Sunday May 28, 2023
Top Republican lawmaker Kevin McCarthy said Saturday that talks with Democratic President Joe Biden over the U.S. federal government's debt ceiling are showing signs of "progress." The development comes as the nation faces imminent risk of default in less than a week.
Time is of the essence, as the Treasury Department recently announced that the government will run out of funds to cover all of its bills on June 5 unless Congress acts. This revised date is slightly later, but firmer, than the previous forecast of failure as early as June 1.
But even if there is an agreement in principle between Biden and House Speaker McCarthy, the process of pushing the legislation through a divided Congress is likely to take up to a week due to close and bitter internal divisions.
McCarthy informed reporters: "We don't have a deal... We're not there yet. We've made progress; we've been working well up until this morning. And now we're back at it."
Hard-line Republicans have threatened to block any legislation that doesn't meet their expectations, which include significant spending cuts. Progressive Democrats, on the other hand, have threatened not to support compromises that include new work requirements for federal anti-poverty programs.
Biden expressed optimism, telling reporters on Friday, "It's very close and I'm optimistic."
With Republicans holding a narrow 222-213 majority in the House and Democrats holding a 51-49 majority in the Senate, passing any deal between a Democratic president and a Republican speaker into law requires walking a tightrope.
Republicans have set a goal of cutting government spending over the next decade to slow the growth of the U.S. debt, which is currently equal to the annual output of the economy. However, the tentative agreement is expected to fall well short of their goal.
The two parties have tentatively agreed to raise the debt ceiling to cover the country's borrowing needs until a presidential election in November 2024. The deal would include increased spending on the military and veterans' care, while cutting spending on many discretionary domestic programs.
McCarthy said Republicans are also pushing for energy-enabling reforms, including easing restrictions on gas and oil production.
Even before the deal was struck, some members of McCarthy's troubled committee raised objections. Republican Representative Dan Bishop expressed anger at the idea of extending the debt ceiling into the next presidential election, writing on Twitter: "If the Speaker's negotiators bring back essentially a net increase in the debt limit... so big that it even protects Biden from a presidential challenge... it's war ."
Among the sticking points in the negotiations are Republicans' rejection of Biden's proposed tax hikes and neither party's willingness to address the rapidly growing health care and pension programs that are contributing to the escalating debt.
If Congress did not raise the self-imposed debt ceiling before June 5, it could trigger a default that would severely affect financial markets and plunge the United States into a deep recession. Ratings agencies have put the United States under review for a possible downgrade, which would raise borrowing costs and undermine its position as a cornerstone of the global financial system. A similar standoff in 2011 led to a downgrade of US debt by Standard & Poor's, leading to market turmoil and higher borrowing costs for the government.
