President Joe Biden and Speaker Kevin McCarthy plan to meet Monday afternoon to discuss how to raise the debt limit after a weekend of negotiations by proxies left each side accusing the other of throwing up new roadblocks to a deal.
With only 10 days to spare before the government may be unable to pay all its bills, the two top negotiators will try to reset the table for a compromise that both sides claim to want but which has eluded them for months.
McCarthy, who spoke with Biden by phone Sunday on the president’s return from a meeting of the world’s leading democracies in Japan, accused Biden of backtracking from a pledge not to include tax increases in a debt limit package.
“He goes overseas and now he wants to change the debate,” the California Republican said on Fox News before his phone call. “That’s not healthy.”
Biden, at a news conference in Japan, warned that Republicans could “force a default by doing something outrageous,” as he again pushed back against steep spending cuts sought by the GOP.
Biden’s delegation to the debt limit talks, including White House counselor Steve Ricchetti and budget director Shalanda Young, met with McCarthy’s proxies led by GOP Reps. Garret Graves of Louisiana and Patrick T. McHenry of North Carolina for about two and a half hours Sunday night at the Capitol. They left without elaborating on where things stood.
“We’ll keep working tonight,” Ricchetti said on his way out.
Treasury Secretary Janet L. Yellen warned again Sunday that federal borrowing authority could run dry as early as June 1, leaving the government unable to pay all its bills. “I certainly haven’t changed my assessment, so I think that that’s a hard deadline,” she said on NBC’s “Meet the Press” program.
Yellen also rejected Republican claims that she may be exaggerating the fiscal stakes to force a deal because the government will get new tax receipts on June 15 that could extend the time lawmakers have to act. While the timeline remains uncertain, she said, “the odds of reaching June 15 while being able to pay all of our bills is quite low.”
Wrightson ICAP, an independent research firm that closely follows the national debt, issued a memo Sunday night saying its own debt ceiling forecast “is not quite as gloomy as the Treasury’s — but it’s close.” The firm differed only slightly on Yellen’s prediction of running out of borrowing room before June 15. “We think it is a close call — at best,” it said.
Spending cuts, tax increases
Negotiators have feuded for days over the length and severity of discretionary spending caps that would be part of a deal to raise the debt limit — a key condition demanded by Republicans.
Last week, there was renewed optimism that a deal could be reached as soon as Sunday, in time to draft legislative text, provide the required 72 hours notice and vote this week in the House. Senate leaders were making plans to potentially call their members back early from this week’s recess. But starting on Friday, with Biden out of the country, the talks turned sour.
The White House over the weekend had proposed roughly freezing next year’s discretionary spending at this year’s levels — a plan Biden said would save an estimated $1 trillion over a decade compared to baseline projections. But House Republicans, in their own debt limit bill they passed last month, called for rolling back discretionary spending to fiscal 2022 levels, which the Congressional Budget Office said would save $3.2 trillion over 10 years.
Defense spending has become another partisan flashpoint. The White House would impose its near-freeze on defense and nondefense programs alike. But Republicans have called for increasing defense, which would force much deeper cuts to domestic programs.
If defense and veterans programs were exempt from cuts as Republicans seek, the proposed White House freeze at fiscal 2023 levels “would mean everything else would have to be cut 12 percent” in the coming year, said Joel Friedman, senior vice president for federal fiscal policy at the liberal-leaning Center on Budget and Policy Priorities.
Biden also faulted Republicans over the weekend for refusing to consider tax increases as part of a deficit reduction plan, instead of relying solely on spending cuts. But McCarthy said the president had acknowledged to him privately that tax increases were “off the table,” and accused Biden of backtracking.
House Budget Chairman Jodey C. Arrington, R-Texas, said Sunday that Republicans would refuse to consider a deal that includes a tax increase. “We’re heading into recession,” Arrington said on ABC’s “This Week” program. “This is not the time to put a tax on our economy or on working families.”
Republicans also want to claw back unspent COVID-19 pandemic aid that the Congressional Budget Office has estimated to be about $56 billion. Democrats have protested losing some of that money, saying the move could also lead to a cut to veterans.
Republicans also want a deal to include measures to streamline the federal permitting process for energy projects to boost domestic energy production. Some Republicans have also talked about including elements of the House-passed GOP border security measure but it wasn’t clear negotiators were still discussing that option.
Still another sticking point was whether Republicans would insist on clawing back money appropriated to the IRS last year to step up tax enforcement. Rep. Byron Donalds, R-Fla., a member of the hard-right Freedom Caucus, told NBC an increase in IRS agents “would go after middle-class families and small-business owners.”
But Yellen rejected the GOP criticism, saying the additional IRS manpower would crack down on “tax fraud” and help close a gap of an estimated $7 trillion over the next decade that is owed but unlikely to be collected without greater enforcement.
And negotiators continued to battle over whether and how to impose additional work requirements on recipients of federal benefit programs such as Temporary Assistance to Needy Families and food stamps.
A Democratic aide familiar with the talks said Republicans pitched recycling a Trump-era proposal to make it tougher for states to waive Supplemental Nutrition Assistance Program work requirements, which the Agriculture Department said at the time could result in nearly 700,000 people losing their benefits. That provision wasn’t in the House-passed debt limit bill.
Discharge petition, 14th Amendment talk
With so much left to resolve and so little time, Sen. Chris Van Hollen, D-Md., advocated moving to “Plan B” on Sunday — a discharge petition in the House that could force a floor vote on a debt limit bill.
“I’m extremely worried about where we are now,” Van Hollen told ABC. “I think the markets are going to get shaky.”
But that would move would require winning support from at least five House Republicans if all Democrats support it. And the convoluted process wouldn’t be completed until well after the June 1 deadline, even if somehow could pass in both chambers.
Meanwhile, Biden came as close as he ever has to endorsing a move to invoke the 14th Amendment to the Constitution and its public debt clause, which some legal scholars have interpreted to mean the executive branch can keep paying U.S. debts even after exceeding the statutory limit.
“I’m looking at the 14th Amendment, as to whether or not we have the authority. I think we have the authority,” Biden said at his Sunday press conference.
But then he quickly appeared to douse hopes expressed by a number of Democrats that he use the 14th Amendment rather than negotiate with Republicans.
“The question is: could it be done and invoked in time that it … would not be appealed and, as a consequence, pass the date in question and still default on the debt?” Biden said. “That’s a question that I think is unresolved.”
Paul M. Krawzak contributed to this report.
