Biden and McCarthy will talk about the debt limit; talks stalled as Republicans seek deep spending cuts


HIROSHIMA, Japan (AP) – President Joe Biden planned to speak directly with House Speaker Kevin McCarthy on Sunday, hoping to salvage talks to raise the debt limit that have stalled in recent days while he was abroad at the Group of Seven summit.

Republican lawmakers are holding back on demands for sharp spending cuts, rejecting alternatives proposed by the White House to reduce deficits. Biden and world leaders meeting in Japan had been closely watching the negotiations, looking for signs of a compromise that would ensure the federal government could keep paying its bills and avoid a potentially catastrophic default.

Biden has tried to project optimism even as the talks in Washington were difficult. Republicans reject a White House plan that would impose less severe cuts while raising revenue. The two sides face a deadline as soon as June 1 to raise their debt limit, now at $31 trillion.

“We’ll have a chance to talk later today,” Biden said of McCarthy, R-Calif., as the president met with the leaders of Japan and South Korea at the G7 in Hiroshima, Japan.

But McCarthy may need bipartisan support; he may need as many as 100 House Democratic votes to pass a deal, based on likely GOP defections and previous votes, according to a person familiar with the talks. The person was not authorized to provide details about the proposal and spoke to The Associated Press on condition of anonymity.

In the last round, McCarthy’s team called for deep cuts to non-defense spending, while insisting on increased funding for the military. Depending on the person, education, health care, Meals on Wheels, and other programs would likely shoulder the burden.

The GOP wants work requirements in Medicaid, though the administration has countered that millions of people could lose coverage. The Republican side also introduced new cuts to food aid by restricting states’ ability to waive work requirements in places with high unemployment, an idea that, when floated by the Trump administration, was expected to spark that 700,000 people lost their food benefits.

GOP lawmakers are also seeking cuts to IRS funding and are asking the White House to accept provisions of their proposed immigration overhaul.

The White House has countered by keeping defense and non-defense spending next year, which would save $90 billion in fiscal year 2024 and $1 trillion over 10 years.

Republicans have also rejected White House proposals to raise revenue to further reduce deficits. Among the proposals the GOP opposes are policies that would allow Medicare to pay less for prescription drugs and the closing of a dozen tax loopholes. Republicans have refused to roll back Trump-era tax breaks for corporations and wealthy families, as proposed in Biden’s own budget.

With talks frozen Saturday as each side accused the other of being unreasonable, Biden was briefed frequently on the status of negotiations and directed his team to set up the call with McCarthy.

The decision to set a call came after another start-and-stop day with no outward signs of progress. Food was brought into the Capitol negotiating room Saturday morning, only to be brought back hours later, and no meeting was expected. The talks, however, could resume on Sunday after the conversation between the two leaders.

“The president’s team put an offer on the table that was a major step backwards and contained a set of extreme partisan demands that both Houses of Congress could never pass,” said press secretary Karine Jean- Pierre in a statement Saturday afternoon.

“Let’s be clear: the president’s team is ready to meet at any moment,” Jean-Pierre said, adding that the Republican leadership is forced to its extreme wing to threaten default.

McCarthy tweeted that it was the White House that was “backing down on negotiations.”

He said the “socialist wing” of the Democratic party appears to be in control, “especially with President Biden out of the country.”

Republican Rep. Dusty Johnson, who has worked closely with McCarthy to shape the GOP proposal, told The Associated Press late Saturday that there were no meetings scheduled Sunday. Republicans are trying to get the president’s attention instead of negotiators.

“If the president doesn’t get involved again, I don’t know that the staff conversations can bear fruit,” Johnson said.

Biden, who attended the meeting of the world’s most powerful democracies, tried to reassure them on Saturday that the United States would not default, a scenario that would shake the world economy. He said he felt there was progress in the talks.

“The first meetings were not that progressive, the second were, the third was,” he said. The president added that he believes that “we will be able to avoid a breach and we will do something decent”.

For months, Biden had refused to engage in debt limit talks, insisting that Congress should not play political games by trying to use the debt limit vote as leverage to extract other policy priorities.

But as the deadline approaches as soon as June 1, when the Treasury says it could run out of cash, and Republicans put their own legislation on the table, the White House began talks on a budget deal that could accompany an increase in the debt limit.

The negotiations leading up to the weekend had been hectic. McCarthy said Friday it was time to “pause” the talks, but then the two sides met again in the evening, only to quickly call it quits for the night.

“We re-engaged, we had a very, very frank discussion,” Rep. Garret Graves, R-La., a negotiator for McCarthy, said Friday evening.

As the White House team left the overnight session, Biden adviser Steve Ricchetti, who is leading the talks for Democrats, said he was hopeful. “We will continue to work,” he said.

McCarthy had said that resolving the standoff is “easy,” if only the Biden team would agree to some spending cuts that Republicans are demanding. The biggest impasse was over the 2024 budget amount, according to another person briefed on the talks who spoke on condition of anonymity to discuss them. Democrats say the sharp cuts Republicans have put on the table would be potentially harmful to Americans, and they insist Republicans agree to raise taxes on the wealthy, as well as cut spending, to close the deficit.

Wall Street fell on Friday as trading halted abruptly. Experts have warned that even the threat of a debt default could trigger a recession.

Republicans argue that the nation’s deficit spending must be brought under control, with the goal of rolling spending back to fiscal 2022 levels and restraining future growth. But Biden’s team counters that the caps proposed by Republicans in the House-passed bill would mean cuts of 30 percent in some programs if Defense and veterans are spared, according to a memo from the Office of Management and Budget.

Any deal would need support from both Republicans and Democrats to find approval in a divided Congress and be passed into law. Negotiators are seeking a tighter budget cap deal of several years, rather than the decade-long caps that Republicans initially wanted, and clawing back about $30 billion of unspent COVID-19 funds.

Still up for debate are policy changes, including a framework to allow reforms to speed up the development of energy projects, as well as the Republican push to impose work requirements on recipients of government aid that Biden has been open to, but the leader House Democrat Hakeem Jeffries of New York said he was not a “starter.”

McCarthy faces pressure from his far-right flank to cut the strongest possible deal for Republicans, and risks threatening his leadership as speaker if he fails to do so. Many House Republicans are unlikely to accept any deal with the White House.

Biden faces further pushback from Democrats, especially progressives, who argue the cuts will fall too far into domestic programs Americans trust.


AP congressional correspondent Lisa Mascaro and AP writers Seung Min Kim, Kevin Freking, Stephen Groves and Farnoush Amiri in Washington contributed to this report.

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