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Parties scramble for deal on debt limit, budget

Not clear parties agree about what's on the table ahead of White House meeting

Speaker Kevin McCarthy conducts a vote on the House floor on May 11.
Speaker Kevin McCarthy conducts a vote on the House floor on May 11. (Tom Williams/CQ Roll Call)

Democratic and Republican staff negotiators spent the weekend and a good part of Monday trying to get on the same page about what’s on the table in debt limit and budget talks ahead of a high-stakes Tuesday meeting at the White House.

The consensus among people familiar with the talks is that the two parties remain far apart, so much so that it wasn’t clear how much progress President Joe Biden and congressional leaders would be able to make at their meeting.

One issue is logistical: Biden is scheduled to leave Wednesday for G-7 meetings in Japan and subsequent stops that will keep him away from Washington for a week.

But Speaker Kevin McCarthy and his allies believe a deal is needed before this weekend, in order to give lawmakers time to get a bill through both chambers and signed by the president before Treasury runs out of borrowing room to meet all U.S. obligations on time.

“I think everybody should ask Joe Biden, you know, why’s he leaving town at such a serious moment? I mean, the American people are worried about defaulting on our debt and he’s going out of the country,” Republican Study Committee Chairman Kevin Hern of Oklahoma said after leaving a meeting in McCarthy’s office Monday.

“I don’t think we’re in a good place. I know we’re not,” McCarthy told reporters, even as the president expressed some optimism over the weekend. The speaker reiterated his view that talks should have started back in February, the first time they met to discuss the budget and debt limit.

McCarthy said he planned to tell Biden that “time is of the essence” during their meeting Tuesday.

“We only have so many days to get it done. So if we’re just going to sit in a room with staffers talking, it’s not going to happen,” he said.

Meanwhile, Treasury Secretary Janet L. Yellen kept the pressure on, reiterating in a letter to lawmakers Monday that the government could run out of cash and “extraordinary measures” used to stay under the $31.4 trillion debt ceiling as soon as June 1. That position hasn’t changed in two weeks.

‘Parallel’ tracks

The other issue is substantive: Negotiators haven’t agreed about what potentially might end up in a package that results in a debt limit increase, or even procedurally how that could get accomplished.

Democrats are still talking about “parallel” tracks where lawmakers keep the debt limit and budget negotiations separate, even if they’re going on concurrently. That appears aimed at technically keeping their pledge not to negotiate on the debt ceiling.

Senate Majority Leader Charles E. Schumer said he, Biden and House Minority Leader Hakeem Jeffries continue to make it clear that “default is not an option.”

And Democrats are also talking about increasing taxes, something Republicans have ruled out — despite the House GOP’s willingness to raise revenue from eliminating a series of expanded clean energy tax credits Democrats pushed through last year.

“This week both sides are continuing to hold parallel discussions about the budget, what we should do with revenues, what we should do with spending, as Congress does every year,” Schumer said in floor remarks Monday. “And I’m glad these conversations are continuing in a very, very serious way.”

The Washington Post reported Monday that Democratic aides had put several tax proposals on the table, including two from Biden’s fiscal 2024 budget request that would increase capital gains taxes on certain cryptocurrency and real estate transactions.

But those are falling flat with Republicans, and there’s a feeling among rank-and-file Democrats that they don’t want to go along with spending cuts unless taxes go up.

“If we want to get serious about deficit reduction, then you have to put tax increases for billionaires and corporations on the table,” Sen. Christopher S. Murphy, D-Conn., said Sunday on NBC’s “Meet the Press” program. “That’s why I’m pretty skeptical that there’s going to be an agreement in the next two weeks.”

As for spending cuts, there is general agreement that appropriations will be capped. But for how many years and at what levels — two major, threshold questions — is undetermined.

House Republicans want 10 years of caps, as in the bill they passed last month, while Democrats don’t want any more than two. The House bill would cut spending in fiscal 2024 by 8 percent, and then allow just 1 percent growth for the next nine years, cutting agency budgets by $3.6 trillion; however they don’t want to cut defense or veterans, so nondefense programs would take a much larger hit.

Senate Appropriations Chair Patty Murray, D-Wash., is set to slam House Republicans for their proposed spending cuts in her opening statement at a full Senate Appropriations Committee hearing on China Tuesday with Defense Secretary Lloyd J. Austin III, Secretary of State Antony J. Blinken and Commerce Secretary Gina M. Raimondo.

These spending cuts will cause the U.S. to lose ground to China, Murray will say. “House Republicans aren’t just proposing one year of cuts to [research and development], diplomacy, workforce programs, essentially everything that keeps us competitive,” Murray will say. “House Republicans are also demanding spending caps that will tie our hands and lock in even more cuts over the next decade.”

The U.S. Chamber of Commerce laid out some potential middle-ground options in a memo to members Friday. For example, instead of cuts in fiscal 2024 appropriations, negotiators could agree to a freeze at the current-year level, and then allow for future growth at the rate of inflation. That would cut agency budgets by $923 billion below the Congressional Budget Office’s baseline forecast, wrote Neil Bradley, the chamber’s chief policy officer.

But there’s also a dispute over which baseline to use, according to sources familiar with the talks. Democrats have floated using Biden’s budget as the baseline, which would produce larger savings on paper if negotiators agree to spending caps since the numbers start out higher. But Republicans have said at minimum they need to use the CBO baseline, which assumes spending grows annually at the rate of inflation.

Work requirements

Then there’s what to do on work requirements: Republicans want to save $120 billion through fiscal 2033, mostly through new rules governing the availability of Medicaid assistance. Biden and Democrats appear adamantly opposed to that provision, though they aren’t happy with the smaller cuts to food stamps either.

“I didn’t come here to take food away from hungry kids, and that’s exactly what this proposal would do; a proposal that would make Scrooge blush,” Sen. John Fetterman, D-Pa., said in a statement Monday.

One area that appears ripe for agreement is clawing back $56 billion in unspent COVID-19 relief funds. But that ends up being even smaller, just $30 billion, when the CBO scores the actual budgetary savings since a portion of those funds weren’t likely to be spent anyway.

And that leads to the separate, but related, question of how much additional room under the debt limit to provide: House Republicans were able to stomach a $1.5 trillion increase, through next March, after the inclusion of $4.8 trillion in total budget savings in their bill.

If the deficit reduction target ends up much smaller, McCarthy could lose a number of GOP votes for any substantial debt limit boost. And Democrats want to punt the next deadline past the 2024 elections, which could require more than $2 trillion in additional borrowing authority.

Laura Weiss, David Lerman, Lindsey McPherson and Aidan Quigley contributed to this report.

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