Speaker of the House Kevin McCarthy, R-Calif., talks with reporters about the debt ceiling negotiations in Statuary Hall of the U.S. Capitol on Wednesday, May 24, 2023.
Tom Williams | CQ-Roll Call, Inc. , Getty Images
Top congressional Republican Kevin McCarthy said Saturday he was making “progress” in talks with Democratic President Joe Biden on raising the federal government’s debt limit, as the nation faces the risk of default in less than a week.
Time is tight. The Treasury Department said Friday that the government will lack the funds to pay all of its bills without Congressional action on June 5, a slightly later but longer deadline than its earlier forecast of default as early as June 1.
And any deal in principle between Biden and House Speaker McCarthy would be the start of a weeks-long process of legislating through a narrow and bitterly divided Congress.
McCarthy told reporters, “We don’t have a deal.” “We’re not there yet. We’ve made progress, we did a good job this morning. And now we’re back at it.”
Hardline Republicans have threatened to block any bill that does not meet their expectations, including sharp spending cuts.
Progressive Democrats have threatened to withdraw support for some of the compromises, particularly those taken to impose new work requirements on federal anti-poverty programs.
“It’s very close and I’m optimistic,” Biden told reporters on Friday.
Republicans control the House by a 222–213 margin, while Democrats hold a 51–49 Senate majority, leaving a narrow path for a Democratic president and Republican speaker to pass any compromise into law.
Republicans have called for sharp curbs on government spending over the coming 10 years to slow the growth of the US debt, which now equals the economy’s annual output.
But a tentative agreement will likely fall far short of their goal.
The two sides have tentatively reached an agreement that would substantially increase the debt ceiling to meet the country’s borrowing needs through the November 2024 presidential election.
It would boost spending on the military and veterans care, and cap spending on a number of discretionary domestic programs, according to sources familiar with the talks.
McCarthy said Republicans are still pushing for energy permitting reforms, including making it easier to drill for gas and oil.
sticking points
Republicans have rejected Biden’s proposed tax hikes, and neither side has shown a willingness to take on rapidly expanding health and retirement programs that will rapidly increase the debt in coming years.
Biden’s signature infrastructure and green-energy laws would remain in place, while the Internal Revenue Service would slightly reduce the increase in its most recent budget.
But the safety-net program remains a sticking point. Republicans want to toughen work requirements for the Medicaid health plan and the SNAP food assistance program for the poor. Democrats say it will create more barriers for people already struggling to make ends meet.
Both programs expanded dramatically during the COVID-19 pandemic, but have been scaled back in recent months.
Failure by Congress to raise its own debt limit before June 5 could trigger a default that would roil financial markets and send the United States into a deep recession.
Several credit-rating agencies have said they have placed the United States on review for a possible downgrade, which would raise borrowing costs and undermine its position as the backbone of the global financial system.
A similar 2011 impasse led Standard & Poor’s to downgrade its rating on US debt, hurting markets and raising the government’s borrowing costs.
