After another day of negotiations on Capitol Hill, there is still a "significant gap" between House Republicans and the White House on how to resolve the looming debt ceiling deadline, according to the GOP negotiators.
Reps. Garret Graves and Patrick McHenry said that until the president and the White House “recognize that this is a spending problem” those gaps could remain. The Treasury Department has said the country could default as soon as June 1.
Graves said there are no planned meetings tonight with the White House, but the door is open for more talks should the administration want to return to the Capitol. He said Republican negotiators are meeting in Speaker Kevin McCarthy's office to try to come up with other options to cut spending.
McCarthy has said over the week that he needs an agreement to come together by the end of the week in order to meet the “X date” deadline, a date that some in his conference has said is not a hard-and-fast date.
McHenry, however, said he trusts Treasury Secretary Janet Yellen's assessment, saying, "She said June 1, and she is in charge of cash management. There's a whole bureaucracy within the Treasury. They don't play games. They don't play games.”
This underscores that the clock is ticking for both sides, with McHenry saying it will take 24 to 48 hours to actually write the legislation. He also said they will keep the rule in the House that allows members three days to review the bill before voting on it.
House Minority Leader Hakeem Jeffries blasted House Republicans for demanding significant spending cuts be included in any debt limit deal and accused them of not being willing to compromise.
“America is at risk of a dangerous default for one reason: extreme MAGA Republicans in the House of Representatives refuse to be reasonable in trying to find common ground with President Biden, House and Senate Democrats,” he said. “You cannot achieve a bipartisan resolution if House Republicans have taken the position that it's my way or the highway.”
He noted that any deal will also need to get bipartisan support in the House, as some conservatives are threatening to vote against anything less than the debt limit bill they passed last month.
Because of this, Jeffries argued that Democrats will need to be part of the resolution, but that House Republicans "have taken the position that the only thing they're willing to yield on is avoiding a default,” adding that they are acting “differently, irresponsibly, and unreasonably.”
Pressed whether freezing spending at 2023 fiscal year levels is the absolute limit for the White House and Democrats, Jeffries replied that it is a reasonable compromise.
"That is an approach that actually represents finding common ground,” he said. “It's less than what President Biden asked for in his budget, but it doesn't go as far as the dramatic, draconian and devastating cuts that extreme MAGA Republicans want to visit on the American people.”
Several moderate Republicans and GOP members from swing districts poured cold water on the long-shot Democratic effort to force a vote on a debt ceiling hike and circumvent Republican leadership.
Democrats have initiated a so-called discharge petition, where they need 218 signatures to force a vote on legislation. But with 213 members — and only 210 Democrats signing on so far — they need Republican support, which they are struggling to get.
Rep. Mike Lawler, a freshman New York Republican, rejected the idea outright.
"My position has never changed. The president must negotiate with the speaker. They're finally negotiating. So maybe what Leader (Hakeem) Jeffries should be doing is actually supporting those negotiations, and working to find compromise, rather than undermine it and create chaos. That might be a good idea, for a leader of the party to try that," Lawler said, referring to the Democratic leader.
Other moderate Republicans echoed Lawler's call for negotiation and compromise.
“I’m not interested in that,” Rep. David Joyce of Ohio told CNN. "Why would we do that right now when we got Speaker McCarthy and President Biden sitting down in hopefully serious negotiations to get to top-line spending? I think it's premature to discuss anything like that.”
Rep. Nancy Mace, a South Carolina Republican from a swing district, also did not indicate she would sign on.
“I'm not gonna vote on a clean debt ceiling without some sort of responsible, reasonable mechanism to say, ‘Hey, timeout on spending,’” she said.
White House and House Republican negotiators met Tuesday as the clock ticks on the nation's debt ceiling drama.
Talks are not going well, according to key GOP negotiators Patrick McHenry and Garret Graves. And House Speaker Kevin McCarthy said Tuesday that he’s not close to a bipartisan deal with President Joe Biden to avoid a first-ever default on the nation’s debt. He left the Capitol on Tuesday and told reporters that he does not expect a debt ceiling deal to come through today.
Exactly when the federal government will no longer be able to pay its bills in full and on time is not known, but it could come as soon as early June.
Here's what you should know:
Talks on the table: McHenry refused to say whether the White House and Republicans have discussed a short-term bill to raise or suspend the debt limit in the event a deal cannot be reached by the deadline for a potential government default. He argued, however, that there are "technical challenges" to doing that. McHenry and Graves said the White House needs to realize they have to agree to cut spending or no deal can be reached.
Graves told reporters that as the negotiators deal with spending, they also have to be dealing with the reality of the other issues that have become part of these talks, including clawing back unspent Covid funds, new work requirements and other issues.
McCarthy said he thinks Biden is trying to “disrupt” debt ceiling negotiations by bringing proposals involving Medicare and Social Security back on the table. McCarthy also said he wanted longer spending, saying that “the country would be in better shape” if they were extended out. The White House has said cuts to Social Security and Medicare are off the table in debt ceiling negotiations. But they have long telegraphed an interest in expanding Medicare drug price negotiation, which would raise additional revenue by allowing the government to negotiate the prices of more prescription drugs.
Democrats and Republicans remain divided: House members on both sides of the aisle remain divided over the approach to debt ceiling discussions. House Democratic Leader Hakeem Jeffries on Monday evening asserted that talks are moving in the “wrong direction.” Jeffries’ position is critical because McCarthy will almost certainly need House Democratic support to pass any deal cut with the White House. Still, a number of Republicans – even some who haven’t always backed McCarthy – said they are standing by the speaker and are happy with how he’s negotiated up until this point.
Implications of a default. If Congress fails to address the debt ceiling, the federal government could run out of money as soon as June 1, according to Treasury Secretary Janet Yellen. The nonpartisan Congressional Budget Office said Friday there is a “significant risk” the federal government will no longer be able to pay all of its obligations during the first two weeks of June. Experts warn of dire consequences for American families in the case of an unprecedented default on US debt including the possibilities of mass layoffs, market mayhem and spiked borrowing costs. If the US defaults on its debt, it would also raise questions about the safety and viability of US Treasuries. However, an analysis released by the Atlantic Council on Tuesday says investors may actually buy more US Treasuries.
The debt ceiling snafu, which has the potential to wreck the US economy, is a civics lesson in the bizarrely inefficient way the American government spends your money.
Here's the broadest outline of how members of Congress oversee trillions in tax dollars each year and the borrowing of money to make up for the annual shortfall:
- They budget. Lawmakers debate and set priorities through a detailed budget process that was created in the 1970s. The White House initiates a budget proposal each year, and a set of budget committees take a look.
- They authorize. A different set of committees votes to give the government authority to set up and run government programs.
- They appropriate. A third set of committees actually OKs the spending of money, effectively telling the Treasury Department to cut checks.
- They reconcile. Congress OKs the spending of more money than it brings in every year, so the budget process gives lawmakers an opportunity to bypass normal rules to address deficits. (Although in recent years, Republican lawmakers have used this special reconciliation process to pass massive permanent tax cuts for corporations, and Democrats have used it to fund new spending.)
Where does the debt ceiling come in? The debt ceiling, the subject of the current drama consuming the nation's capital, is something else entirely.
While legally separate from the budget process, it represents yet another check that has evolved into the system since a version of the debt ceiling was first adopted in the run-up to World War I.
The Treasury Department has been given gradually more leeway by Congress over how to finance deficit spending, be it for wars, emergencies or the creation of the social safety net.
While the size of that debt has exploded, the government guarantee behind it represents the solid backbone of the US financial system.
"America's ability to borrow — and its sterling reputation for paying it back — is its superpower. And if it doesn't do that — for the first time, ever — that reputation could vanish," writes CNN's chief business correspondent Christine Romans in an excellent piece of analysis.
Using the threat of default on debt for previous spending is an inefficient way to control future spending, she argues.
Read more here
Republican Rep. Michael McCaul, chair of the House Foreign Affairs Committee, said the US doesn’t “default on our full faith and credit” and that talks for a debt limit deal are going well.
"I think the talks are going relatively well now. I think over the weekend they digressed, but now picking up. And I think we’re finding some common ground. I hope by the end of this week we’ll have a vote on the floor," he said in remarks outside the State Department with Democratic ranking member Rep. Gregory Meeks.
Meeks said he is concerned about whether other members of the GOP would vote for any deal agreed to by President Joe Biden and House Speaker Kevin McCarthy.
“I should hope that we don’t see some of the things that we saw on the floor when Mr. McCarthy became the speaker and that they’re able to organize and let’s work out an agreement,” Meeks said.
Federal Reserve Chair Jerome Powell told a coalition of House Democrats on Tuesday that he has a lot of ideas about how to reform the debt ceiling, a person familiar with the matter tells CNN.
Powell spoke before nearly 100 lawmakers at the New Democrat Coalition’s member lunch – a meeting that took place as leaders in Washington struggle to reach a deal to raise the debt ceiling before the government runs out of cash.
During that event, Powell declined to address specifics about debt ceiling negotiations given that these talks are ongoing, the person familiar with the matter said.
However, Powell did say he has ideas about how the controversial debt ceiling can be revamped and would be happy to share them once the current impasse is over, the source said.
A spokesperson for the Federal Reserve declined to comment.
More background: The New Democrat Coalition describes itself as a center-left group of nearly 100 House Democrats committed to “pro-economic growth, pro-innovation and fiscally responsible policies.”
Neel Kashkari, president of the Minneapolis Federal Reserve Bank, told CNN’s Poppy Harlow on Tuesday that it would be “prudent once we get through this scenario to figure out why we do this to ourselves” with the debt ceiling and whether a “more rational approach” can be taken in the future.
“I do think it’s odd,” Kashkari said of the debt ceiling, noting that most major economies don’t have such a borrowing limit. “It’s up for Congress to decide what to do there.”
US stocks closed lower on Tuesday as debt ceiling fears triggered a selloff on Wall Street. Investors are on edge as they fret over the lack of progress towards a deal.
The Dow closed down 212 points, or 0.6% on Tuesday. The S&P 500 was 1.1% lower. The Nasdaq Composite fell 1.2%.
Negotiations between President Joe Biden and Republican House Speaker Kevin McCarthy have so far failed to produce any agreement as the June 1 “hard deadline" for the United States to raise the debt ceiling or risk defaulting on its obligations is just now just nine days away.
Treasury yields, meanwhile, moved higher across the board as worries of a default grew. Yields on the two-year and 10-year notes recently reached their highest levels since March.
As stocks settle after the trading day, levels might change slightly.
House Speaker Kevin McCarthy left the Capitol Tuesday and told reporters that he does not expect a debt ceiling deal to come through.
“I don’t think we’ll get one today," he said.
Earlier, GOP Rep. Patrick McHenry, one of the chief Republican negotiators on the debt limit, told CNN that there are no plans for more meetings with the White House negotiators Tuesday.
“There’s nothing scheduled at this point,” he said.
However, he noted that is just the plan “right now,” and said he’s been out of the office for about an hour and a half — so this could change.