Days after a deadline, President Joe Biden and House Speaker Kevin McCarthy are hammering out a two-year budget deal aimed at reining in the federal deficit in exchange for raising the nation’s debt ceiling and preventing an economically devastating government default.
The Democratic president and the Republican speaker hope to reach a budget compromise this weekend. As Republicans seek steep cuts, the two parties have been unable to agree on spending levels for 2024 and 2025. Any deal would have to be a political compromise that would support both Democrats and Republicans to pass a divided Congress.
But the budget stream isn’t the only closure.
A person familiar with the negotiations said the two sides were “at odds” over whether to agree to Republican demands to impose stricter work requirements on people who receive government food stamps, cash assistance and health care, some most vulnerable Americans. .
Still, both Biden and McCarthy expressed optimism over the weekend that the gulf between their positions could be bridged. The two-year deal would raise the debt limit until after the 2024 presidential election.
“We knew it wasn’t going to be easy,” McCarthy, R-Calif., said as he left the Capitol Thursday night.
McCarthy said: “It’s hard, but we’re working and we’ll keep working until we get it done.”
House Republicans pushed the issue to the brink, showing risky political bravado by leaving town over the Memorial Day holiday. The US could face an unprecedented default on June 1, throwing the global economy into chaos.
During a speech at the White House, Biden said: “It’s about America’s competing options.”
“The only way forward is bipartisan agreement,” Biden said Thursday. “And I believe we will come to an agreement that will allow us to move forward and protect hardworking Americans across this country.”
Lawmakers are not expected to get down to business until Tuesday, just two days after an early June deadline, when Treasury Secretary Janet Yellen said the U.S. could run out of cash and face a federal default.
Biden will also be away this weekend, traveling to the presidential compound in Camp David, Maryland, on Friday and to his home in Wilmington, Delaware, on Sunday. The Senate is on recess and will return after Memorial Day.
Meanwhile, Fitch Ratings put the United States’ AAA credit on “rating view negative,” warning of a possible downgrade.
Weeks of talks between Republicans and the White House failed to reach an agreement, in part because the Biden administration resisted debt ceiling talks with McCarthy, arguing that the country’s full faith and credit should not be used as leverage to extract other party members. priorities.
The White House has proposed freezing spending at current levels through 2024 and capping spending in 2025, but the Republican leader says that’s not enough.
“We have to spend less than we spent last year. That’s the starting point,” McCarthy said.
One idea is to set those base budget numbers, but then add a “catchback” provision that would apply the cuts if Congress fails to meet the new goals in its annual appropriations process.
On work requirements for aid recipients, the White House is particularly resistant to measures that would push Americans into poverty or take away their health, said a person familiar with the negotiations, who spoke on condition of anonymity to describe the closed-door discussions.
On the Republican request to defund the Internal Revenue Service, it is still an “open question” whether the parties will compromise by allowing funding to be pushed back into other domestic programs, the person said.
McCarthy is under pressure from the right wing of the House not to make a deal, even if it means missing the June 1 deadline.
“Let’s hold the line,” said U.S. Representative Chip Roy of Texas, a member of the Freedom Caucus.
McCarthy said former President Donald Trump, who is running for office again, told him:
Failure to raise the nation’s debt ceiling, now at $31 trillion, risks a potentially chaotic federal default to pay the bills America already has. Anxious retirees and social service groups are among those already preparing contingency plans.
Even if negotiators reach an agreement in the coming days, McCarthy has promised lawmakers that he will stick to the rule and place any bill within 72 hours of a vote, now possibly Tuesday or even Wednesday. The Democratic-controlled Senate has vowed to move quickly to send the package to Biden’s desk in time for a possible deadline next Thursday.
In one possible development, according to another person familiar with the talks, Republicans could relax their demand to increase defense spending, instead offering to keep it at the levels proposed by the Biden administration.
The teams are also eyeing a proposal to boost transmission line development from Sen. John Hickenlooper, D-Colo., that would make it easier to build interregional power grids, according to a person familiar with the project. Those two individuals have also been granted anonymity to discuss the private negotiations.
The White House continues to insist that the deficit can be reduced by ending tax breaks for wealthier households and some corporations, but McCarthy said he told the president as early as a February meeting that raising revenue from tax increases was off the table.
Although Biden has so far ruled out Amendment 14, which would raise the debt limit on its own, House Democrats said 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 their party and tip the majority to push the plan forward.
All of them, however, are sure to withdraw about $30 billion in unspent COVID-19 funds now that the pandemic emergency has officially been lifted.
Associated Press writers Chris Megerian, Josh Boak, Zeke Miller and Mary Claire Jalonik contributed to this report