Time is ‘tight’ in debt ceiling talks, as McCarthy and Biden strike deal with looming deadline

WASHINGTON — House Speaker Kevin McCarthy and his Republican debt negotiators reached “crisis” time Friday on Capitol Hill, working to strike a deal with President Joe Biden to cut federal spending and raise the country’s borrowing limit before an upcoming deadline.

They hope to end weeks of frustrating talks and strike a deal by this weekend. The Treasury said the government could start running out of money as early as next Thursday, sending the United States into a potentially catastrophic default with economic fallout around the world.

Anxious retirees and social service groups are already among those already making contingency plans by default. The next batch of Social Security checks is due out next week.

“We made progress last night, we need to make more progress now,” McCarthy said. “We know this is a crisis.”

Democrat Biden and the Republican President are narrowing the differences, working to lock in the details of a two-year deal that would limit federal spending and lift the legal limit on borrowing after next year’s presidential election.

Any deal would have to be a political compromise, with support from Democrats and Republicans to pass the divided Congress.

As the outlines of the deal take shape to cut spending for 2024 and impose a 1% cap on spending growth for 2025, the two sides remain locked in on various provisions. The debt ceiling, now at $31 trillion, would be lifted for two years to pay the bills incurred by the country.

A person familiar with the talks said both sides are ‘dug’ on whether or not to agree to Republican demands to impose tougher work requirements on people receiving government food stamps, cash assistance and health care assistance.

Still, both Biden and McCarthy expressed optimism heading into the weekend that the gap between their positions could be bridged.

In remarks at the White House on Thursday, Biden acknowledged, “The only way to move forward is with a bipartisan deal.”

House Republicans pushed the issue to the brink, displaying risky political bravado by leaving town for the Memorial Day holiday. Lawmakers tentatively aren’t expected to return to work until Tuesday, just two days before the “X date” of June 1, when Treasury Secretary Janet Yellen said the United States could face a default.

Biden will also be absent this weekend, leaving Friday for the presidential retreat in Camp David, Maryland, and Sunday for his home in Wilmington, Delaware. The Senate is on recess and will return after Memorial Day.

“Every time there is progress, the issues that remain get harder and harder,” negotiator Patrick McHenry, RN.C., said at noon Friday.

Weeks of negotiations between Republicans and the White House failed to yield a deal — in part because the Biden administration resisted negotiating with McCarthy over the debt limit, arguing that full faith and credit of the country should not be used as leverage to extract other partisan priorities.

”We have to spend less than we spent last year. That’s the starting point,” McCarthy said.

One idea is to fix the Main Estimates numbers, but then add a “rollback” provision to apply the cuts if Congress is unable, during its annual appropriations process, to to achieve new goals.

On work requirements for aid recipients, the White House is particularly resistant to measures that could push more people into poverty or take their health care, said the person familiar with the talks, who obtained the anonymity to describe the discussions behind closed doors.

On top of the Republican demand to rescind the money for the Internal Revenue Service, it’s still an “open question” whether the parties will compromise by allowing funding to be pushed to other national programs. , the person said.

In a potential development, Republicans could ease their demand to increase defense spending beyond what Biden had proposed in his budget, offering instead to keep it at its proposed levels, according to another person familiar with the issues. talks.

Teams are also considering a proposal to spur development of Sen. John Hickenlooper’s power transmission line, D-Colo., to facilitate the construction of an interregional power grid.

Meanwhile, McCarthy is feeling pressure from the House’s right flank not to cave to any deal, even if it means missing the June 1 deadline.

“Let’s hold on,” said Rep. Chip Roy, R-Texas, a member of the Freedom Caucus.

McCarthy said Donald Trump, the former president who is running for re-election, told him, “Make sure you get a good deal.”

Vigilant Democrats, however, are also pressing Biden. The three top House Democratic leaders led by Rep. Hakeem Jeffries met Thursday night with the White House.

Even if negotiators strike a deal in the next few days, McCarthy promised lawmakers he would abide by the rule of releasing any bills for 72 hours before voting — now likely Tuesday or even Wednesday. The Democratic-held Senate has pledged to move quickly to send the package to Biden’s office, just before a possible deadline of next Thursday.

Meanwhile, ratings agency Fitch Ratings has placed US AAA credit ratings watch negative, warning of a possible downgrade.

The White House has continued to argue that deficits can be reduced by ending tax breaks for the wealthiest households and some businesses, but McCarthy said he told the president as early as their February meeting that the increase in income through tax increases was not an option.

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

They are almost certain to recover some $30 billion in unspent COVID-19 funds now that the pandemic emergency has been officially lifted.

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Associated Press writers Chris Megerian, Josh Boak, Zeke Miller and Mary Clare Jalonick contributed to this report.