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Parties moving closer on debt ceiling deal as talks drag on

Parties appeared to be making progress as negotiations stretched late into the night, but difficult issues remain

Rep. Patrick T. McHenry, R-N.C., arrives at the Capitol during the last votes of the week on Thursday.
Rep. Patrick T. McHenry, R-N.C., arrives at the Capitol during the last votes of the week on Thursday. (Tom Williams/CQ Roll Call)

Negotiators working to hash out a deal to raise the debt limit were getting closer to agreement late Thursday on a framework that could potentially lift the nation’s borrowing cap until sometime in 2025 and set appropriations caps for the next two fiscal years.

A source familiar with the talks said the package would provide enough borrowing authority to last two years, which GOP lawmakers said earlier Thursday would require something on the order of $3.5 trillion to $4 trillion.

Two years of discretionary caps would be less than the 10 years House Republicans wanted and included in their debt limit bill that passed last month. The total amount of fiscal 2024 appropriations was still in flux, but the topline was likely to be close to a freeze at current-year levels — rather than the 8 percent cut Republicans sought. But spending would grow just 1 percent the following year, in line with the GOP bill.

Talks remained fluid as negotiators worked into the night Thursday. They were scrambling to assemble a deal that could win bipartisan support and become law ideally by June 1 —  the earliest “x date” for when the government may be unable to pay all its bills without more borrowing authority, according to Treasury Secretary Janet L. Yellen.

Rep. Garret Graves, R-La., said leaving Speaker Kevin McCarthy’s office just before 7:30 p.m. Thursday night that progress was “slow,” specifically calling out the White House for refusing to negotiate on work requirements for certain federal safety-net programs.

“You’re actually prioritizing paying people taxpayer funds to not work, and you’re putting at risk … funds for Medicare and Social Security for seniors,” he said. “I mean, this is just a crazy calculation at this point.”

Graves, one of McCarthy’s top deputies in the talks, said negotiations would continue but there remain significant differences. “We have a lot of hangups, but [work requirements] is one of the big issues we’re dealing with,” he said.

As McCarthy was leaving the Capitol shortly after 6 p.m., he said there was no deal yet but that he’s staying in town to keep working into the weekend.

“We’ve worked throughout the day, and we’ll continue to work to try and solve the problem, but there is no agreement,” McCarthy said. Hours earlier, the House wrapped up votes for the week and members left for their districts and various Memorial Day weekend events.

Within the appropriations caps, the exact split between defense and nondefense programs was still in dispute, according to another source briefed on the discussions. This person also cautioned that a final decision on a two-year debt limit increase had not been made. Some of the details were reported earlier by The New York Times.

But the leading option as of late Thursday was to boost military and veterans programs in line with President Joe Biden’s new budget request, while cutting other nondefense accounts somewhat — roughly to fiscal 2022 levels but adjusted for inflation.

To shield some programs from further cuts, negotiators were moving to shift roughly around $10 billion from mandatory IRS enforcement funds appropriated in last year’s budget reconciliation package to other domestic accounts.  That’s a much smaller cut to IRS funding than Republicans were seeking, but it would cost less in terms of lost revenue, and still gives them a win on one of their top legislative priorities.

Rescissions of unspent pandemic aid and potentially classifying additional veterans health care funds as mandatory spending, taking it out from under the appropriations cap, were also under discussion to soften the blow on nondefense accounts. But nothing had been decided, and a final agreement could still take days to reach.

House Financial Services Chairman Patrick T. McHenry, R-N.C., one of McCarthy’s top proxies in the talks, has in his daily interactions with reporters tried to tamp down optimism that a deal was near. But Thursday morning after emerging from a meeting in McCarthy’s office, he offered what passes for hopeful commentary.

“I’m not a pessimist at the moment,” McHenry said. “The work that we’re doing centers on a shorter and shorter range of issues.”

He repeatedly declined to give a timeline for a deal, however, and earlier in the day he was more pessimistic, saying reaching agreement by this weekend “looks very difficult.”

‘Idiotic’ and ‘un-American’

Members of the hard-line conservative House Freedom Caucus on Thursday were already up in arms, arguing what they’ve heard so far signals McCarthy and his team haven’t extracted enough concessions from Biden.

The House GOP-drafted debt ceiling bill offered only a $1.5 trillion debt limit increase, good through next March at the latest, giving Republicans an election-year shot at extracting more concessions. And it would have produced nearly $5 trillion in deficit reduction over the next 11 years, likely far more than the emerging compromise would.

“We’ve got to take the credit card away from the government, and it’s idiotic for him — for anybody — to consider anything [other] than what we had” in the House-passed bill, Rep. Ralph Norman, R-S.C., said. “To raise the debt ceiling without tremendous concessions is un-American and it shouldn’t happen.”

Likely gone from the final package are provisions blocking Biden’s student loan relief plan and repealing clean energy tax credits from last year’s budget reconciliation law, according to Texas Rep. Chip Roy, another Freedom Caucus member.

“If it’s true that we’re talking about another two, two and a half trillion dollars in debt increase, and if it’s true that we’re going to remove three, four, five, six of the things that we had in the [House bill], someone explain to me why that’s an off-ramp that should be taken now,” Roy said. “I think it’s an exit ramp about five exits too early.”

McCarthy dismissed the criticism from his party’s right flank: “I just think they need to be updated” on the negotiations, he said.

‘Auto-CR’, energy talks

Another idea circulating that’s won conservative backing in the past would set up an “automatic continuing resolution” mechanism in the event appropriations bills aren’t passed by Sept. 30.

The exact details of the House proposal weren’t clear, but the idea is to avert a partial government shutdown without having to scramble to pass a last-minute CR. Appropriations would kick in automatically at some preset level, perhaps the cap set by the debt limit deal.

House Judiciary Chairman Jim Jordan, R-Ohio, is involved in the “auto-CR” discussions, according to a source familiar with the talks. Punchbowl News first reported on the proposal.

The idea also has bipartisan support, including in a bill Sens. Angus King, I-Maine, and James Lankford, R-Okla., introduced earlier this year.

How the provision would incentivize lawmakers to actually finish the annual spending bills was an open question. Some conservatives have floated the idea of across-the-board cuts of 1 to 2 percent as part of an auto-CR; the King-Lankford bill would prevent Congress from adjourning and bar taxpayer-funded travel for lawmakers and staff until their work is done.

Energy policy was also an emerging area of some agreement, although it wasn’t clear how much could get done in time to beat the deadline. Some loosening of permitting requirements sought by Republicans might be included, as well as new rules to bolster interregional transmission of electric power, a priority of Democrats including California Rep. Scott Peters and Colorado Sen. John Hickenlooper.

Their plan would require each region to transfer a certain amount of power out of the region to help with electric grid reliability, an expanding problem as extreme weather events grow more frequent, Peters said.

“I think anyone in energy realizes it’s important not just for reliability, but it’s important for consumer choice because the more competition … the cheaper energy might be,” Peters said. “And also it’s important for getting clean energy from where it is — solar in Arizona — to Detroit, to where it needs to be.”

House Democrats, whose votes will be needed given likely substantial GOP defections, were caucusing on Thursday to discuss the emerging package. Earlier, Minority Leader Hakeem Jeffries and other party members sought to keep up the pressure on Republicans by criticizing them for sending members home for Memorial Day.

“It’s my understanding that the designees of both President Biden as well as Speaker McCarthy will continue to talk, but it is unfortunate that House Republicans have chosen to get out of town before sundown,” Jeffries said.

Procedural hoops

Even if a deal is reached Thursday or Friday, GOP leaders have promised members 72 hours to review the text. So House passage will likely be fairly close to the June 1 deadline, leaving virtually no time for the Senate to jump through its usual procedural hoops and get a bill to Biden’s desk in time.

Under one potential scenario, if the House can pass a bill by next Wednesday, and sends it to the Senate as a “message from the House,” Senate Majority Leader Charles E. Schumer could file cloture on it as soon as that day.

There would be no need for a motion to proceed under this format. The cloture vote would be on June 2, and then up to 30 hours of debate and a final vote on the following day. That would put Treasury into the danger zone, but no payments go out on the weekend anyway.

But House Rules Chairman Tom Cole, R-Okla., said he’s unaware of a legislative vehicle in the House at the moment that could serve as a “message” — something that’s passed both chambers in amended form. So the Senate early next week might still need to send over a vehicle for the House to amend, and then send back.

And then there’s no guarantee that all senators will consent to shorten debate time.

“I will use every procedural tool at my disposal to impede a debt-ceiling deal that doesn’t contain substantial spending and budgetary reforms. I fear things are moving in that direction,” Sen. Mike Lee, R-Utah, tweeted Thursday. “If they do, that proposal will not face smooth sailing in the Senate.”

Avery Roe and Laura Weiss contributed to this report.