By LISA MASCAO, SEUNG MIN KIM and KEVIN FREKING (Associated Press)
WASHINGTON (AP) – House Speaker Kevin McCarthy and his Republican debt negotiators reached “crunch” time on Capitol Hill Friday, trying to strike a deal with President Joe Biden to cut federal spending and raise the nation’s borrowing limit before rapid emergence. Deadline.
They hope to end weeks of frustrating talks and reach a deal by this weekend. The Treasury says the government could start running out of money as early as next Thursday, sending the US into a potentially catastrophic default with economic spillovers around the world.
Anxious pensioners and social services groups were among those making default contingency plans as lawmakers left town for the long holiday weekend. The next batch of Social Security checks is set to go out next week.
“The world is watching,” International Monetary Fund Managing Director Kristalina Georgieva said as she met with Treasury Secretary Janet Yellen on Friday. “Let us remember that we are now in the 12th hour.”
Democrat Biden and the Republican spokesman were narrowing their differences as they worked to hammer out the details of a two-year deal that would curb federal spending and raise the legal borrowing limit after next year’s presidential election.
Any deal would have to be a political compromise with support from both Democrats and Republicans to pass a divided Congress.
“We know it’s a crisis,” McCarthy said as he arrived at the empty Capitol, acknowledging that more progress is needed.
In remarks at the White House honoring Louisiana State University’s champion women’s basketball team, Biden gave a shout-out to one of those top negotiators saying he was “making a deal, hopefully.”
He was referring to Office of Management and Budget Director Shalanda Young, who attended the event, as did Rep. Garret Graves of Louisiana, a top Republican negotiator.
While the contours of the deal have taken shape to cut spending for 2024 and impose a 1 percent cap on spending growth for 2025, the two sides remain deadlocked on various provisions. The debt ceiling, now at $31 trillion, will be raised for two years to pay the nation’s bills.
A person familiar with the talks said the two sides were “settled” on whether or not to agree to Republican demands to impose stricter work requirements on people receiving government food stamps, cash assistance and health care.
House Democrats have called such requirements for health care and food aid a non-starter.
Asked if Republicans would drop work requirements, Graves blurted out, “Hell no, not a chance.”
House Republicans pushed the issue to the brink, showing risky political bravado in leaving town for the Memorial Day holiday. Lawmakers are not expected to return to work until Tuesday, just two days after the June 1 “X date,” when Treasury Secretary Yellen said the U.S. could face default.
Biden will also be away this weekend, leaving on Friday for the presidential retreat in Camp David, Maryland, and on Sunday for his home in Wilmington, Delaware. The Senate is in recess and will return after Memorial Day.
“Every time there is progress, the issues that remain become more difficult and more challenging,” said negotiator Rep. Patrick McHenry, RN.C., Friday at noon.
Weeks of negotiations between Republicans and the White House failed to reach an agreement — in part because the Biden administration opposed negotiating with McCarthy on the debt limit, arguing that the country’s full faith and credit should not be used as leverage to extract other priorities partisans. .
“We have to spend less than we spent last year. That’s the starting point,” McCarthy said.
One idea is to set the top budget numbers, but then add a “snap-back” provision to impose cuts if Congress can’t during its annual appropriations process meet the new targets.
On work requirements for aid recipients, the White House is particularly opposed to measures that could push more people into poverty or take away their health care, said the person familiar with the discussions, who spoke on condition of anonymity because to describe closed-door discussions.
On the Republican demand to cancel money for the Internal Revenue Service, it is still an “open issue” whether the parties will compromise, allowing funding to be pushed into other domestic programs, the person said.
In a potential development, Republicans could ease their demand to increase defense spending beyond what Biden proposed in his budget, offering instead to keep it at the proposed levels, according to another person familiar with the talks. .
The teams are also pursuing a proposal to spur the development of power transmission lines from Sen. John Hickenlooper, D-Colo., to facilitate the construction of an interregional power grid.
Meanwhile, McCarthy is feeling pressure from the right side of the House not to budge on any deal, even if it means missing the June 1 deadline.
“Let’s hold the line,” said Rep. Chip Roy, R-Texas, a member of the Freedom Caucus.
McCarthy said Donald Trump, the former president who is running for office again, told him, “Make sure you get a good deal.”
Vigilant Democrats, however, are pressuring Biden. The top three House Democratic leaders, led by Rep. Hakeem Jeffries, spoke to the White House Thursday night.
Even if negotiators reach a deal in the coming days, McCarthy promised lawmakers he would abide by the rule to publish any bill for 72 hours before a vote — now likely Tuesday or even Wednesday. The Democratic-controlled Senate has vowed to move quickly to send the package to Biden’s desk, even before a possible deadline next Thursday.
Meanwhile, the Fitch Ratings agency placed the United States’ AAA credit on “ratings watch negative”, warning of a possible downgrade.
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 as early as their meeting in February that increasing revenue from tax increases was not on the table.
While Biden has ruled out, for now, invoking the 14th Amendment to raise the debt limit himself, House Democrats have announced they have all signed on to a legislative “discharge” process that would force a vote for the debt ceiling. But they need five Republicans to break with their party and tilt the majority to move the plan forward.
They are almost certain to recover about $30 billion in unspent COVID-19 funds now that the pandemic emergency has officially been lifted.
Associated Press writers Mary Clare Jalonick, Stephen Groves, Fatima Hussein, Farnoush Amiri and videographer Rick Gentilo contributed to this report.