With days left before the government could face a calamitous default, negotiators are closing in on an agreement that would raise the debt ceiling by two years — a key priority of the Biden administration — while also essentially freezing government spending on domestic programs and slightly increasing funding for the military and veterans affairs, three people familiar with the matter said, speaking on the condition of anonymity to reflect private deliberations. Although the deal is expected to include key GOP priorities, such as partially clawing back new funding for the Internal Revenue Service, a growing chorus of conservatives has balked at how little the deal appears to cut government spending overall — especially because it would also give up their party’s leverage on the debt ceiling until after the 2024 presidential election.
Rep. Ralph Norman (R-S.C.), a top member of the far-right House Freedom Caucus, described what he’s learned so far of the emerging deal as “watered down.” Norman urged McCarthy to hew closely to the legislation that conservatives helped craft and pass last month, which raised the debt ceiling only into next year and coupled the increase with larger spending cuts than the two parties are now discussing.
“This is totally unacceptable, and it’s not what we agreed to,” Norman said.
Rep. Bob Good (R-Va.), another House conservative, complained about reports that the deal would raise the debt ceiling by more money than the bill approved by the House. Good pointed out that the emerging deal would do so “for a whole lot less in return that we need from a policy standpoint, from a fiscal standpoint.” He added: “And if that were true, that would absolutely collapse the Republican majority for this debt ceiling increase.”
Rep. Andy Harris (R-Md.), another House conservative, added of the longer debt ceiling increase: “You’ve got to add things into it, not compromise things away.” Rep. Chip Roy (R-Tex.), a key conservative leader, downplayed the idea that the deal would lead to McCarthy losing his speakership, but added of the deal: “I think it’s an exit ramp about five exits too early.”
Asked by reporters about the criticisms on Friday, McCarthy said: “I’m not concerned about anybody making any comments right now about what they think is in or not it. Whenever we come to an agreement, we’ll make sure we will first brief our entire conference.”
The extent and ferocity of the conservative revolt could prove crucial to the ongoing debt ceiling standoff, as well as McCarthy’s future. But it was not exactly yet clear how many GOP lawmakers shared the objections voiced by Norman and Good. Since the beginning of the negotiations, McCarthy has been widely assumed to be able to lose the roughly three dozen members of the far-right House Freedom Caucus and still manage to pass the debt ceiling increase and retain his position as speaker. If he loses several dozen additional House Republican lawmakers, though, both the deal — and his grip on power — could be on shaky ground.
“These guys were never going to vote for it, so the question becomes how many of them you lose,” said one GOP strategist, speaking on the condition of anonymity to frankly describe internal dynamics.
Exactly when the government will run out of money isn’t certain. The Treasury Department says it could be as soon as June 1, less than a week off. Other estimates say the “X-date” might come sometime in early June, but few analysts think there’s much more than a couple of weeks to maneuver. Two prominent credit rating agencies warned that they could downgrade the U.S. government’s coveted AAA debt rating in the event of a default.
When is the debt limit deadline? Early June, CBO says. Unless it’s not.
Even if negotiators do reach an agreement soon, they need time to put it into action. House rules require 72 hours for lawmakers to review legislation before a vote. The Senate would also have to act. All told, passage could take days.
“We’re making progress and our goal is to make sure that we get a deal because default is unacceptable,” Deputy Treasury Secretary Wally Adeyemo told CNN on Friday. “The president has said it and the speaker has said it.”
With lawmakers in the House and Senate now back in their districts for Memorial Day weekend, the timeline became more precarious by the hour.
“I think there’s a sense of understanding from both teams that we have serious issues still to work out and come to terms with, and that’s going to take some time,” Rep. Patrick T. McHenry (R-N.C.), one of the key GOP negotiators, told reporters Thursday evening. “That’s all there is to it.”
On Thursday, White House press secretary Karine Jean-Pierre said “negotiations have progressed” and that ongoing talks were moving toward a “bipartisan, reasonable budget negotiation.”
“We’re fighting against Republicans’ extreme, devastating proposal that would slash — as you’ve heard me say — law enforcement, education, food assistance, all of these things are critical to American families who are just trying to make ends meet,” Jean-Pierre said. “So what the people should know, what the American people should know, is that we are not taking any hostages here. Default is not an option.”
The exact contours of a final deal remained unclear even as lawmakers on both sides of the aisle alluded to progress heading into the weekend.
For weeks, negotiators had clashed over GOP demands that would significantly cut federal spending on programs such as nutrition assistance, rental aid and scientific research, which White House aides fear could spark a revolt among Democrats.
McCarthy had demanded that the government spend less money next year than it did this year on a portion of the budget covering domestic programs, while also insisting on substantial increases for the military and border security. Democrats balked at these demands, since they would lead to huge cuts to federal programs such as nutrition aid, housing assistance, education and scientific research.
But negotiators appeared to reach a breakthrough this week. Repurposed money from the IRS and other federal programs will allow Democrats to mitigate the cuts to the domestic programs, while the overall amount of spending will go down — a key McCarthy demand. Spending on veterans and the military will also rise in line with the increases sought by the president’s budget, said one person familiar with the matter.
At least two key issues — new work requirements, and permitting reform to spur domestic energy production — remained unresolved. On CNN, Adeymo wouldn’t say where the negotiations were heading on whether to impose work requirements for recipients of some federal aid programs, which McCarthy has called essential to a final deal.
McCarthy may need those changes as concessions to sell the deal to his base. A freeze on government spending could be estimated to reduce long-term deficits by more than $1 trillion, because projections would show spending lower in every successive year. But conservative budget analysts say that does not go far enough to rein in the roughly $52 trillion debt projected for the U.S. by the end of the next decade.
“Kevin McCarthy is on the verge of striking a terrible deal to give away thru Biden’s term for little in the way of cuts,” Russ Vought, a conservative leader who served as Trump’s budget director, tweeted Thursday. “They are lining up Democrats to pass it. The DC cartel is reassembling.”
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