WASHINGTON (AP) — Days after a deadline, President Joe Biden and House Speaker Kevin McCarthy are approaching a two-year budget deal to curb federal deficits in exchange for lifting the country’s debt ceiling and averting an economically devastating government default.
The Democratic president and Republican speaker hope to reach a budget compromise this weekend. With Republicans enacting major budget cuts, the two parties have failed to agree on spending levels for 2024 and 2025. Any deal would have to be a political compromise, with support from both Democrats and Republicans to pass the divided Congress.
But budget flow is not the only problem.
A person familiar with the talks said the two sides are “entrenched” about whether or not to agree to Republican demands to impose stricter work requirements on people receiving government food stamps, cash aid and health care, some of the most vulnerable Americans. .
Still, both Biden and McCarthy expressed optimism towards the weekend that the gap between their positions could be bridged. A two-year deal would raise the debt limit before then, after the 2024 presidential election.
“We knew this wasn’t going to be easy,” McCarthy, R-Calif., said as he left the Capitol Thursday night.
McCarthy said, “It’s hard, but we’re working and we’ll keep working until we get this done.”
House Republicans pushed the issue to its limits, showing risky political bravado by leaving town before Memorial Day. The US could face an unprecedented bankruptcy on June 1, throwing the global economy into chaos.
In remarks at the White House, Biden said, “It’s about competing versions of America.”
“The only way forward is with a bipartisan agreement,” Biden said Thursday. “And I believe we will come to an agreement that will allow us to move forward and protect the hard-working Americans of this country.”
Lawmakers are tentatively not expected to return to work until Tuesday, just two days after the early June deadline, when Treasury Secretary Janet Yellen has said the US could run out of cash to pay its bills and face with a federal default.
Biden will also be away this weekend, leaving Friday for the presidential retreat at Camp David, Maryland, and Sunday for his home in Wilmington, Delaware. The Senate is in recess and will be until after Memorial Day.
Meanwhile, the 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 has resisted negotiating the debt limit with McCarthy, arguing that the country’s full confidence and credit should not be used as a bargaining chip. leverage to weed out other partisan priorities. .
The White House has offered to freeze 2024 spending for next year at current levels and cap spending for 2025, but the Republican leader says that’s not enough.
“We have to spend less than last year. That’s the premise,” McCarthy said.
One idea is to fix those topline budget numbers, but then add a “snap-back” provision that enforces the cuts if Congress is unable to meet the new targets during its annual appropriations process.
In terms of job requirements for aid recipients, the White House is particularly opposed to measures that would drive Americans into poverty or cut back on their health care, said the person familiar with the conversations, who was given anonymity to conduct discussions behind closed doors. to describe.
As for the Republican demand to withdraw money for the Internal Revenue Service, it is still an “open question” whether the parties will compromise by allowing funding to be pushed back to other domestic programs, the Republican said. person.
There is pressure from the right flank of the House on McCarthy not to budge on a deal, even if it means passing the June 1 deadline.
“Let’s hold the line,” said Representative Chip Roy, R-Texas member of the Freedom Caucus.
McCarthy said Donald Trump, the former president running for re-election, told him, “Get a good deal.”
If the US debt ceiling, now at $31 trillion, is not raised to pay America’s bills already incurred, there is a risk of potentially chaotic federal bankruptcy. Anxious retirees and social services are among those already making standard emergency plans.
Even if negotiators close a deal in the coming days, McCarthy has promised lawmakers he will stick to the rule of publishing any bill 72 hours before the vote — now likely Tuesday or even Wednesday. The Democratic Senate has vowed to move quickly to get the package to Biden’s office just before the potential deadline next Thursday.
According to another person familiar with the talks, the Republicans could potentially relax their demand to increase defense spending, offering instead to keep it at the level proposed by the Biden administration.
The teams are also looking at a proposal to boost power transmission line development from Sen. John Hickenlooper, D-Colo., that would facilitate the construction of an inter-regional power grid, according to a person familiar with that design. Those two people were also given anonymity to discuss the private negotiations.
The White House has continued to argue that deficits can be reduced by ending tax breaks for wealthier households and some businesses, but McCarthy said he already told the president at their February meeting that raising revenue from tax increases was out of the question.
While Biden has preliminarily ruled out invoking the 14th Amendment to raise the debt limit alone, House Democrats announced they have all agreed to a legislative “discharge process” that would force a vote on the debt ceiling. But they need five Republicans to break with their party and tip off the majority to pass the plan.
They will almost certainly get back some $30 billion in unused COVID-19 funds now that the pandemic emergency has been officially lifted.
Associated Press writers Chris Megerian, Josh Boak, Zeke Miller and Mary Clare Jalonick contributed to this report.