Negotiators See Progress on Debt Ceiling, as Biden’s Liberal Allies Worry

The Washington Post / Jeff Stein, Rachel Siegel, Marianna Sotomayor, Liz Goodwin

16:22 JST, May 17, 2023

WASHINGTON – President Biden and top congressional leaders expressed optimism about urgent negotiations over the debt ceiling after a meeting at the White House on Tuesday, as the administration’s liberal allies worried that talks with House Republicans over the budget risk rewarding the GOP’s hard-line stance.

House Speaker Kevin McCarthy (R-Calif.) sounded confident that an agreement could be reached ahead of a June 1 deadline to raise the nation’s borrowing limit or risk a global economic catastrophe. Biden gave a similar assessment, though major differences remain between the two sides before a deal can be struck.

White House officials also announced that Biden would be cutting short a visit to Asia as the administration seeks to finalize an agreement. Aides to McCarthy and Biden will negotiate directly, lawmakers said, slimming down the number of parties involved in the talks as the deadline nears. The White House said staff would continue meeting daily, adding that Biden will check in with leaders by phone during his trip this week and in person when he returns.

White House Office of Management and Budget Director Shalanda Young and presidential counselor Steve Ricchetti have been appointed to lead the negotiations for the president, while Rep. Garret Graves (R-La.) and McCarthy’s staff will lead the negotiations for McCarthy. Congressional Democratic leaders said they approved that arrangement.

“We’re going to continue to make progress toward avoiding default,” the president said at a White House Jewish American Heritage Month celebration shortly after what he called a “good, productive meeting” with congressional leadership. “There was an overwhelming consensus . . . that defaulting on the debt is not an option.”

Emerging from the White House meeting Tuesday afternoon, McCarthy said: “It is possible to get a deal by the end of the week. It’s not that difficult to get to an agreement.”

The current phase of negotiations began shortly after the House passed legislation last month that would raise the debt ceiling but also cut federal spending sharply, roll back green-energy programs and impose work requirements for some recipients of benefit programs. Biden had said for months that Congress should raise the debt limit without any policy concessions from the White House, but as the “X-date” deadline for the government to run out of money nears, officials have been talking almost daily since last week.

The positive signals surrounding negotiations Tuesday came amid new pressure on the administration from its left flank not to agree to new work requirements on federal programs, which McCarthy said must be included in a final deal. Democratic Sens. John Fetterman (Pa.) and Elizabeth Warren (Mass.) strongly criticized such proposals and threatened to vote against a deal that included them, potentially imperiling Democratic support for an agreement.

Publicly, Biden administration officials are adamant that they are working with House Republicans on a deal to fund the federal government in the next fiscal year – not to raise the debt ceiling. Privately, however, some Biden aides recognize that the negotiations appear to be in part about the debt limit. Behind the scenes, negotiators are clear that any deal on the budget must resolve the debt ceiling as well. Democratic negotiators also acknowledge that they will have to agree to more spending cuts if they want to secure a longer extension of the debt ceiling increase – an implicit recognition that lawmakers are bartering over the full faith and credit of the U.S. government, an approach Biden has repeatedly disavowed.

“The issue here is principle: If you accept the idea that you can, in essence, be held to blackmail with the debt ceiling, it will be done again and again. Not to be crass, but it’s essentially negotiating with terrorists who have taken hostages,” said Dean Baker, a liberal economist at the Center for Economic Policy and Research, a left-leaning think tank. “More and more people in progressive circles are becoming concerned with it.”

Concerns are mounting among many Democratic lawmakers that Biden could agree to a deal that would impose new work requirements on some federal benefits. McCarthy told reporters Tuesday that he would insist that such requirements be included in any final agreement, after Biden suggested Sunday that he was open to GOP proposals on the matter.

Warren, the Massachusetts Democrat, told reporters that the idea of imposing work requirements on food stamps, as some Republicans have proposed, is “despicable” and that the White House should not give in to GOP demands to do so.

“I cannot support a deal that is only about hurting people,” the senator said. “If the Republicans are really serious about lowering the amount of the national debt, then, by golly, let’s bring in some revenues.”

Fetterman said in a statement that he “cannot in good conscience support a debt ceiling proposal that pushes people into poverty.”

The debt limit is the maximum amount the federal government can borrow under the law, currently about $31 trillion. That limit must be raised by as soon as June 1 to avoid a potential economic catastrophe, Treasury Secretary Janet L. Yellen warned lawmakers again on Monday.

White House officials on Tuesday said Biden would cut short his upcoming foreign trip because of the ongoing negotiations. The president is scheduled to leave Wednesday morning to attend the Group of Seven meeting in Hiroshima, Japan. He was then slated to travel to Papua New Guinea and Australia, but that portion of the trip has been canceled.

The emerging deal could extend the debt ceiling by two years – crucially, past the 2024 presidential election – in a victory for the Biden administration, while also potentially setting the government’s total spending through then. In exchange for avoiding the economic instability of a default, the White House would agree at least in part to GOP demands to set new limits on spending while rescinding unused pandemic funding and, potentially, approving a permitting deal to encourage energy production.

If any spending cuts in a final deal are not too dramatic, the administration could explain that it was always going to have to compromise on spending in an era of divided government and that the timing of the debt ceiling increase was largely coincidental.

The president also seemed to emphasize the need for compromise.

“Congressional Republicans have not been willing to discuss raising revenues, but policy differences between the parties should not stop Congress from avoiding default,” Biden said.

The White House has made clear that it has some red lines in the talks despite the threats to the debt limit, ruling out a deal that would pare back Biden’s Inflation Reduction Act or cut many government programs by more than 20 percent, as House Republicans have sought.

“A key part of this is whether the White House will be able to credibly say the elements that get negotiated are ones that would have been on the table this year anyway,” said David Kamin, who served as deputy director of the White House National Economic Council earlier in the Biden administration. “I think the White House is focused on trying not to reward Republicans for irresponsibly using the debt limit as a focal point for negotiations.”

The emerging deal may also involve a two-step plan floated by House Republicans for speeding up the nation’s permitting process for energy projects, according to a person familiar with the matter who spoke on the condition of anonymity to describe sensitive deliberations.

As a first step, the person said, the deal would change the permitting process under the National Environmental Policy Act, a 1970 law that requires the federal government to analyze the environmental impact of its proposed actions. As a second step, House GOP leaders would agree to pursue separate legislation to address Democrats’ top permitting priorities: accelerating the approval of renewable-energy projects and electric transmission lines.

However, many Democrats would probably object to punting their priorities to later negotiations. And some liberal lawmakers have criticized what they see as attempts to undermine the National Environmental Policy Act and other bedrock environmental laws.

Concern is building on the left about a potential agreement, especially as Republicans appear more emboldened on work requirements. Talking to reporters Tuesday, McCarthy said it would be “ludicrous” to fail to reach an agreement and default because of resistance to negotiating on such requirements. Asked in another exchange whether work requirements on certain federal programs were a “red line,” the speaker responded, “Yes.”

The president’s liberal allies in Congress have thus far supported the administration’s approach to the debt ceiling, and many are wary of publicly criticizing the administration until a deal becomes public. But that could change as the contours of an agreement come into focus.

Speaking to reporters Tuesday, Sen. Richard J. Durbin (D-Ill.) said work requirements for federal food stamp programs were “ridiculous.”

“We have work requirements,” Durbin said, adding that if Republicans want “to impose work requirements on disabled people and children,” they should say so.

On Monday, Rep. Barbara Lee (D-Calif.) led a group of lawmakers in sending a letter to Biden urging the White House not to accept new work requirements.

Capitol Police also arrested 12 people in the Rotunda on Tuesday afternoon during a demonstration calling on Congress to raise the debt limit without cutting spending on social programs or efforts to fight climate change. The protesters sat on a banner that read “OUR LIVES ARE NOT NEGOTIABLE.”

Ahead of the meeting Tuesday, House Republicans emphasized that they view work requirements as critical.

“Look: You saw the president himself say over this weekend he voted for these work requirements; why would you back away from them today?” said Graves, a top House Republican in the debt ceiling discussions. “I’ll say it again: Then-Senator Biden voted for this.”

Liberal lawmakers have in prior years called for the White House to resolve the debt ceiling issue by unilateral means, such as by minting a $1 trillion coin or invoking the 14th Amendment to disregard the borrowing cap. Even allies who agree that those measures are risky say that encouraging what the administration sees as GOP “hostage-taking” would be worse, since it gives Republicans an incentive to continue to weaponize the debt ceiling for concessions. While the details of a deal are unclear, liberal allies are also worried about broad cuts to programs that millions of Americans depend on – and are particularly wary of re-creating the budget cuts that similar standoffs over the debt ceiling forced during the Obama administration. Many economists believe those cuts slowed the economic recovery after the Great Recession.