Republican Speaker Kevin McCarthy comments on the promising strides in negotiations between House members and the White House toward increasing the national debt ceiling. With the clock ticking towards a potential government default deadline, everyone aims to finalize an agreement.
Despite progress, McCarthy highlighted that more effort was necessary. “Last night brought us closer to our goal, but there’s more to accomplish within this restricted time window,” he added.
President Joe Biden, a Democrat, and McCarthy, the Republican speaker, are working overtime to reach a fiscal compromise before the weekend concludes. The two sides are closing in on a biennial agreement regulating federal spending and increasing the borrowing limit before a potential June 1st deadline when the Treasury might deplete its funds to pay national bills.
The agreement must gain bipartisan support to pass through the divided Congress.
The deal-in-progress would include cuts in 2024 spending, a 1% cap on spending growth in 2025, and a two-year increase in the current $31 trillion debt ceiling, ensuring payment of the nation’s bills past the political turmoil of the presidential election. However, disagreement remains over several provisions.
An insider in the discussions stated that the two parties are entrenched in their stance on whether to acquiesce to the Republican proposal for stricter work requirements for government assistance beneficiaries, many of whom are among America’s most vulnerable.
Despite these disagreements, Biden and McCarthy remain hopeful they can bridge the gap between their positions over the weekend.
Biden’s comments at the White House encapsulated the situation: “It’s about differing visions of America. The only way to proceed is through bipartisan consensus. We’ll reach an agreement enabling progress while protecting America’s hardworking citizens.”
House Republicans have pushed the issue to the edge, leaving the capital for the Memorial Day holiday. As a result, the U.S. faces a possible unprecedented default that could destabilize the global economy.
Congress members are expected to return to work, leaving just two days until the early June deadline when the Treasury may start to run out of funds, leading to a federal default, according to Treasury Secretary Janet Yellen.
After departing for the presidential retreat at Camp David, Maryland, on Friday, Biden will also spend the weekend away, heading to his home in Wilmington, Delaware. The Senate is also on a break, planning to return post-Memorial Day.
Despite several weeks of negotiation, the Republican party and the White House have disagreed. The deadlock is partially due to the Biden administration’s resistance to using the nation’s credit as leverage to meet McCarthy’s partisan preferences.
The White House proposed to cap 2024 spending at current levels and limit 2025 spending, but according to McCarthy, that’s insufficient. “We must spend less than we did last year. That’s the starting point,” stated McCarthy.
One possible solution is setting an overarching budget limit with a “snap-back” clause that would enforce the proposed cuts if Congress fails to meet new objectives in its annual appropriations process.
According to the above source, regarding work requirements for assistance recipients, the White House is staunchly against measures that could push Americans into poverty or deprive them of healthcare.
Concerning the Republican call to retract funding for the IRS, there’s still uncertainty about whether both sides will compromise and allocate the budget to other domestic programs.
A potential breakthrough might be Republicans withdrawing their demand to increase defence spending beyond Biden’s proposed budget, instead agreeing to maintain it at the suggested levels, per another source familiar with the discussions.
In addition, a proposition to enhance energy transmission line development from Sen. John Hickenlooper, D-Colo., that would enable the construction of an interregional power grid is under consideration.
McCarthy is under pressure from right-wing House members not to agree to any deal that might overshoot the June 1 deadline. Rep. Chip Roy, R-Texas, a member of the Freedom Caucus, encouraged: “Let’s hold the line.”
McCarthy mentioned that former President Donald Trump, who is running for office again, urged him to “Ensure you get a good deal.”
The failure to increase the national debt ceiling could lead to a tumultuous federal default. Concerned retirees and social service groups are already preparing for a possible bankruptcy.
Although a deal might be reached in the upcoming days, McCarthy assured lawmakers that he would adhere to the rule of posting any bill 72 hours before voting, making Tuesday or Wednesday the likely voting days. The Democratic-led Senate has committed to swiftly forwarding the package to Biden’s desk, just ahead of the possible deadline.
Fitch rating agency has put the United States’ AAA credit on a “ratings watch negative,” signalling a potential downgrade.
While the White House continues to assert that curbing tax breaks for wealthy households and some corporations can reduce deficits, McCarthy claims that he informed the president in their February meeting that tax hikes for revenue generation were non-negotiable.
Although Biden currently rules out invoking the 14th Amendment to increase the debt limit, House Democrats have declared their unanimous support for a legislative “discharge” process that would enforce a debt ceiling vote. However, they require five Republicans to diverge from their party and tip the majority to set the plan in motion.
There is a near certainty that around $30 billion in unspent COVID-19 funds will be reclaimed now that the pandemic emergency has officially been lifted.
As the negotiations continue and the deadline approaches, all parties acknowledge the high stakes. Failure to raise the debt ceiling would risk a potentially chaotic federal default and profoundly impact the global economy. While there is progress, there remains a significant gulf to bridge, particularly around issues such as work requirements for aid recipients and funding for the IRS. The nation and the world watch and wait, hoping for a resolution that averts potential economic disaster.
