President Biden and Speaker Kevin McCarthy reached an agreement in principle on Saturday to raise the debt limit for two years while cutting and limiting some government spending over the same period, a breakthrough after a marathon set of talks about the crisis that has brought the nation in a few days. his first flaw in history.
Approval of the plan by Congress before June 5, when the Treasury is expected to exhaust its ability to pay its obligations, is not guaranteed, especially in the House, which plans to study it on Wednesday. Republicans hold a narrow majority in the chamber, and right-wing lawmakers who had demanded significantly bigger budget cuts in exchange for lifting the debt limit were already reeling.
But the compromise, which would effectively freeze federal spending that had been on track to grow, had the blessing of both the Democratic president and the Republican speaker, raising hopes that it could break the fiscal gridlock that has gripped Washington and the nation for weeks. threatening an economic crisis. The two spoke on the phone Saturday evening to iron out the latest issues.
In an evening news conference outside his Capitol office that lasted just a minute, Mr. McCarthy said the deal contained “historic spending cuts, consequential reforms that will lift people out of poverty and into the workforce, curb government overreach,” and added. no new taxes. He declined to answer questions or provide details, but said he planned to release the legislative text on Sunday, ahead of Wednesday’s vote.
“We still have more work to do tonight to finish writing it,” he said.
The plan was structured to attract votes from both parties, though it has drawn the ire not only of conservative Republicans but also of Democrats furious at asking them to vote for the cuts they counter with the threat of default.
Still, it gives Republicans the ability to say they managed to cut some federal spending, even as funding for military and veterans programs would continue to grow, while allowing Democrats to say they saved most programs nationals of significant cuts.
The deal would raise the debt limit, which is currently $31.4 trillion, for two years, enough to get through the next presidential election.
It would also impose new work requirements for some recipients of government aid, such as food stamps and the Temporary Assistance for Needy Families program, according to a person familiar with the deal. It would put new limits on the amount of time some food stamp recipients — those under 54 who don’t have children — could benefit from the program. But it would also expand food stamp access for veterans and the homeless, said the person, who spoke on condition of anonymity because they were not authorized to discuss details of the package.
The interim agreement also brings back some unspent money from an earlier pandemic relief bill and cuts by $10 billion (from $80 billion to $70 billion) new implementation funding for the ‘IRS to crack down on tax cheats. It includes measures aimed at speeding up environmental reviews of certain energy projects.
Work requirements and environmental review reforms were among the last details the two sides worked out Saturday.
The White House and congressional negotiators — working around the clock on Capitol Hill, at the White House and virtually — pushed through the resolution almost to the last minute, increasing pressure on lawmakers to accept a solution unpopular with activists both right and left. Economists and Wall Street analysts warned that a default would be devastating and could lead to a global economic crisis.
To avoid a defect, the House and Senate must approve the deal and send it to Mr. Biden for signature. This promises to be a great job for both Mr. McCarthy as for Representative Hakeem Jeffries of New York, the Democratic leader, who must now assemble a coalition of House Republicans and Democrats to push it forward.
Mr. McCarthy has repeatedly said he believes a majority of his conference would vote for the deal, but it remains unclear how many Republicans will support the compromise, and how many Democrats might be needed to vote for it to make up for GOP defections. .
The path is also likely to be difficult in the Senate, where swift action requires bipartisan support and conservatives have indicated they are unwilling to move forward.
Sen. Mike Lee, R-Utah, has vowed to use “every procedural tool” available to block any measure that does not contain substantial tax changes.
Republicans have refused for months to raise the debt limit unless Mr. Biden agreed to spending cuts and reduced future debt, risking a default to exert his leverage. The final deal serves its purpose, but only modestly. A New York Times analysis of the spending caps at the heart of the deal suggests they will cut federal spending by about $650 billion over a decade.
The cuts in the package are almost certainly too modest to win the votes of hard-line conservatives and too strict to win the votes of progressives in the House. Lawmakers in the House Freedom Caucus were privately pouring over the deal Saturday night, and the Congressional Progressive Caucus had already begun to do so even before negotiators finalized the deal.
The deal would impose limits on discretionary spending for two years, though those limits would apply differently to military spending than to the rest of the federal budget. Spending on the military would increase next year, as would spending on care for some veterans. Spending on other national programs would fall slightly (or remain roughly flat) compared to this year’s levels.
The announcement came after months of political confrontation. Mr. Biden and congressional Democrats initially insisted that House Republicans raise the debt ceiling without conditions, but relented after Mr. McCarthy organized his conference to pass a bill to raise the nation’s debt limit in exchange for cutting government programs by an average of another 18 percent. A decade Republicans deliberately avoided setting out exactly which programs they planned to cut, but the passage of the bill forced Mr. Biden to do what he had said he would never do: negotiate on raising the debt ceiling.
The agreement was finally reached by a group led by Biden’s adviser, Steve Ricchetti; its budget director, Shalanda Young; and two of the closest confidants of Mr. McCarthy, representatives Patrick T. McHenry of North Carolina and Garret Graves of Louisiana. They agreed to use some creative accounting maneuvers in the deal to help provide political cover for both sides.
But Mr. McCarthy was still likely to face a revolt from hard-right lawmakers in his conference whom he empowered as part of the concessions he made to become speaker in January, after a landslide election in 15 laps
Texas Representative Chip Roy, an influential conservative, had urged Republicans on Thursday not to “tailgate, take the first exit ramp” of the negotiations “and walk away.”
“Republicans must hold the line and rally around each and every reform proposed in the Limit, Save, Grow Act and not allow these reforms to be abandoned or watered down in the pursuit of a ‘deal’ with Biden,” wrote Mr. Roy to a separate opinion essayreferring to the name of the debt limit bill that House Republicans passed.
Progressives had also vented their unhappiness before the deal was announced.
Lindsay Owens, the executive director of the liberal Groundwork Collaborative in Washington, criticized the agreement for forcing budget cuts in national programs and, in particular, for reducing money from the IRS.
“Giving in to Republican demands to limit the IRS’s ability to go after wealthy tax evaders is a losing proposition for Democrats,” he said. “It undermines an important policy initiative, drains a good source of revenue, and requires the caucus to vote against a policy that is incredibly popular with the public.”
Peter Baker contributed to this report.
