans seeking deep cuts, the two sides have been unable to agree on spending levels for 2024 and 2025. Any deal must be a political compromise, with the support of both Democrats and Republicans to pass a divided Congress.
But budget streaming isn’t the only solution.
A person familiar with the talks said both sides are “deep in” agreeing or disagreeing with Republican demands to impose stricter work requirements on people who receive government food stamps, cash assistance and healthcare assistance, some of the most vulnerable Americans. .
However, as the weekend approaches, both Biden and McCarthy expressed optimism that the chasm between their positions could be bridged. A two-year deal would raise the debt limit for that period, after the 2024 presidential election.
“We knew this wasn’t going to be easy,” California’s McCarthy said as he left the Capitol Thursday night.
McCarthy said, “It’s tough, but we’re working and we’ll keep working until we get it done.”
House Republicans pushed the issue to the brink, displaying risky political bravado in leaving town for the Memorial Day weekend. The United States may face an unprecedented default once June 1st, throwing the global economy into chaos.
“It’s about competing versions of America,” Biden said in remarks at the White House.
“The only way forward is through a bipartisan agreement,” Biden said Thursday. “And I believe we will come to an agreement that allows us to move forward and protects the hardworking Americans in this country.”
Lawmakers are not tentatively expected to return to work until Tuesday, just two days after a deadline in early June when Treasury Secretary Janet Yellen said the United States could start running out of money to pay its bills and face a federal default.
Biden will also be away this weekend, leaving on Friday for the presidential retreat at Camp David, Maryland, and on Sunday for his home in Wilmington, Delaware. The Senate is in recess until after Memorial Day.
Meanwhile, Fitch Ratings put the US AAA on “negative ratings watch,” warning of a possible downgrade.
Weeks of negotiations between Republicans and the White House have failed to produce an agreement — in part because the Biden administration has resisted negotiating with McCarthy on a debt limit, arguing that the country’s full faith and credit should not be used as leverage to extract other partisan priorities.
The White House has offered to freeze spending in the next year 2024 at current levels and restrict spending in 2025, but the Republican leader says this is not enough.
“We have to spend less than we did last year. That’s the starting point,” McCarthy said.
One idea is to set those preliminary budget numbers, then add a “blowback” provision that forces cuts if, during the annual appropriations process, Congress is unable to meet the new goals.
On the job requirements for aid recipients, the White House is particularly resistant to actions that would push Americans into poverty or access to their health care, said the person familiar with the talks, who was granted anonymity to describe the closed-door discussions.
Regarding the Republicans’ demand that the funds be canceled by the Internal Revenue Service, the person said that whether the parties would concede by allowing the refinancing to other local programs remains an “open issue.”
The pressure is on McCarthy from the right wing of the House of Representatives not to give in to any deal, even if it means missing the June 1 deadline.
“Let’s get the line,” said Rep. Chip Roy, R-Texas, who is a member of the Freedom Caucus.
McCarthy said Donald Trump, the former president running for office again, told him, “Make sure you get a good deal.”
Failure to raise the country’s debt ceiling, now at $31 trillion, to pay the American bills already incurred would risk a potentially chaotic federal default. Worried retirees and social service groups are among those already making hypothetical contingency plans.
Even if negotiators reach an agreement in the coming days, McCarthy has promised lawmakers he will abide by the rule to post any bill 72 hours before a vote — now likely on Tuesday or even Wednesday. The Democratic-controlled Senate has vowed to move quickly to send the package to Biden’s desk, ahead of a potential deadline next Thursday.
In one possible development, Republicans could soften their demands for increased defense spending, and instead offer to keep it at levels proposed by the Biden administration, according to another person familiar with the talks.
The teams are also eyeing a proposal to boost power transmission line development from Sen. John Hickenlooper, R-Col., that would make it easier to build an interregional power grid, according to a person familiar with the draft. These two have also been granted anonymity to discuss private negotiations.
The White House has continued to argue that the deficit can be reduced by ending tax breaks for wealthier households and some businesses, but McCarthy said he told the president early in their meeting in February that increased revenue from tax increases was off the table.
While Biden has, for the time being, ruled out invoking the Fourteenth Amendment to raise the debt limit on his own, House Democrats announced that they have all signed on to a legislative “discharge” process that would force a vote on the debt ceiling. But they need five Republicans to break away from their party and push a majority to put the plan forward.
They are all certain to recover about $30 billion in unspent COVID-19 money now that the pandemic emergency is officially lifted.