Days before the deadline, President Joe Biden and House Speaker Kevin McCarthy are hammering out a two-year budget deal aimed at curbing federal deficits in exchange for raising the nation’s debt ceiling and avoid an economically devastating government default.
What you need to know
Days before the deadline, President Joe Biden and House Speaker Kevin McCarthy are hammering out a two-year budget deal that could unblock a vote to raise the nation’s debt ceiling.
They are vying for a deal this weekend. As soon as June 1, the Treasury says it could run out of funds to pay the bills
A federal default on the nation’s debt would send the economy into chaos
Any compromise needs the support of both Democrats and Republicans to pass Congress
The Democratic president and the Republican speaker hope to reach a budget compromise this weekend. With Republicans pushing for 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, with support from both Democrats and Republicans for pass the divided Congress.
But the budget flow is not the only problem.
A person familiar with the talks said the two sides are “deadlocked” over whether to accept Republican demands to impose tougher work requirements on people who receive government food stamps, cash assistance and unemployment benefits. health, some of the most vulnerable Americans. .
However, both Biden and McCarthy expressed optimism heading into the weekend that the gulf between their positions could be bridged. A two-year deal would raise the debt limit by then, after the 2024 presidential election.
“We knew this wasn’t going to be easy,” McCarthy, R-Calif., said as he left the Capitol for the evening Thursday.
McCarthy said, “It’s tough, but we’re working and we’re going to keep working until we get it done.”
House Republicans have pushed the issue to the limit, showing risky political bravado by leaving town for the Memorial Day holiday. The US could face an unprecedented default as soon as June 1, throwing the global economy into chaos.
Speaking at the White House, Biden said: “This is about competing versions of America.”
“The only way forward is with a bipartisan deal,” Biden said Thursday. “And I think we’re going to reach an agreement that allows us to move forward and protect American workers in this country.”
Lawmakers are not expected to return to work until Tuesday, just two days from an early June deadline, when Treasury Secretary Janet Yellen has said the US could start to run out of cash by pay their bills and face federal default.
Biden will also be away this weekend, leaving on Friday for the presidential retreat in Camp David, Maryland, and on Sunday for his home in Wilmington, Delaware. The Senate is in recess and will be in recess until after Memorial Day.
Meanwhile, the agency Fitch Ratings placed the AAA credit of the United States in “negative ratings”, warning of a possible downgrade.
Weeks of negotiations between Republicans and the White House have failed to produce a deal, in part because the Biden administration resisted negotiating with McCarthy on the debt limit, arguing that the country’s full faith and credit would not be they must use as leverage to extract other partisan priorities. .
The White House has offered to freeze next year’s 2024 spending at current levels and restrict 2025 spending, 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 top-line budget numbers, but then add a “snapback” provision that enforces the cuts if Congress can’t meet the new targets during its annual appropriations process.
As for work requirements for aid recipients, the White House is particularly resistant to measures that would drive Americans into poverty or take away their health care, said the person familiar with the talks, who was granted anonymity to describe the closed-door discussions.
On the Republican demand to rescind money for the Internal Revenue Service, it remains an “open question” whether the parties will compromise by allowing the funding to be reallocated to other domestic programs, the person said.
Pressure on McCarthy from the right wing of the House not to budge on any deal, even if it means missing the June 1 deadline.
“We hold the line,” said Rep. Chip Roy, R-Texas, a member of the Freedom Caucus.
McCarthy said Donald Trump, the former president who is running for office again, told him, “Make sure you get a good deal.”
Failure to raise the nation’s debt ceiling, now at $31 trillion, to pay the bills America has already incurred would risk a potentially chaotic federal default. Anxious retirees and social service groups are among those already making contingency plans.
Even if negotiators reach a deal in the coming days, McCarthy has promised lawmakers he will abide by the rule to release any bill for 72 hours before voting, now likely Tuesday or even Wednesday. The Democratic Senate has vowed to move quickly to send the package to Biden’s desk, just ahead of a possible deadline next Thursday.
In a potential development, Republicans may be scaling back their demand to increase defense spending, rather than offering to keep it at the levels the Biden administration proposed, according to another person familiar with the talks.
The teams are also looking at a proposal to boost transmission line development by Sen. John Hickenlooper, D-Colo., that would facilitate the creation of an interregional power grid, according to a person familiar with the draft. Those two people were also granted anonymity to discuss the private negotiations.
The White House has continued to argue that deficits can be reduced by ending tax breaks for the wealthiest households and some corporations, but McCarthy said he told the president as early as his February meeting that raising revenue for tax increases were off the table.
Although Biden has ruled out, for now, invoking the 14th 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 debt ceiling But they need five Republicans to break with their party and sway the majority to move the plan forward.
They are sure to recover about $30 billion in unspent COVID-19 funds now that the pandemic emergency has officially been lifted.
