With just days to go before a possible first-ever U.S. default, House Speaker Kevin McCarthy, R-Calif., said that negotiators had "made some progress" in talks with the White House to raise the debt limit.
"We’re not going to default," McCarthy told reporters Wednesday evening, adding: "I want to work as hard as we can and not stop."
What You Need To Know
- Debt ceiling negotiations are locked on a classic problem that has vexed Washington before: Republicans led by House Speaker Kevin McCarthy want to roll back federal government spending, while President Joe Biden and other Democrats do not
- Time is short to strike a deal before a deadline as soon as June 1, when the Treasury says the government risks running out of cash to pay its bills
- Speaker McCarthy dispatched his top negotiators to the White House on Wednesday in an effort to find common ground
- McCarthy, R-Calif., said later Wednesday that negotiators had "made some progress" in talks with the White House to raise the debt limit
McCarthy said he remained optimistic they could reach an agreement before a deadline as soon as next week, when the Treasury Department could run out of cash to pay its bills. Financial markets are teetering as Washington edges closer to a debt default crisis that would be unprecedented in modern times, sending shockwaves around the globe.
But the California Republican tempered some of his optimism, telling reporters that they were still far apart on some points: "I think being able to find some ways that we can probably get to fruition on a couple of these, there’s still a number of these out there."
But in a potential sign of progress, House Majority Leader Steve Scalise, R-La., advised members of Congress Wednesday evening that they will get 24 hours notice to return to Washington for votes on an agreement.
"Following tomorrow's votes, if some new agreement is reached between President Biden and Speaker McCarthy, members will receive 24 hrs notice in the event we need to return to Washington for any additional votes either over the weekend or next week," Scalise said in remarks to the House. "We will allow all members 72 hours to review any such legislative text that may come before us relating to the debt ceiling before final passage of that bill."
The White House blamed the Republicans led by McCarthy for risking a devastating default that would hit “every single part of the country” as they demand “extreme” spending cuts that would hurt millions of Americans.
From the White House, Press Secretary Karine Jean-Pierre decried what the administration called a “manufactured crisis” set in motion by Republicans pushing “extreme proposals” that would hurt “every single part of the country, whether you’re in a red state or a blue state.”
"We believe there is still an opportunity here to get a bipartisan agreement," she said, later adding of the talks: "If it keeps going in good faith, then we can get to an agreement here that is bipartisan."
Jean-Pierre decried what the administration called a “manufactured crisis” set in motion by Republicans pushing “extreme proposals” that would hurt "every single part of the country, whether you’re in a red state or a blue state.”
Time is running out to strike a deal. Treasury Secretary Janet Yellen said Wednesday that “it seems almost certain” that the United States would not make it past early June without defaulting. That would be catastrophic, as the government risks running out of cash to pay its bills as soon as June 1.
“We are seeing some stress already in Treasury markets,” Yellen said Wednesday at a Wall Street Journal event. "Even in the run up to an agreement, when one does occur, there can be substantial financial market distress, we’re seeing just the beginnings of it."
Debt ceiling negotiations are locked on a classic problem that has vexed, divided and disrupted Washington before: Republicans led by McCarthy want to roll back federal government spending, while Biden and other Democrats do not.
Failure to raise the nation’s debt ceiling, now at $31 trillion, would risk a potentially chaotic federal default, almost certain to inflict economic turmoil at home and abroad. Anxious retirees and social service groups are among those making default contingency plans.
While Biden has ruled out, for now, invoking the 14th Amendment to raise the debt limit on his own, Democrats in the House announced they have all signed on to a legislative “discharge” process that would force a debt ceiling vote. But they need five Republicans to break with their party and tip the majority to set the plan forward.
Dragging into a third week, the negotiations over raising the nation’s debt limit were never supposed to arrive at this point.
The White House insisted early on it was unwilling to barter over the need to pay the nation’s bills, demanding that Congress simply lift the ceiling as it has done many times before with no strings attached.
The newly elected speaker visited Biden at the Oval Office in February, urging the president to come to the negotiating table on a budget package that would reduce spending and the nation’s ballooning deficits in exchange for the vote to allow future debt.
Cheered on by a hard-charging conservative House majority that hoisted him to power, McCarthy was not swayed by a White House counter-offer to freeze spending instead. “A freeze is not going to work,” McCarthy said.
“We have to spend less than we spent last year. That is the starting point.”
McCarthy said earlier Wednesday that he told Biden that "we will not raise taxes," saying that "we've got more revenue coming in to our coffers at any time in American history" before blaming the situation on Democrats and accusing them of reckless spending.
"We cannot continue down this path," McCarthy said, adding: "I think we can make progress. I'm hoping we can make progress."
House Democrats, meanwhile, held a press conference of their own to point fingers at Republicans for dragging out talks and criticize their initial proposal for raising the debt limit in exchange for steep spending cuts.
"Today the United States is closer to default than we’ve ever been in our history for one reason and one reason only: that is extreme Republican recklessness that will crash our economy," said Washington Rep. Pramila Jayapal, the chair of the Congressional Progressive Caucus.
"If we default and if we crash the economy, there is only one person to blame and that is, the Speaker of the House, Kevin McCarthy," she added.
McCarthy disagreed with that assertion, telling reporters later Wednesday that the standoff was "not my fault."
The longstanding Washington debate over the size and scope of the federal government now has just days to be resolved. Failure to raise the nation's debt ceiling, now at $31 trillion, would risk a potentially chaotic federal default, almost certain to inflict economic turmoil at home and abroad.
Negotiations are focused on finding agreement on a 2024 budget year limit. Republicans have set aside their demand to roll back spending to 2022 levels, but say that next year’s government spending must be less than it is now. But the White House instead offered to freeze spending at current 2023 numbers.
By sparing defense and some veterans accounts from reductions, the Republicans would shift the bulk of spending reductions to other federal programs, an approach that breaks a tradition in Congress of budget cap parity.
Agreement on that topline spending level is vital. It would enable McCarthy to deliver spending restraints for conservatives while not being so severe that it would chase off the Democratic votes that would be needed in the divided Congress to pass any bill.
But what, if anything, Democrats would get if they agreed to deeper spending cuts than Biden’s team has proposed is uncertain.
McCarthy and his Republican negotiators said what the Democrats get is a debt ceiling increase — typically something both parties take responsibility for doing.
Asked what concessions the Republicans were willing to give, McCarthy said Wednesday: "We've offered a lot of concessions."
"The cap on the spending is a Democrat idea," the California Republican said. "The work requirement was a Democrat idea. I can't help it if the Democrats have become so extreme, and now is a party of Bernie Sanders than the party where Joe Biden was elected."
"Joe Biden is the President of the United States," McCarthy continued. "He is the head Democrat. But if [progressive Rep. Alexandria Ocasio Cortez] and [Vermont Sen.] Bernie Sanders is going to run their party, that's not my fault.
"I'm not even sure Bernie Sanders is a registered Democrat," he quipped.
When pressed again about what Republicans would be willing to give up in order to avoid default and economic disaster, McCarthy replied: "I'm willing to make America stronger, to curb inflation, less dependency on China and spend less than we spent the year before."
"The moment [Biden] was willing to meet with me, I've been there each and every day and I firmly believe we will get and solve this problem," he later added.
“The problem is not the White House. The problem is Kevin McCarty and the extreme Republicans,” said Rep. Jayapal. “They are the ones holding this economy hostage, that are putting all these cuts on the American people.”
The White House has continued to argue that deficits can be reduced by ending tax breaks for wealthier households and some corporations, but McCarthy said he told the president at their February meeting that raising revenue from tax hikes is off the table.
The negotiators are now also debating the duration of a 1% cap on annual spending growth going forward, with Republicans dropping their demand for a 10-year cap to six years, but the White House offering only one year, for 2025.
Republicans, however, are pushing additional priorities as the negotiators focus on the $100 billion-plus difference between the 2022 and 2023 spending plans as a place to cut.
They want to beef up work requirements for government aid to recipients of food stamps, cash assistance and the Medicaid health care program that the Biden administration says would impact millions of people who depend on assistance.
All sides have been eyeing the potential for the package to include a framework to ease federal regulations and speed energy project developments. They are all but certain to claw back some $30 billion in unspent COVID-19 funds now that the pandemic emergency has officially been lifted.
The White House has countered by keeping defense and nondefense spending flat next year, which would save $90 billion in the 2024 budget year and $1 trillion over 10 years.
McCarthy promised lawmakers he will abide by the rule to post any bill for 72 hours before voting, making any action doubtful until the weekend — just days before the potential deadline. The Senate would also have to pass the package before it could go to Biden’s desk to be signed.