White House and GOP sign debt limit deal to avoid default
President Biden and Chairman Kevin McCarthy reached an agreement in principle on Saturday to lift the two-year debt limit while reducing and capping some of government spending over the same period, a breakthrough after a marathon series of crisis talks that would have swept the country within a matter of days. days after the first standard in history.
Congressional approval of the plan before June 5, when the Treasury is expected to exhaust its ability to pay its obligations, is not assured, especially in the House, which plans to consider it Wednesday. Republicans have a slim majority in the chamber, and right-wing lawmakers who had demanded significantly bigger cuts in exchange for lifting the borrowing limit were already rioting.
But the compromise, which would effectively freeze federal spending on track to grow, had the blessing of both the Democratic president and the Republican speaker, raising hopes that it could break the fiscal stalemate that Washington and the nation have already been in. hold for weeks. an economic crisis looms.
Mr Biden urged the House and Senate to approve the deal in a nightly statement from the White House, saying it would avoid a catastrophic default.
“It is an important step forward that reduces spending while protecting critical programs for working people and growing the economy for everyone,” Biden said. “And the agreement protects the most important priorities and legislative achievements of mine and of the Democrats in Congress. The agreement is a compromise, which means not everyone gets what they want.”
The President and Mr. McCarthy spoke by phone Saturday evening to resolve the final sticking points.
During a late-night press conference outside his Capitol office that lasted just a minute, Mr. McCarthy that the deal “included historic spending cuts, the ensuing reforms that will lift people out of poverty into the workforce, rein in the government’s outreach” and would add no new taxes. He declined to answer questions or provide details, but said he planned to release the bill on Sunday.
“We have more work to do tonight to finish all the writing on it,” he said.
The plan was structured with the aim of luring votes from both parties, although it has drawn the wrath not only of conservative Republicans, but also Democrats who are outraged at being asked to vote for cuts they oppose, with the threat of pending default.
Still, it allows Republicans to say they managed to cut some federal spending — even if funding for the military and veterans programs continued to grow — while Democrats can say they have spared most domestic programs from significant cuts.
The deal would suspend the loan limit, which currently stands at $31.4 trillion, for two years — enough to get past the next presidential election.
According to a person familiar with the agreement, it would also impose new job requirements on some recipients of government assistance, including food stamps and the Temporary Assistance for Needy Families program. It would put new limits on how long certain food stamp recipients — people under age 54, who don’t have children — can take advantage of the program. But it would also expand access to food stamps for veterans and the homeless, said the person, who spoke on condition of anonymity because they were not authorized to discuss package details.
The preliminary deal also reclaims some unused money from a previous pandemic relief bill and cuts by $10 billion — from $80 billion to $70 billion — new enforcement funding for the IRS to tackle tax fraud. It includes measures designed to expedite environmental assessments of certain energy projects and a provision designed to force the president to find budget cuts to offset the costs of a unilateral action, such as canceling student loans — though state officials could get around that requirement . It also includes an enforcement measure designed to prevent a government shutdown later this year.
Work requirements and environmental assessment reforms were among the final details the two sides worked out on Saturday.
White House and Congressional negotiators — working around the clock at the Capitol, in the White House, and virtually — pushed the resolution almost to the last minute, increasing pressure on lawmakers to accept a solution that would was unpopular with activists from both the right and the left. Economists and Wall Street analysts warned that bankruptcy would be devastating and potentially lead to a global economic collapse.
To avoid a default, the House and Senate must approve the deal and send it to Mr Biden for signature. That promises to be a tough task for both Mr. McCarthy as New York Representative Hakeem Jeffries, the Democratic leader, who must now muster a coalition of House Republicans and Democrats to get it through.
Mr McCarthy has repeatedly said he believes a majority of his conference would vote in favor of the deal, but it’s not yet clear how many Republicans will support the compromise — and how many Democrats might be needed to vote to reverse the defection of to make amends for the GOP.
The path is also likely to be rocky in the Senate, where swift action requires bipartisan support and conservatives have indicated they are not willing to go along.
In a sign of their displeasure, members of the House Freedom Caucus gathered to identify procedural tools to delay passage of the agreement or make the bill more conservative.
Republicans have for months refused to raise the debt limit unless Biden agreed to cut spending and reduce future debt — risking default on their influence. The final agreement achieves their goal, but only modestly. A New York Times analysis of the spending caps in the middle of the agreement suggests they will cut federal spending by about $650 billion over a decade, if spending grows at the expected rate of inflation after the caps are lifted two years from now.
The package cuts are almost certainly both too modest to win the votes of hardline conservatives and too severe to win the votes of progressives in the House. Lawmakers in the House Freedom Caucus privately pilloried the deal Saturday night, and the Congressional Progressive Caucus began arguing over it even before negotiators had finalized the deal.
But budget hawks pressed for passage. “The process was tense, risky and ugly, but in the end we have a plan to make savings and lift the debt ceiling, which is what is needed,” said Maya MacGuineas, chair of the responsible federal budget committee in the United States. Washington.
The deal would place limits on discretionary spending for two years, though those limits would apply differently to spending on the military than to the rest of the federal budget. Spending on the military would grow next year, as would spending on care for some veterans. Spending on other domestic programs is expected to fall slightly – or stay about the same – compared to this year’s levels.
The announcement came after months of political conflict. Mr Biden and Congressional Democrats initially pushed for House Republicans to raise the debt ceiling without conditions, but relented after Mr McCarthy convened his conference to pass a bill to raise the borrowing limit of the country in exchange for a cut in government programs by an average of 18 percent from the previous month. a decade. Republicans purposefully avoided saying exactly which programs they planned to cut, but the passage of the bill forced Mr Biden to do what he had said he would never do: negotiate raising the debt ceiling.
The deal was eventually closed by a group led by Mr Biden’s adviser Steve Ricchetti; its budget director, Shalanda Young; and two of Mr. McCarthy’s closest confidants, Representatives Patrick T. McHenry of North Carolina and Garret Graves of Louisiana. They agreed to use some creative accounting maneuvers in the deal to provide political cover for both sides.
But Mr McCarthy would still face an uprising from the hard-right legislators in his conference, whom he authorized as part of the concessions he made to become speaker in January, after a painful 15-round election.
In a private conversation to update his conference members on the impending deal, Mr. McCarthy viewed the agreement as a victory, saying there was little in the package that Democrats supported. But hard-right lawmakers in the Freedom Caucus, who had spent days expressing their frustration at the emerging outline of the deal, expressed their displeasure.
Everything “they fought for” in the House bill was left out of the agreement, Virginia Representative Bob Good said, according to a person familiar with the comments who spoke on condition of anonymity to describe a private conversation. Mr. McCarthy and his deputies defended the deal, citing several victories, including a rollback of money for the IRS
Progressives, too, had expressed their displeasure before the deal was even announced.
Lindsay Owens, the executive director of the liberal Groundwork Collaborative in Washington, criticized the deal for forcing cuts to domestic programs — and in particular for reducing enforcement money for the IRS
“Giving in to Republican demands to hinder the IRS’s ability to go after wealthy tax evaders is a losing proposition for Democrats,” she said. “It undermines an important policy initiative, depletes a good source of revenue and requires the caucus to reject a policy that is incredibly popular with the public.”
Peter Baker reporting contributed.