White House and Republicans begin shaping debt ceiling deal

The shape of a possible US debt ceiling deal is emerging between the White House and Republicans in Congress as they ramp up talks to avoid an unprecedented national default.

People familiar with the matter said the issues on the table had narrowed in the talks, as senior Biden administration officials and allies of House Republican Speaker Kevin McCarthy prepare to hold new discussions later this week.

At the heart of any deal will be an agreement to limit domestic spending. Republicans are seeking deep cuts to many government programs over 10 years, while the White House wants to see more modest restrictions over two years, a person familiar with the talks said.

President Joe Biden said on Saturday, “There is a real discussion about some changes that we can all make.” “We’re not there yet.”

He told reporters: “We will know more in the next two days.”

Biden has indicated he is willing to apply savings from unspent COVID relief funds to any deal that could help narrow differences between the sides.

Another element of a possible deal is legislation to speed up the permit process for large investment projects. That legislation has been championed by Senator Joe Manchin of West Virginia, a centrist Democrat, and supported by the White House and supported in various forms by Republicans.

The White House has rejected Republican calls to repeal clean energy tax credits that were part of Biden’s signature legislation last year, the Inflation Reduction Act, and to repeal student loan relief measures enacted by the president. His call.

Democrats are also opposing a Republican demand for work requirements that would apply to anti-poverty and Social Safety Net programs in areas such as health care and nutrition, which could be a major sticking point, said a person familiar with the talks.

On Sunday, California’s progressive Democratic Congressman Ro Khanna called for raising taxes on billionaires.

Negotiators are averse to compromise in a toxic political climate and working on a short deadline: The US could default on its debt as early as next month if no deal is reached.

Any agreement is unlikely to be concluded before Biden’s appearance at the G7 summit in Hiroshima next week, but it could happen after that, the person said.

In a briefing with reporters on Friday, White House Press Secretary Karine Jean-Pierre expressed some optimism. “It has been productive. It continues,” she said. “The conversation is going in the right direction.”

But Republicans have been more downbeat and skeptical. “Republicans are focusing on the principles of a single bill to pass a body of Congress that raises the debt ceiling, protects against default and costs,” a Republican aide said, referring to legislation passed by the House last month. implements reforms. But tied it to deep budget cuts.

McCarthy rebuked the Biden administration for moving too slowly, claiming the White House had “no plan, no proposed savings and no clue”. Jean-Pierre denied that allegation on Friday.

“Obviously, very important,” she said. “We’re talking about potentially millions of jobs because of what the House Republicans are doing.”

On Sunday morning, Michael McCaul, the Republican chairman of the House Foreign Affairs Committee, said Congress was playing “a dangerous game.”

“I think any financial person will tell you, it’s pretty devastating,” McCall said, “to default on our full faith and credit.”

Trade groups are following the talks closely as corporate America grows increasingly concerned over the possibility of default and pushes for a deal. Some corporate leaders say it is within reach.

Neil Bradley, chief policy officer of the largest trade lobby group, the US Chamber of Commerce, said, “It doesn’t seem like any of these (issues) are impossible to solve and it really puts you on the path to getting a deal.” ” ,

Bradley sent a memo to member companies on Friday outlining what the settlement could look like. “I think there is a will on both sides to successfully lift the debt ceiling and get the deal done. I believe the biggest danger is simply a miscalculation,” he told the Financial Times.

For Democrats, the priority is making sure they don’t sacrifice any of their major policy achievements of the last two years, or they are forced to accept a level of austerity that will strain the economy.

They also want to uphold the principle that debt ceiling talks should be kept separate from spending talks, even if they are on two parallel tracks.

McCarthy would have to make significant concessions from the White House to win enough Republican support without jeopardizing his speakership. The task got tougher this week after former President Donald Trump urged him to hold the line.

Additional reporting by Aimee Williams in Washington