As debt ceiling deadline nears, White House accused of ‘lack of urgency’

Debt ceiling negotiators for President Joe Biden and House Speaker Kevin McCarthy traded more budget-cutting ideas at the Capitol Tuesday, but Republicans warned of a “lack of urgency” at the White House to resolve the standoff in time to avert a potentially chaotic federal default.

With barely a week to go before a deadline as soon as June 1 the Democratic president and the Republican speaker were staring down a financial crisis. Failure to strike a deal would be unprecedented, and certain to throw U.S. financial markets into turmoil, inflicting economic pain at home and abroad. Markets lowered Tuesday with no deal in sight.

“We’re not there yet,” McCarthy said at the Capitol, reiterating he won’t bring any bill forward “that doesn’t spend less than we spent this year.”

Behind closed doors, McCarthy urged his slim House Republican majority to “just stick together” despite their own factions as he negotiates the strongest deal possible for conservatives, said lawmakers exiting the private session.

He told reporters the teams are eyeing “creative” ways of rolling back spending that all sides can accept.

“I believe we can still get there — and get there before June 1,” McCarthy, R-Calif., said at midday.

2:58 McCarthy says Democrats ‘addicted to spending’ ahead of Biden debt ceiling meeting

Dragging into a third week, the negotiations over raising the nation’s debt limit, now at $31 trillion, were never supposed to arrive at this point — a crisis in the making.

From the White House, press secretary Karine Jean-Pierre said it was “ridiculous” to suggest Biden wasn’t acting with urgency. “He wants to see this done as soon as possible,” she said.

The White House insisted early on it was unwilling to barter over the need to pay the nation’s bills, demanding that Congress simply lift the ceiling as it has done many times before with no strings attached.

But the newly elected speaker urged the president at an Oval Office meeting in February to come to the negotiating table on a budget package that would reduce spending to reduce ballooning deficits in the post-COVID era in exchange for the vote to allow future debt.

Both men said after a crucial meeting late Monday at the White House — after the president returned from the Group of Seven summit in Japan — that talks were productive.

But with time short to strike a deal, they are laboring to come up with a compromise that could be approved quickly by the Republican House and the Democratic Senate and be signed into law.

2:14 How the U.S. debt ceiling impacts Canada

Negotiations are focused on finding agreement over a 2024 budget year limit. Republicans have set aside their demand to rollback spending to 2022 levels, but say that next year’s government spending must be less than it is now. But the White House instead is offering to freeze spending at current 2023 numbers.

Agreement on that topline spending level is vital. It would enable McCarthy to deliver spending restraint for conservatives while not being so severe that it would chase off the Democratic votes that would be needed in the divided Congress to pass any bill.

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“We are holding firm to the speaker’s red line,” said a top Republican negotiator, Rep. Garret Graves of Louisiana. “Which is that we will not do a deal unless it spends less money than we’re spending this year.”

The White House continues to argue that deficits can be reduced by ending tax breaks for wealthier households and some corporations, but McCarthy said he told the president at their February meeting that raising revenue from tax hikes is off the table.

The negotiators are now also debating the duration of a one per cent cap on annual spending growth going forward, with Republicans dropping their demand for a 10-year cap to six years, but the White House offering only one year, for 2025.

2:05 Talks to avoid U.S. debt default on the edge

Typically, the debt ceiling has been lifted for the duration of a budget deal, and in this negotiation the White House is angling for a two-year agreement that would push past the presidential elections.

Another main Republican negotiator, Rep. Patrick McHenry of North Carolina, who joined the speaker at the Oval Office Monday evening, said, “What I sense from the White House is a lack of urgency.”

But on the Senate side, Republican leader Mitch McConnell said, “Look, I think everybody needs to relax.”

Traveling in his home state of Kentucky, McConnell said of the back and forth, “This is not that unusual.”

However, time is growing short. The House speaker promised lawmakers he will abide by the rule to post any bill for 72 hours before voting, making any action doubtful until the weekend — just days before the potential deadline. The Senate would also have to pass the package before it could go to Biden’s desk to be signed.

McCarthy faces a hard-right flank in his own party that is likely to reject any deal, and that has led some Democrats to encourage Biden to resist any compromise with the Republicans and simply invoke the 14th Amendment to raise the debt ceiling on his own, an unprecedented and legally fraught action the president has resisted for now.

On Tuesday, the leader of the conservative House Freedom Caucus Rep. Scott Perry said: “We all want to stick together. But again, it’s sticking together around the right thing.”

1:05 U.S. debt ceiling crisis: Biden taps senior members for negotiations as he leaves for G7

He and others are skeptical of the June 1 deadline that Treasury Secretary Janet Yellen said is when “it is highly likely” the government will be unable to pay all the nation’s bills.

Treasury said Tuesday it is keeping in close contact with federal agencies on their planned spending as it monitors cashflows.

As the negotiators focus on the $100 billion-plus difference between the 2022 and 2023 spending plans as a place to cut, other priorities Republicans are pushing as part of the deal remain on the table.

Republicans also want to beef up work requirements for government aid to recipients in the Medicaid health care program, though the Biden administration has countered that millions of people could lose coverage.

The GOP additionally wants new cuts to food aid by restricting states’ ability to waive work requirements in places with high joblessness. But Democrats have said any changes to work requirements are nonstarters.

GOP lawmakers are also seeking cuts in IRS funding and, by sparing defense and veterans accounts from reductions, would shift the bulk of spending reductions to other federal programs.

1:21 White House says ‘no deal to be had’ on debt ceiling as crisis looms

The White House has countered by keeping defense and nondefense spending flat next year, which would save $90 billion in the 2024 budget year and $1 trillion over 10 years.

All sides have been eyeing the potential for the package to include a framework to ease federal regulations and speed energy project developments. They are all but certain to claw back some $30 billion in unspent COVID-19 funds now that the pandemic emergency has officially lifted.

—Associated Press writers Kevin Freking, Seung Min Kim, Chris Megerian, Darlene Superville and Fatima Hussein contributed to this report.