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Debt limit deal appears close as negotiators keep working

Work requirements for low-income support programs a key sticking point; McCarthy a ‘total optimist’

Speaker Kevin McCarthy is seen after talking with reporters about the debt ceiling negotiations outside the Capitol on Thursday.
Speaker Kevin McCarthy is seen after talking with reporters about the debt ceiling negotiations outside the Capitol on Thursday. (Tom Williams/CQ Roll Call)

The new June 5 deadline for Congress to lift the debt limit “maintains and ensures the urgency” negotiators have to close a deal this weekend.

That’s what Republican negotiator and House Financial Services Chairman Patrick T. McHenry told reporters shortly after Treasury Secretary Janet L. Yellen sent congressional leaders a letter updating the “x date” in which her department expects to run out of cash and accounting maneuvers to continue paying all of the government’s debt obligations.

Yellen previously estimated the cash crunch would hit as early as June 1 but she had left wiggle room that it could happen later in early June. Her newest estimate is more definitive. She said Treasury will not have enough resources to make roughly $92 billion of payments and transfers that are due the week of June 5.

“There was some skepticism of a date range and that you can pick whatever you want it to be and everything else. That is not how this works,” McHenry said. “We now have a solid date we have to perform to.”

While the deadline shift from June 1 to June 5 doesn’t change negotiators’ urgency, it could help them get a bill through both chambers of Congress before the “x date.” It was growing increasingly likely that without a deal in hand procedural hoops that the House and Senate have to jump through would drag the process out beyond June 1.

“We have to perform here in the House and then the Senate has to have time to meet their requirements,” McHenry said. “That means that we’re in the window by which we meet the June 5 deadline. It’s not over. We’re not done. But we’re within the window.”

McHenry said negotiators are in the “closing hours” of their negotiations, but he admitted that could still mean a few days and declined to be more precise.

“There are a lot of issues still on the table,” he said.

Tentative compromises

Rep. Garret Graves, R-La., another of Speaker Kevin McCarthy‘s top proxies in talks with President Joe Biden’s deputies, said one of the remaining sticking points is a GOP demand to beef up work requirements on low-income benefit programs.

“The White House has been very difficult on this issue,” Graves said, after returning to the Capitol from an event there where he spoke with one of the Democratic negotiators, Office of Management and Budget Director Shalanda Young.

“It continues to be a very candid conversation about how we’re going to move forward, if we’re going to be able to come together and ultimately get a deal,” he added.

Despite the remaining obstacles, the Republicans suggested tentative compromises had been reached in some areas, although they declined to comment on specifics.

“We had some progress that was made on some key issues, but I want to be clear, we continue to have major issues that we have not bridged the gap on right now,” Graves said earlier Friday.

Biden told reporters as he departed the White House for Camp David Friday evening that the negotiations were “looking good” and he was “very optimistic” about reaching an agreement.

“I’m hopeful we’ll know by tonight whether we are going to be able to have a deal,” he said.

When asked if he would bow to Republican demands on work requirements, the president answered: “I don’t bow to anybody.”

Spending caps

The contours of the package were starting to become clearer, though as McCarthy said Friday, “nothing is agreed to until everything agreed to.”

Based on preliminary readouts from people briefed on the talks, it appears the measure could raise the debt ceiling by enough to put off the next market-rattling fight until 2025.

Sources familiar with the talks said there is tentative agreement on overall discretionary spending caps for the next two years that would set the fiscal 2024 cap somewhere between the fiscal 2022 level Republicans sought to return to and the fiscal 2023 level that Democrats didn’t want to go below.

Although the exact split for defense and nondefense programs had yet to be worked out, sources said, the ultimate deal is expected to contain a small increase for defense and a slight cut for nondefense programs.

Clawing back unobligated pandemic aid and rescinding some of the funds provided for IRS enforcement in Democrats’ 2022 budget reconciliation law are part of the tentative agreement and are likely to be counted as part of the cuts to nondefense programs.

Funding would then be capped at 1 percent growth the following year.

McCarthy, R-Calif., struck an optimistic tone on Friday morning about the potential for a deal.

“I’m gonna work as hard as we can to try to get this done, get more progress today and finish the journey,” McCarthy said after arriving at the Capitol. “I’m a total optimist.”

‘Not a chance’

Work requirements for certain federal safety net programs remained an outstanding issue late Friday. Republicans initially sought to put more restrictions on eligibility for work-capable adults without dependents in Medicaid, the Supplemental Nutrition Assistance Program and Temporary Assistance for Needy Families.

When asked if Republicans would be willing to drop demands for work requirements, Graves replied: “Hell no. Not a chance. Not happening.”

McCarthy called tightening work requirements a “philosophical difference” between the White House and House Republicans. He and Graves have argued getting more people back into the labor force would shore up Social Security and Medicare’s finances because more payroll tax revenue would flow into those trust funds.

“If you’re opposed to work requirements, you support the idea of borrowing money from China, paying people who are … able-bodied with no dependents, to sit on the couch, and then they aren’t paying any Social Security or Medicare,” McCarthy said Friday.

Democrats are pushing back against the changes, arguing they would hit those most in need the hardest. The Congressional Budget Office estimates provisions in the House-passed debt limit bill would cause around 600,000 people to lose health insurance because of the Medicaid changes, while 275,000 would lose access to SNAP benefits.

House Agriculture ranking member David Scott urged Biden in a statement Friday to “hold the line” against the expanded work requirements, particularly those on SNAP, which he argued would further exacerbate food insecurity.

“This is not a policy that supports economic growth from the bottom up and middle out; it is a boot crushing the fingers of those at the bottom climbing the ladder of upward mobility,” the Georgia Democrat said.

The Medicaid provisions, which the CBO said would cut spending by $109 billion over a decade, seem the likeliest to be dropped.

“We are still having discussions across the board and I certainly don’t speak for the White House, but I will make note that certainly on Medicaid, they have expressed strong concerns there,” Graves said.

McHenry said both sides are feeling increasing pressure as the country approaches the “x date.”

“Here we are, night after night after night,” he said. “And the pressure is more, the consequences are greater. We recognize that, we know this, and the White House surely recognizes it.”

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