President Joe Biden and House Speaker Kevin McCarthy are closing near on a two-year budget agreement that will reduce federal deficits in exchange for raising the country’s debt ceiling and preventing an economically ruinous government default. The deadline is just a few days away.
This weekend, Biden and McCarthy are hoping to reach an agreement on the budget. Republicans’ push for significant cuts has prevented the two sides from reaching an agreement on spending levels for 2024 and 2025. To be approved by the divided Congress, any agreement would need to be a political compromise that had the backing of both Democrats and Republicans. The money flow isn’t the only issue, though.
Despite the differences in their positions, both Biden and McCarthy expressed optimism as they headed into the weekend, believing that they could bridge the gap between them. A two-year deal would raise the debt limit for that time, past the 2024 presidential election.
“We knew this would not be easy,” McCarthy, R-Calif., said as he left the Capitol for the evening Thursday. McCarthy said, “It’s hard, but we’re working and we’re going to continue to work until we get this done.”
House Republicans have pushed the issue to the brink, displaying risky political bravado in leaving town for the Memorial Day holiday. The U.S. could face an unprecedented default as soon as June 1, hurling the global economy into chaos. In remarks at the White House, Biden said, “It’s about competing versions of America.”
Bipartisan Agreement
“The only way to move forward is with a bipartisan agreement,” Biden said Thursday. “And I believe we’ll come to an agreement that allows us to move forward and protects the hardworking Americans of this country.”
Lawmakers tentatively do not expect to return to work until Tuesday, which is just two days away from the early June deadline. Treasury Secretary Janet Yellen has warned that the U.S. could begin running out of cash to pay its bills and potentially face a federal default.
Biden will also be away this weekend, departing Friday for the presidential retreat at Camp David, Maryland, and Sunday for his home in Wilmington, Delaware. The Senate is on recess and will be until after Memorial Day.
United States’ AAA Credit
Meanwhile, Fitch Ratings agency placed the United States’ AAA credit on “ratings watch negative,” warning of a possible downgrade. Weeks of negotiations between Republicans and the White House have failed to produce a deal — in part because the Biden administration resisted negotiating with McCarthy over the debt limit, arguing that the country’s full faith and credit should not be used as leverage to extract other partisan priorities.
The White House has offered to freeze next year’s 2024 spending at current levels and restrict 2025 spending, but the Republican leader says that’s not enough.
“We have to spend less than we spent last year. That is the starting point,” said McCarthy. One idea is to set those topline budget numbers but then add a “snap-back” provision that enforces the cuts if Congress is unable during its annual appropriations process to meet the new goals.
According to an anonymous source familiar with the talks, the White House is specifically opposing measures that have the potential to push Americans into poverty or deprive them of their healthcare.
On the Republican demand to rescind money for the Internal Revenue Service, it’s still an “open issue” whether the sides will compromise by allowing the funding to be pushed back into other domestic programs, the person said. Pressure is bearing down on McCarthy from the House’s right flank not to give in to any deal, even if it means blowing past the June 1 deadline.
“Let’s hold the line,” said Rep. Chip Roy, R-Texas, a Freedom Caucus member. McCarthy said Donald Trump, the former president who is again running for office, told him, “Make sure you get a good agreement.”
Nation’s Debt Ceiling, Now at $31 Trillion
Failure to raise the nation’s debt ceiling, now at $31 trillion, to pay America’s already incurred bills would risk a potentially chaotic federal default. Anxious retirees and social service groups are among those already making default contingency plans.
Even if negotiators strike a deal in coming days, McCarthy has promised lawmakers he will abide by the rule to post any bill for 72 hours before voting — now likely Tuesday or even Wednesday. The Democratic-held Senate has vowed to move quickly to send the package to Biden’s desk, right before next Thursday’s possible deadline.
In one potential development, Republicans may be easing their demand to boost defense spending, instead offering to keep it at levels the Biden administration proposed, according to another person familiar with the talks.Those two individuals requested anonymity to actively engage in discussions about the private negotiations.
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.