McCarthy, Kevin (1965- )

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    Potential Debt Ceiling Deal Would Barely Change Federal Spending Path

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    Negotiators have focused on a relatively small corner of the budget, shunning new revenues or cuts to the fastest-growing programsAs their debt limit negotiations with President Biden push the nation perilously close to a devastating default, House Republicans have stuck to a clear message: They must force a change in what they call the nation’s “unsustainable” spending path.Yet in talks with Mr. Biden, Speaker Kevin McCarthy and his lieutenants have focused almost entirely on cutting a small corner of the budget — known as nondefense discretionary spending — that includes funding for education, environmental protection, national parks, domestic law enforcement and other areas. That budget line accounts for less than 15 percent of the $6.3 trillion the government is expected to spend this year. It is not outsized, by historical standards. It is already projected to shrink, as a share of the economy, over the next decade.And it has nothing to do with the big drivers of projected spending growth in the coming years: the safety-net programs Social Security and Medicare, which are facing increasingly large payouts as the American population ages.Those politically popular programs have been deemed off limits in the current talks by Republicans, who came under heavy criticism from Mr. Biden for even entertaining changes that could raise the retirement age for those programs or make other changes to slow their future spending.Republicans have also refused to entertain cuts to military spending, which is nearly as large as nondefense discretionary spending. As a result, the negotiations are almost certain not to produce any agreement with Mr. Biden that would dramatically alter the course of federal spending in the next decade.Instead, they would concentrate budget cuts on education, environmental protection and a host of other government services that fiscal experts say are nowhere close to being primary sources of spending growth in the years to come.For instance, if Republicans could somehow persuade Mr. Biden to accept the full round of discretionary spending cuts contained in the fiscal bill the House passed last month, it would do little to alter the nation’s overall spending trajectory over the next decade. Those cuts would reduce federal spending by about $470 billion in 2033 and likely save about $100 billion that year in borrowing costs, according to the Congressional Budget Office.Total government spending would then be just under 24 percent of the economy — or nearly exactly what it is today.While those cuts might not make much of a dent in the overall budget, they would still be felt by many Americans. Because the cuts would be so contained to one segment, many popular government programs would shrink by as much as 30 percent under that scenario, White House officials and independent analysts have calculated.“The cuts Republicans propose would have severe impacts on education, public safety, child care, veterans’ health care and more,” the White House budget director, Shalanda Young, wrote in a memo last week.Republicans have for months cited growing federal spending and debt as the reason they have refused to raise the nation’s borrowing limit — risking default — unless Mr. Biden agrees to spending cuts.Representative Garret Graves of Louisiana, one of Mr. McCarthy’s top negotiators, said this week that the biggest gap with Biden administration officials was on spending numbers. “My interpretation of their position is that they fail to recognize or fail to see to the fact that we are on a spending trajectory right now that is absolutely unsustainable,” he said.Federal spending spiked during the Covid-19 pandemic, first under President Donald J. Trump and continuing under Mr. Biden, as lawmakers delivered trillions of dollars in assistance to businesses, people and state and local governments. It remains higher than historical norms, when measured as a share of the economy, which is the easiest way to track spending patterns as prices have increased over time.The Congressional Budget Office estimates that total spending averaged just under 21 percent of gross domestic product from 1980 through 2019, just before the pandemic hit. It surged above 30 percent in 2020 and 2021. This fiscal year, it is expected to be just over 24 percent, falling slightly over the next several years and then beginning to grow again in the waning years of this decade, climbing past 25 percent in 2033.Discretionary spending, though, is expected to decline over the decade as a share of the economy. Military spending — which Republicans have thus far refused to reduce as part of talks with Mr. Biden’s team — should tick down slightly from 3 percent of the economy. Discretionary spending outside the military is now 3.6 percent but is expected to fall to 3.2 percent by 2033.Social Security and Medicare, conversely, are expected to grow rapidly over the next 10 years, as retiring baby boomers qualify to receive health and retirement benefits. Social Security spending will rise from 4.8 percent to 6 percent of the economy in that time, the budget office projects, and Medicare will rise from 3.9 percent to 5.3 percent.Analysts say those programs are the primary reason budget forecasts have long shown federal spending increasing in the coming decades — even before Mr. Biden took office.“The entirety of the overall federal spending increase relative to G.D.P. over the long term can be accounted for by the growth in the major federal health programs (Medicare, Medicaid, and the A.C.A.) and Social Security,” Charles P. Blahous, who studies federal spending and debt at the Mercatus Center at George Mason University, told the Senate Budget Committee this month in written testimony.Conservative groups have criticized Republicans for not including the safety-net programs in debt demands. “While current debt ceiling negotiations largely concern ways to restrain the discretionary parts of the budget, any serious proposal to tackle the emerging debt and deficit crisis must also address our largest mandatory spending programs: Social Security and Medicare,” Alex Durante, an economist at the Tax Foundation, which promotes lower taxes, wrote on Wednesday.Liberal groups and the White House have criticized Mr. McCarthy and his team for neglecting the other side of the fiscal ledger: the nation’s tax system. Tax receipts briefly surged last year but are expected to fall back toward historical norms this year, stabilizing around 18 percent of the economy, the budget office projects. Mr. McCarthy has cited last year’s numbers to incorrectly claim current tax revenues are near record highs. More

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    Biden and McCarthy Describe ‘Productive’ Debt Limit Talks, but No Deal Is Reached

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    President Biden and Speaker Kevin McCarthy expressed optimism on Monday that they could break the partisan stalemate that has prevented action to avert a default on the nation’s debt, but remained far apart on a deal to raise the debt limit as Democrats resisted Republicans’ demands for spending cuts in exchange.The two met face to face at the White House for the second time in two weeks in a show of good will after a weekend of behind-the-scenes clashes among negotiators, punctuated by a move by Republicans on Friday to halt the talks and accusations by both sides that the other was being unreasonable.With Mr. Biden back from a summit meeting in Japan, the tenor appeared to have changed considerably. “We don’t have an agreement yet,” Mr. McCarthy told reporters at the White House after the meeting. “But I did feel like the discussion was productive,” he said, adding later that he believed the tone of the talks was “better than any other time we’ve had discussions.”“I believe we can still get there,” Mr. McCarthy said. “I believe we can get it done.”He said he expected to speak with Mr. Biden daily until a deal could be struck.With a default looming as soon as June 1, both Mr. Biden and Mr. McCarthy began their latest meeting sounding upbeat about finding common ground in an effort to avoid economic catastrophe and left dispatching their top advisers to hammer out an agreement in the coming days.“We still have some disagreements, but I think we may be able to get where we have to go,” Mr. Biden said as the two sat down in the Oval Office. “We both know we have a significant responsibility.”Mr. Biden said in a brief statement after the meeting that the talks were “productive.”“We reiterated once again that default is off the table and the only way to move forward is in good faith toward a bipartisan agreement,” he added, saying that he and his negotiating team would continue talking with Mr. McCarthy and his.Still, the two sides remained at loggerheads. The White House has called Republicans’ demands for spending cuts extreme, while Mr. McCarthy and his aides have accused White House officials of being unreasonable.The number of legislative days for Congress to vote to raise the debt ceiling before the projected deadline is rapidly dwindling. Treasury Secretary Janet L. Yellen on Monday reiterated her warning to Congress that the United States could exceed its authority to borrow to pay its bills as soon as June 1. She said in an interview with NBC’s “Meet the Press” over the weekend that the odds of the government being able to hold out until mid-June — when a substantial amount of quarterly tax revenue is expected to roll in, giving the Treasury more breathing room to cover its obligations — were “quite low.”And Republicans hinted that no deal was likely to materialize until a default was truly imminent. When asked on Monday evening what it would take to break the deadlock, Mr. McCarthy replied simply: “June 1.”Chief among the outstanding issues is how much to spend overall next fiscal year on discretionary programs and how long any spending caps should be in place. Republicans want to allow military spending to increase while cutting other programs. But they have shown some flexibility around how long they would seek to cap spending overall, coming down from their initial demand of a decade to six years.That is longer than Mr. Biden wants. White House officials have proposed holding both military and other spending — which includes education, scientific research and environmental protection — constant over the next two years.“These are tough issues,” said Representative Patrick T. McHenry, Republican of North Carolina and a key ally of Mr. McCarthy who has been involved in the talks and attended the White House meeting. “A directive to cut spending year over year is the toughest thing to do in Washington, D.C. But that is the speaker’s directive to his negotiating team. It is our expectation to be able to get that.”Hard-right members of Mr. McCarthy’s conference have continued to pressure the speaker not to accept anything less than the spending cuts that House Republicans passed in their debt limit bill last month, which would have amounted to a reduction of an average of 18 percent over a decade.“Republicans must #HoldTheLine on the debt ceiling to bring spending back to reality and restore fiscal sanity in DC,” the House Freedom Caucus wrote on Twitter. “We spend $100+ billion more than federal tax revenues EVERY MONTH. Washington has a spending problem, not a revenue problem.”Mr. McCarthy expressed confidence that he could keep his conference largely united around whatever deal he strikes with Mr. Biden, telling reporters at the Capitol before the meeting that he believed it would draw the support of both Democrats and Republicans.“I firmly believe what we’re negotiating right now, a majority of Republicans will see that it is a right place to put us on a right path,” he said.But he also hinted that members of his conference should prepare to accept a final product that falls short of what some lawmakers have demanded.“I don’t want you to think at the end of the day, the bill that we come up with is going to solve all this problem,” he said. “But it’s going to be a step to finally acknowledge our problem and put one step in the right direction. And we’re going to come back the next day and get the next step.”Once negotiators agree to a deal, it will take time to translate it into legislative text. Mr. McCarthy has promised that he will give lawmakers 72 hours to review the bill, and said on Monday that he believed negotiators would need to agree to a compromise this week in order to pass legislation raising the debt ceiling before the projected June 1 deadline.Lawmakers in the House were still left uncertain about when they would need to be present to cast a vote to avert a default. The House, as of Monday evening, was set to depart Washington beginning on Thursday afternoon ahead of the Memorial Day weekend.The two sides have found some agreement in talks in the last week, including on clawing back some unspent funds from previously approved Covid relief legislation.But many other issues have yet to be resolved, including tightening work requirements for able-bodied adults without dependents for certain safety social net programs. The bill passed by House Republicans contained stricter requirements for recipients of Temporary Assistance for Needy Families and food stamps, and is a key demand of conservatives in the House.Mr. McCarthy said on Monday that he would continue to push for their inclusion in whatever deal he strikes with Mr. Biden, and White House negotiators have shown openness to finding some compromise on the issue.Carl Hulse More

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    Debt Limit Negotiators Debate Spending Caps to Break Standoff

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    The strategy, which was used in 2011, could allow both sides to save face but would most likely do little to chip away at the national debt.As negotiators for the White House and House Republican leaders struggle to reach a deal over how to raise the nation’s debt limit, a solution that harks back to old budget fights has re-emerged as a potential path forward: spending caps.Putting limits on future spending in exchange for raising the $31.4 trillion borrowing cap could be the key to clinching an agreement that would allow Republicans to claim that they secured major concessions from Democrats. It could also allow President Biden to argue that his administration is being fiscally responsible while not caving to Republican demands to roll back any of his primary legislative achievements.The Biden administration and House Republican leaders have agreed in broad terms to some sort of cap on discretionary federal spending for at least the next two years. But they are hung up on the details of those caps, including how much to spend on discretionary programs in the 2024 fiscal year and beyond, and how to divide that spending among the government’s many financial obligations, including the military, veterans affairs, education, health and agriculture.What could a spending cap deal look like?The latest White House offer would hold military and other spending — which includes education, scientific research and environmental protection — constant from the current 2023 fiscal year to next fiscal year, according to a person familiar with both sides’ proposals. That move would not reduce what is known as nominal spending, which simply means the level of spending before adjusting for inflation. Republicans are pushing to cut nominal spending in the first year.One reason the White House is willing to entertain holding spending essentially flat has to do with politics. Given that Republicans control the House, getting an increase in funding for discretionary programs outside the military would have been nearly impossible. Congress would not have approved increases through the appropriations process, the normal way in which Congress allocates money to government programs and agencies.Republicans have repeatedly said that they will not accept a deal unless it results in the government spending less money than it did in the last fiscal year. They have said that simply freezing spending at current levels, as the White House has proposed, does not enact the kind of meaningful cuts many in their party have long called for.But Republican negotiators have shown some flexibility around how long they would require those spending caps to last. House G.O.P. leaders are now looking to set spending caps for six years, rather than 10. Still, that is longer than the White House is proposing, with Democrats offering to cap spending for two years.“The numbers are foundational here,” Representative Garret Graves, Republican of Louisiana and one of Speaker Kevin McCarthy’s lead negotiators, said on Sunday. “The speaker has been very clear: A red line is spending less money and unless and until we’re there, the rest of it is really irrelevant.”The approach is evoking debt limit déjà vu.If spending caps sound familiar, that is because they were employed during the last big debt limit fight in 2011.During that episode of brinkmanship, lawmakers agreed to impose limits on both military and nonmilitary spending from 2012 to 2021. The Budget Control Act caps were somewhat successful at keeping spending in check, but not entirely.A Congressional Research Service report published this year noted that during the decade that the caps were in place, Congress and the president repeatedly enacted laws that increased the spending limits. Certain types of expenditures — for emergencies and military engagements — were exempt from the caps and the federal government spent $2 trillion over 10 years on those programs. And spending on so-called mandatory programs such as Social Security was not capped, and those make up about 70 percent of total government spending.Still, the Congressional Research Service pointed out that spending was lower each year from 2012 to 2019 than had been projected before the caps were put in place.The strategy is no fiscal panacea.Caps that limit spending around current levels will help slow the growth of the nation’s debt, but will not cure the government’s reliance on borrowed money.The Congressional Budget Office said this month that annual deficits — the gap between what America spends and what it earns — are projected to nearly double over the next decade, totaling more than $20 trillion through 2033. That deficit will force the United States to continue to rely heavily on borrowed funds.Marc Goldwein, the senior policy director for the Committee for a Responsible Federal Budget, estimated that it would require $8 trillion of savings over 10 years to hold the national debt to its current levels. However, he said that did not mean that enacting spending caps would not be worthwhile.“We’re not going to fix this all at once,” Mr. Goldwein said. “So we should do as much as we can, as often as we can.”The group has called for spending caps to be accompanied by spending cuts or tax increases as a plan to reduce the national debt.Spending caps are not the only issue.Finding an agreement on the extent and duration of spending caps will be a critical part of getting a deal.But negotiators are still working to resolve several other issues, including whether to put in place tougher work requirements for social safety net programs including food stamps, Temporary Assistance for Needy Families and Medicaid, and whether to expedite permitting rules for energy projects, two key Republican priorities that White House negotiators have shown some openness to.Jim Tankersley More

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    Biden and McCarthy Set to Resume Debt Ceiling Talks on Monday

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    Discussions aimed at avoiding a default have bogged down as Republicans press their demand for spending caps, work requirements for public benefit programs and other proposals in exchange.President Biden and Speaker Kevin McCarthy agreed on Sunday to meet on Monday afternoon to try to jump-start talks aimed at averting a default on the nation’s debt, capping a tumultuous stretch of negotiations that faltered over the weekend as the two sides clashed over Republicans’ demands to cut spending in exchange for raising the debt limit.Mr. McCarthy announced the meeting — his third with Mr. Biden this month, scheduled for after the president’s return from the Group of 7 summit in Hiroshima, Japan — after he concluded a call with the president on Sunday sounding more sanguine than before about the prospects for a deal. The speaker said House G.O.P. and White House negotiators would continue talks at the Capitol on Sunday to lay the groundwork. White House negotiators left the Capitol on Sunday night after a two-and-a-half-hour bargaining session with their Republican counterparts but said they intended to keep working before Monday’s session.Mr. Biden “walked through some of the things that he’s still looking at, he’s hearing from his members; I walked through things I’m looking at,” Mr. McCarthy said. “I felt that part was productive. But look — there’s no agreement. We’re still apart.”Negotiators are working against a punishing clock. The debt ceiling, the statutory limit on the government’s power to borrow to pay its obligations, is projected to be reached as soon as June 1.Mr. Biden and Mr. McCarthy are negotiating over a fiscal package that would raise the limit, which Republicans have refused to do without spending cuts. They remain far apart on key issues, including on caps for federal spending, new work requirements for some recipients of federal antipoverty assistance and funding meant to help the I.R.S. crack down on high earners and corporations that evade taxes.Mr. Biden said on Sunday that he believed he had the power to challenge the constitutionality of the nation’s borrowing limit, but that he did not believe such a challenge could succeed in time to avoid a default on federal debt if lawmakers did not raise the limit soon.“I think we have the authority,” Mr. Biden said at a news conference in Hiroshima. “The question is could it be done and invoked in time.”Mr. Biden added that after the current crisis is resolved, he hopes to “find a rationale and take it to the courts” to decide whether the debt limit violates a clause in the 14th Amendment stipulating that the United States must pay its debts. He also said that, while meeting with world leaders, he had not been able to assure them that America would not default on its debt — an event that economists say could set off a financial crisis that would sweep the globe.“I can’t guarantee that they will not force a default by doing something outrageous,” Mr. Biden said, referring to congressional Republicans who have insisted on deep cuts to federal spending in exchange for raising the borrowing limit.“The numbers are foundational here,” Representative Garret Graves, Republican of Louisiana and one of Mr. McCarthy’s lead negotiators, said on Sunday. “The speaker has been very clear: A red line is spending less money and unless and until we’re there, the rest of it is really irrelevant.”Treasury Department officials estimate that there are just over two weeks before the government could lose its ability to pay its bills on time, forcing a default. Both Mr. Biden and Mr. McCarthy had expressed rising optimism last week that they could reach an agreement that would pave the way for Congress to raise the borrowing limit while also reducing some federal spending.But on Friday, Republicans abruptly halted the talks, leading to a weekend of stop-and-start negotiations that left things in limbo and Mr. McCarthy insisting that Mr. Biden reinsert himself.Treasury Secretary Janet L. Yellen is expected to provide another update to Congress on the government’s cash balance this week. On Sunday, Ms. Yellen indicated that her projections that the United States could be unable to pay all of its bills on time as soon as June 1 had not changed.“I certainly haven’t changed my assessment, so I think that that’s a hard deadline,” Ms. Yellen said on NBC’s “Meet the Press.”Ms. Yellen noted that the government was expecting to receive substantial tax payments on June 15 that could extend the so-called X-date later into the summer. But she cautioned that the odds of making it that far were “quite low.”The Treasury secretary, who warned last week that a default would “generate an economic and financial catastrophe,” said she was not exaggerating the gravity of the looming crisis.“There will be hard choices to make if the debt ceiling isn’t raised,” Ms. Yellen said, explaining that if the United States ran out of money to pay all its bills, some would have to go unpaid.Hopes had dimmed at least slightly in the last few days. Mr. Biden’s aides accused Republicans of backsliding on key areas of negotiation, and Republicans accused the White House of refusing to budge on top priorities for conservatives.Mr. Biden criticized Republicans on Sunday for not considering raising additional tax revenue to reduce future budget deficits as part of the negotiations. He said he had proposed a discretionary spending cap that would save $1 trillion over a decade compared with baseline projections.“It’s time for Republicans to accept there is no budget deal to be made solely on their partisan terms,” he said.Representative Jodey C. Arrington, Republican of Texas and the chairman of the Budget Committee, on Sunday flatly ruled out Republicans’ accepting any tax increases as part of a debt-limit deal.“It’s not on the table for discussion,” Mr. Arrington said on ABC’s “This Week.” “This is not the time to put a tax on our economy or on working families.”Some of the barbs that have been traded by the parties appeared to be meant to shore up their bases. Hard-line spending hawks in the House have urged Mr. McCarthy to demand far greater concessions from Mr. Biden. Some progressive Democrats have pushed Mr. Biden to cut off negotiations and instead act unilaterally to challenge the debt limit on constitutional grounds.A clause in the 14th Amendment, adopted after the Civil War, stipulates that “the validity of the public debt” issued by the U.S. government “shall not be questioned.” Some legal scholars say the limit is constitutional. But others contend that the clause requires the government to continue issuing new debt to pay bondholders, effectively overriding the nation’s statutory borrowing limit, which is controlled by Congress.The two sides have found some agreement in talks in the last week, including on clawing back some unspent funds from previously approved Covid relief legislation. They have also agreed in broad terms to some sort of cap on discretionary federal spending for at least the next two years. But they are hung up on the details of those caps, including how much to spend overall next fiscal year on discretionary programs — and how to divide that spending among the military and other programs.The latest White House offer would hold both military spending and other spending — which includes education, scientific research and environmental protection — constant from the current fiscal year to next fiscal year, according to a person familiar with both sides’ proposals. That move would not reduce nominal spending before adjusting for inflation, which Republicans are pushing hard to do. Asked by a reporter on Sunday, Mr. Biden said the spending reduction he had proposed would not cause a recession.Speaker Kevin McCarthy at a news conference on debt-limit negotiations at the Capitol on Wednesday.Haiyun Jiang/The New York TimesA bill that Republicans passed last month that paired spending cuts with a debt-limit increase would bring net savings of about $5 trillion over a decade compared with current projections.Republicans’ latest proposal includes a nominal drop in total discretionary spending next year. But that cut is not evenly distributed; in their plan, military spending would continue to rise, while other programs would face deeper cuts.Mr. Biden’s offer would set spending caps for two years. Republicans would set them for six years.Republicans have also proposed several efforts to save money that White House officials have objected to. They include new work requirements for recipients of Medicaid and the Temporary Assistance for Needy Families program. They would also make it harder for states to seek waivers for work requirements for certain recipients of federal food assistance who live in areas of sustained high unemployment — a proposal that was not in the Republican debt-limit bill that passed the House.Republicans are also continuing to seek a reduction in enforcement funding for the I.R.S., a move that the Congressional Budget Office estimates would increase the budget deficit by decreasing future federal tax receipts. And they have sought to include some provisions from a stringent immigration bill that recently passed the House, according to a person familiar with the proposal.“We are all concerned about deficits and fiscal responsibility, but deficits can be addressed both through changes in spending and through changes in revenue,” Ms. Yellen said, adding that she was “greatly concerned” about Republican proposals to cut funding for the I.R.S. Mr. Biden insisted on Sunday that he was willing to cut spending. He also suggested that some Republicans were trying to crash the economy by not raising the borrowing limit, in order to hurt Mr. Biden’s hopes of winning re-election.If the nation were to default, Mr. Biden said, “I would be blameless” on the merits — meaning that it would be Republicans’ fault. But, he said, “on the politics of it, no one would be blameless.”“I think there are some MAGA Republicans in the House who know the damage that it would do to the economy, and because I am president, and the president’s responsible for everything, Biden would take the blame,” he said.Alan Rappeport More

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    Debt Limit Talks Resume After Republicans Briefly Hit Pause

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    Republicans returned to the negotiating table on Friday hours after walking out, though talks lasted only about an hour.Negotiations between top White House and Republican congressional officials over a deal to raise the debt limit resumed on Friday just hours after House G.O.P. leaders said it was time to “press pause,” complaining that President Biden’s team was being unreasonable and that no progress could be made.The abrupt turn reflected the unwieldy state of negotiations over a bipartisan deal to avert a debt default that could occur as soon as June 1. Speaker Kevin McCarthy on Friday evening declared the talks were back on after venting frustration with the White House earlier in the day. Negotiations then broke up again Friday night roughly an hour after they resumed, and it was unclear when negotiators planned to meet again.The hourlong meeting capped a day of whiplash on Capitol Hill, as negotiators searching for a resolution to avoiding the first default in the nation’s history repeatedly restarted and ended discussions, and Republicans showed signs of increasing exasperation around negotiations on spending caps.“It’s very frustrating if they want to come into the room and think we’re going to spend more money next year than we did this year,” Mr. McCarthy, a California Republican, said on Fox Business on Friday evening, as he announced that his deputies would return to the negotiating table. “That’s not right, and that’s not going to happen.”Earlier in the day, Mr. McCarthy and one of his top advisers had declared that they were halting negotiations, saying that White House officials were refusing to budge on spending cuts. “We’ve got to get movement by the White House, and we don’t have any movement,” Mr. McCarthy said.His comments marked a departure from his tone just a day earlier, when he told reporters that he could see a path to reaching a deal in principle as early as the weekend.Still, the return to the negotiating table on Friday night underscored the mounting sense of urgency to find a resolution as Congress runs out of time to avoid the first default in the nation’s history, and the economic calamity that could follow.Once a deal is in hand, it will take time to translate it into legislation and pass it through Congress for Mr. Biden’s signature. Mr. McCarthy has promised his conference that he will give lawmakers 72 hours to read the bill before they vote on it.Republicans hinted that a major source of their frustration was how strictly to cap federal spending. The bill that House Republicans passed last month would raise the nation’s borrowing limit into next year in exchange for freezing spending at last year’s levels for a decade — which would lead to cuts of an average of 18 percent.The bill is a dead letter in the Democratic-controlled Senate, but the ultraconservative House Freedom Caucus declared on Thursday that Republicans should insist that it pass as is.“No more discussion on watering it down,” the group said in a tweet. “Period.”White House officials, speaking on the condition of anonymity to discuss private negotiations, acknowledged that there were significant differences between the parties, including around Mr. McCarthy’s stance on capping federal spending.Former President Donald J. Trump also weighed in on Friday on Truth Social, the social media website he founded, declaring that Republicans should not make a deal on the debt ceiling unless they get everything they want. “DO NOT FOLD!!!” he wrote.Negotiators were at odds over a handful of issues, including the extent to which a possible deal would include tougher work requirements for social safety net programs — a proposal that has drawn a backlash from progressive Democrats — and the length of any debt-limit extension.Conservatives in the House G.O.P. conference had grown increasingly concerned in recent days that Mr. McCarthy would agree to a deal freezing spending at current levels, rather than at last year’s levels, and would not lock in the kind of spending cuts for which they have long agitated.Zolan Kanno-Youngs More

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    Biden Says He Is Confident America Will Not Default on Its Debts

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    Speaking just moments before he left for a diplomatic trip overseas, President Biden said a default would be “catastrophic.”President Biden said a failure by the U.S. to pay its bills would be “catastrophic” for the economy.Tom Brenner for The New York TimesPresident Biden, just moments before he departed on Wednesday for a diplomatic trip to Asia, said he was confident “America will not default” as congressional leaders in both parties offered some signs of optimism about eventually reaching a deal to raise the nation’s borrowing limit.“Every leader in the room understands the consequences if we failed to pay our bills,” Mr. Biden said at the White House on Wednesday before leaving for Hiroshima, Japan, to attend the Group of 7 meeting there. “And it would be catastrophic for the American economy and the American people.”Mr. Biden described his face-to-face meeting with congressional negotiators the day before as productive, “civil and respectful” and said both Democrats and Republicans agreed that the United States cannot default.But his decision to get a final word in on the negotiations signaled that even as he departs for a summit on the global economy, the White House is focused on averting an economic crisis back home.Mr. Biden decided to cut the trip to Asia short to be back for what he called “final negotiations” over the ceiling, the statutory cap on how much the government can borrow to finance its obligations. He is scheduled to return to Washington on Sunday, skipping planned visits to Papua New Guinea and Australia.Mr. Biden echoed the optimism offered by both Democratic and Republican leaders after Tuesday’s meeting.He has designated his senior adviser, Steve Ricchetti, and Shalanda Young, the director of the Office of Management and Budget, to speak to a team of negotiators representing congressional Republicans. Speaker Kevin McCarthy had also commended the move as a sign of progress on Tuesday.“We narrowed the group to meet and hammer out our differences,” Mr. Biden said, adding that the negotiating teams met on Tuesday night and will meet again on Wednesday.Time is running out for the two sides to reach a consensus.The government reached the $31.4 trillion debt limit on Jan. 19, and the Treasury Department has been using a series of accounting maneuvers to keep paying its bills. Treasury Secretary Janet L. Yellen reiterated that the United States could run out of money to pay its bills by June 1 if Congress does not raise or suspend the debt limit, potentially causing a recession or the elimination of jobs.Republicans have said they want to cut federal spending before lifting the ceiling, while Mr. Biden has said negotiating over the cuts must not be a requirement for raising the debt limit. Even so, Democrats have increasingly appeared open to reaching a compromise with Republicans. Both Democratic leaders from New York, Senator Chuck Schumer, the majority leader, and Representative Hakeem Jeffries, the minority leader, told reporters that passing a bipartisan bill in both chambers was the only way forward.Mr. Biden signaled he was open to a potential agreement for tougher work requirements on federal aid programs over the weekend, when he reminded the press that he had voted for such measures — with the exception of Medicaid — as a senator.Asked on Wednesday if he was still considering work requirements, Mr. Biden said it is possible, “but not anything of any consequence.”“I’m not going to accept any work requirements that’s going to have an impact on the medical health needs of people,” Mr. Biden said.Mr. Biden added that he did not believe cutting his overseas trip short would help China gain influence in the region. The administration has sought to bolster partnerships in the region to to counter China’s economic presence. But the ongoing talks forced Mr. Biden to cut stops in Papua New Guinea and Australia.Mr. Biden said he made sure to call Prime Minister Anthony Albanese of Australia on Tuesday to let him know of his decision to cancel part of his trip. While officials in the administration were still deciding whether they would shorten the trip, they also discussed sending a replacement, including Vice President Kamala Harris or Antony J. Blinken, the secretary of state, according to an official familiar with the matter.As of Wednesday morning, there were no such plans to send a substitute. More

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    Biden and McCarthy Show Optimism on Debt Ceiling but Remain Far Apart

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    President Biden and congressional leaders in both parties emerged from a White House meeting on Tuesday offering glimmers of hope about eventually reaching a deal to raise the nation’s borrowing limit, even as they conceded they were still far from averting a default that could come as soon as June 1.With time dwindling to strike a compromise that could make it through Congress in time to avoid an economic catastrophe, Mr. Biden said he would cut short a diplomatic trip to Asia to be on hand for a potential breakthrough. Speaker Kevin McCarthy, the California Republican, said it was possible that such a deal could materialize within days now that the president had agreed to dispatch his top advisers for stepped-up negotiations.“We just finished another good, productive meeting with our congressional leadership about a path forward to make sure that America does not default on its debt,” Mr. Biden said after the hourlong session in the Oval Office.Mr. McCarthy told reporters that he could see a deal reached “by the end of the week” — a marked change in tone after he had lamented the state of the talks just hours earlier. He exulted in a news release after the meeting that “negotiations are happening.”Still, he acknowledged that talks about spending cuts remained far apart and made it clear that the two sides had yet to agree on any policy proposals.Republicans and Democrats had both signaled that they saw the session on Tuesday as a make-or-break moment — much more significant than a similar gathering at the White House a week ago and more urgent with just 16 days before the country is projected to default on its debt.The meeting also appeared to wipe away any pretense by Democrats that they would accept only a clean debt limit increase without conditions from House Republicans. For weeks, Mr. Biden has maintained that negotiating over cuts must not be a condition for raising the limit and avoiding what could be a catastrophic default.But on Tuesday, both Democratic leaders from New York, Senator Chuck Schumer, the majority leader, and Representative Hakeem Jeffries, the minority leader, told reporters at the White House that passing a bipartisan bill in both chambers was the only way forward.“Hakeem and I are committed to getting that bipartisan bill done,” Mr. Schumer said. “We will not sacrifice our values,” he added. “They’ll probably not sacrifice their values. But we’ll have to come together on something that can avoid default. Default is a disaster.”The meeting came a day after Treasury Secretary Janet L. Yellen reiterated that the United States could run out of money to pay its bills by June 1 if Congress does not raise or suspend the debt limit, the statutory cap on how much the government can borrow to finance its obligations. Economists say that could eliminate jobs and cause a recession.The government reached the $31.4 trillion debt limit on Jan. 19, and the Treasury Department has been using a series of accounting maneuvers to keep paying its bills.Ms. Yellen warned on Tuesday that the United States faced “an economic and financial catastrophe” if it defaulted and said the standoff over the debt limit was already affecting financial markets and households.“We are already seeing the impacts of brinkmanship,” Ms. Yellen said in remarks at the Independent Community Bankers of America summit meeting.As Tuesday’s meeting started, Mr. Biden joked to reporters that “we’re having a wonderful time — everything’s going well.”But the session concluded without a breakthrough, even as broad areas of negotiation have emerged in recent days, including fixed caps on federal spending, reclaiming unspent funds designated for the Covid-19 emergency, stiffer work requirements for federal benefits and expedited permitting rules for energy projects.Mr. McCarthy commended Mr. Biden for designating two officials to negotiate directly with his office and with Representative Garret Graves of Louisiana, one of Mr. McCarthy’s top lieutenants. Mr. Biden picked his senior adviser, Steve Ricchetti, and Shalanda Young, the director of the Office of Management and Budget, according to people familiar with his choices.“The structure of how we negotiate has improved,” Mr. McCarthy said. “It now gives you a better opportunity, even though we only have a few days to get it done.”Mr. McCarthy also singled out the proposal to reclaim unspent Covid funds, which Republican officials believe could recoup $50 to $60 billion.“I think at the end of the day, it will be in the bill,” Mr. McCarthy said.He also told reporters on Tuesday that any deal must tighten work requirements for safety net programs like food stamps, a proposal in the bill the House G.O.P. passed that Mr. Biden showed some openness to over the weekend, but which progressives have declared unacceptable.“Remember what we’re talking about: able-bodied people with no dependents,” Mr. McCarthy said. “It helps people get into a job, and what does it mean when somebody gets a job? They get better pay.”Toughening work requirements for programs like food stamps has long been anathema to many Democrats, and the proposal would face fierce resistance in the Democratic-controlled Senate.“I cannot in good conscience support a debt ceiling proposal that pushes people into poverty,” Senator John Fetterman, Democrat of Pennsylvania, said in a statement on Tuesday. “We’re already addressing SNAP in a bipartisan way in the Farm Bill. But with default looming, jamming through harmful cuts to that program is reckless.”Karine Jean-Pierre, the White House press secretary, said on Tuesday that Mr. Biden “will not accept proposals that take away people’s health care, health coverage.”Administration officials have said they will not roll back any of the president’s signature legislation, particularly on climate change.As the talks appeared to gain some momentum, Mr. Biden said he would cut short an overseas diplomatic trip to Asia to be back in Washington for what he called “final negotiations” with congressional leaders. The president will still leave on Wednesday for Hiroshima, Japan, to attend the Group of 7 meeting there, but he will return Sunday, skipping planned visits to Papua New Guinea and Australia.Economists on Wall Street and in the White House have warned that a prolonged default could wipe out jobs and lead the country into a recession.Democrats said earlier in the day on Tuesday that they were awaiting the outcome of the meeting to determine how aggressively to push on an emergency plan they have been preparing for months to try to steer around opposition from Republican leaders and force a debt limit increase vote.Starting Tuesday, they have the opportunity to round up signatures for a special discharge petition that would automatically prompt such a vote if they won support from a majority of members of the House. Democrats would need at least five Republicans to join them to reach the necessary threshold of 218, and winning them over would be extremely difficult unless the crisis were at its peak.Lawmakers also said there was increasing talk of Mr. Biden invoking the 14th Amendment of the Constitution to raise the debt ceiling unilaterally, a move they acknowledged would draw a legal challenge — and which Ms. Yellen has questioned — but could still avert economic disaster.With so much uncertainty, Senate Democrats were also weighing whether they would be able to take a weeklong recess scheduled to begin on Monday, before the Memorial Day weekend.Alan Rappeport More

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    Biden Expresses Optimism on Debt Limit, but a Deal Remains Elusive

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    President Biden and congressional leaders will resume face-to-face talks on Tuesday to raise the debt limit and avoid a default.President Biden and congressional leaders will resume face-to-face talks on Tuesday to avert a government default, with the White House expressing cautious optimism as the contours of a possible deal began to come into focus.With time running out to strike a deal to raise the debt limit, broad areas of negotiation have emerged, including fixed caps on federal spending, reclaiming unspent funds designated for the Covid-19 emergency, stiffer work requirements for federal benefits and expedited permitting rules for energy projects.“I remain optimistic because I’m a congenital optimist,” Mr. Biden told reporters on Sunday in Rehoboth Beach, Del. He added, “I really think there’s a desire on their part, as well as ours, to reach an agreement, and I think we’ll be able to do it.”Still, on Monday, Speaker Kevin McCarthy reiterated that he believed little progress had been made, telling reporters that the two sides remained “far apart” even with a potential default looming. “We have no agreements on anything. That’s why I’m so concerned,” he added.Treasury Secretary Janet L. Yellen reiterated on Monday that the United States could be unable to pay its bills by June 1 if it does not raise or suspend the debt limit, which caps how much money the country can borrow.That $31.4 trillion limit was hit on Jan. 19, and the Treasury Department has been using accounting maneuvers to keep paying the government’s bills. In a letter to lawmakers on Monday, Ms. Yellen cautioned that the actual date “could be a number of days or weeks later than these estimates” but she urged Congress to move quickly to prevent a default.The Treasury Department has been using accounting maneuvers known as extraordinary measures to keep paying the country’s bills without breaching the debt ceiling.Republicans have said they want to cut federal spending before lifting the ceiling, but Mr. Biden has maintained that negotiating over cuts must not be a condition for raising the limit and avoiding what could be a catastrophic default.Economists on Wall Street and in the White House say a prolonged default could obliterate jobs and lead the country into a recession.Mr. Biden, who is set to depart on Wednesday for Japan to attend the Group of 7 meeting, confirmed on Monday that he would meet with Mr. McCarthy on Tuesday. The meeting will be at 3 p.m., according to the White House.Senator Chuck Schumer of New York, the majority leader, was more optimistic than Mr. McCarthy on Monday, saying that the “parallel discussions” on federal spending and the debt ceiling were continuing in “a very serious way.”“We welcome a bipartisan debate about our nation’s fiscal future,” Mr. Schumer said. “But we’ve made it plain to our Republican colleagues that default is not an option. Its consequences are too damaging, too severe. It must be taken off the table.”The two sides had their first face-to-face meeting at the White House last Tuesday, but it ended without a deal. They had been set to meet again on Thursday, but that session was postponed to allow staff members more time to speak in detail.People familiar with the negotiations cast the decision to postpone that meeting as a positive development, one that would give staff members more time to make progress.“The conversations are constructive between all of the parties,” said Wally Adeyemo, the deputy Treasury secretary.“The United States has never defaulted on its debt, and we can’t,” Mr. Adeyemo said. “Because defaulting on our debt isn’t just about financial markets. It’s about paying our Social Security recipients. It’s about paying our troops. It’s about paying the men and women who are working the border today.”Biden administration officials have said they will not accept any deal that rolls back the president’s signature legislative achievements, particularly on climate change. They want Republicans to drop certain provisions in the debt limit bill that passed the House last month.That measure is dead on arrival in the Democratic-led Senate, but the details are a signal of the Republicans’ negotiating position with the White House.The bill would make able-bodied adults without dependents who receive both federal food assistance and Medicaid benefits subject to work requirements until they are 55 years old, an increase from 49. It also seeks to close a loophole that Republicans have claimed is abused by states, which allows officials to exempt food assistance recipients from work requirements.Asked if he was open to tougher work requirements for aid programs, Mr. Biden said over the weekend that had voted for such measures as a senator, “but for Medicaid it’s a different story.”Michael Kikukawa, a White House spokesman, said Mr. Biden “has been clear that he will not accept proposals that take away people’s health coverage.”“The president has been clear he will not accept policies that push Americans into poverty,” Mr. Kikukawa said.Conservatives had initially pushed to tighten those work requirements even further, but more mainstream Republicans in competitive districts balked.Alan Rappeport More