Negotiators Halt Debt-Ceiling Talks With No Breakthrough in Sight
White House, Republicans hope to reach deal centered on spending cuts, work requirements
Debt-ceiling negotiators broke off a second round of talks late Friday without yielding a breakthrough, as the White House and House Republicans struggled to reach a deal to raise the limit and avert a government default as soon as next month.
The resumption and abrupt end of the talks Friday night followed a breakdown in the negotiations earlier in the day, highlighting the divisions that remain as time for reaching a deal draws short.
Rep. Patrick McHenry (R., N.C.), one of the negotiators, said that he wasn’t confident it would be possible to reach an agreement this weekend, the deadline that President Biden said needed to be met to clear legislation by June 1, when the U.S. could default.
“This wasn’t a negotiation tonight,” Rep. Garret Graves (R., La.) told reporters after talks ended. “This was a candid discussion about realistic numbers, a realistic path forward.”
White House officials left the Capitol without promising to return. “We’re going to keep working tonight,” White House adviser Steven Ricchetti told reporters. “I’m not assessing anything. I’m sorry,” Ricchetti said when asked if he would be returning.
Negotiators said the breakdown in talks centered around how deeply to cut the government budget, with House Speaker Kevin McCarthy (R., Calif.) saying Friday that spending levels were a major sticking point as Republicans pressed for deeper reductions than Democrats appeared poised to accept. Republicans have ruled out any tax increases as a way of reducing federal deficits.
“We’ve got to get movement by the White House and we don’t have the movement yet so, yeah, we’re in a pause,” McCarthy told reporters. “We can’t be spending more money next year. We have to spend less than we spent the year before. It’s pretty easy.”
“There is no question we have serious differences,” White House press secretary Karine Jean-Pierre said in a briefing in Hiroshima, Japan, where Biden was attending the Group of Seven summit. She said the president is being briefed regularly while he is in Asia and the White House will “work hard toward a reasonable bipartisan solution” that can pass both chambers of Congress.
“This is the core of democracy, that’s what we’re seeing at play here,” she said, adding that both sides will need to give up some of their demands to land a deal.
The White House followed up with a tougher statement from White House communications director Ben LaBolt. “Republicans are taking the economy hostage and pushing us to the brink of default,” he said, adding that Republicans “are recycling a barely watered down version of their extreme budget proposal.”
In Hiroshima on Saturday, Biden told reporters during a meeting with Australian Prime Minister Anthony Albanese that he was “not at all” worried about the talks. He said they tend to move in stages and “I still believe that we’ll be able to avoid a default.”
The initial setback in talks tempered a weeklong selloff in U.S. Treasurys, with rebounding expectations for economic growth and inflation driving bond yields to new two-month highs. The yield on the benchmark 10-year U.S. Treasury note settled at 3.690% Friday—its highest close since March 10, the day that Silicon Valley Bank was seized by the government following a run by depositors. Yields rise when bond prices fall.
The Dow Jones Industrial Average fell 109.28 points, or 0.3%, while the S&P 500 and Nasdaq Composite finished slightly lower. All three major indexes finished the week in the green.
The break came one day after the White House and McCarthy had expressed optimism that a deal could be reached soon, after both sides narrowed negotiations between McCarthy and Biden to a handful of key aides and allies. McCarthy said he hadn’t spoken Friday with Biden.
Negotiators are facing a short deadline. The Treasury Department has said that the U.S. could become unable to pay its bills on time as soon as June 1 unless Congress acts. Negotiations have focused on capping spending, revoking unused Covid-19 aid, streamlining permitting for energy projects and changing work requirements for some benefit programs.
McHenry had earlier characterized the breakdown in talks as “putting negotiations at a very bad moment.”
Ricchetti had said as he left a meeting earlier Friday that both sides were “playing by ear” when asked whether there would be more talks.
A bill passed by the GOP-controlled House in April that Republicans see as the starting point in negotiations proposed raising the nation’s $31.4 trillion borrowing limit in exchange for deep cuts in government spending. The bill would return the government’s discretionary spending to fiscal 2022 levels in fiscal 2024 and then cap annual spending growth at 1% over roughly a decade.
Notably, McCarthy in his Friday comments didn’t specify returning discretionary spending to fiscal 2022 levels, which would represent about a $130 billion cut from 2023 outlays. Instead, he said that spending had to be less than the current level, which is $1.65 trillion, suggesting that the opportunity for a deal may lie in reaching agreement on a smaller cut.
In the negotiations, the White House has signaled its openness to a deal that caps future spending for two years, though the specifics of such a proposal are unclear. Some Republicans have pushed for a 10-year spending caps deal.
The White House has argued for weeks that rolling back spending to 2022 levels would require cuts as deep as 30% to many government programs if spending on the military and veterans are protected, as GOP lawmakers have promised.
People briefed on the negotiations said the two sides were struggling to make progress on the core issues that have been at the center of the talks for weeks, and both Republicans and White House officials expressed frustration that an agreement hadn’t been reached.
Some of the people expressed optimism that the negotiators could come back to the table over the weekend, but both sides were evaluating next steps on Friday.
Both Republicans and Democrats have acknowledged that any deal to raise the debt ceiling will include some conditions, after the White House effectively gave up on its insistence that the debt-ceiling increase be “clean.” But the conservative and progressive wings of the Republican and Democratic caucuses have signaled opposition to parts of the emerging talks, putting pressure on leadership when it comes time to corral votes.
On Thursday, the House Freedom Caucus, a group of about three dozen, far-right lawmakers who frequently oppose government spending bills, took a position that negotiations should stop until the Senate passed the April debt-ceiling bill.
At the same time, progressive lawmakers on the far left of the Democratic Party are pushing Biden to use the 14th Amendment to the Constitution to raise the debt ceiling without Congress, as a way to avoid negotiating with Republicans. Progressives have loudly opposed strengthening work requirements for programs that help poor Americans.
“We cannot reach a budget agreement that increases the suffering of millions of Americans,” a group of 11 senators wrote, adding it is “seemingly impossible to enact a bipartisan budget deal at this time.”
The 14th Amendment states that federal debt authorized by law “shall not be questioned.” Biden has said he was considering invoking the amendment as a way to keep paying the nation’s bills if Congress didn’t raise the debt limit. But he added the issue would be subject to litigation and might not be a solution in the current standoff, and administration officials have played down the possibility.
The Congressional Black Caucus has also taken a position opposing new work requirements in any final debt-ceiling bill.