McCarthy Says Debt Ceiling Deal Could Be Imminent—Here’s What Might Hold It Up

Topline

Both President Joe Biden and House Speaker Kevin McCarthy (R-Calif.) emerged with a positive outlook following their latest round of debt ceiling negotiations Tuesday, with McCarthy saying a deal to raise the nation’s borrowing limit could be done “by the end of the week,” even as the two sides appear hung up on a handful of details with little time to negotiate ahead of an estimated June 1 deadline for when the federal government might no longer be able to pay its bills.

President Joe Biden delivers the State of the Union address to a joint session of Congress as Vice … [+] President Kamala Harris and House Speaker Kevin McCarthy (R-Calif.) listen on February 7, 2023 in the House Chamber of the Capitol in Washington. (Photo by Jacquelyn Martin-Pool/Getty Images)

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Key Facts

McCarthy told reporters following the meeting that “the structure of how we negotiate has improved,” stating the White House “changed the scope” of how talks are handled.

The comments come in sharp contrast with remarks he made Monday, when he suggested the White House wasn’t serious about negotiating and said: “it seems more like they want a default than a deal.”

The White House called the talks “a productive and direct meeting” in a statement Tuesday afternoon, adding Biden is “optimistic that there is a path to a responsible, bipartisan budget agreement.”

Biden reportedly tapped Shalanda Young, the director of the Office of Management and Budget Director, and longtime advisor Steve Ricchetti to engage directly with congressional Republicans to reach a debt ceiling agreement—despite repeatedly saying he would only accept an agreement to raise the debt ceiling with no strings attached.

What We Don’t Know

It’s not clear if the two sides were able to resolve several sticking points they had heading into Tuesday’s discussions. One of the main holdups appears to be McCarthy’s demand for the federal government to impose stricter work requirements for welfare recipients—specifically raising the maximum age that food stamps and Medicaid beneficiaries are required to work from 49 to 55. Biden has signaled an openness for some tweaks to work requirements but seemed to rule out adjustments to Medicaid over the weekend, calling it “a different story” compared to other welfare programs. Biden and Republicans also did not have agreements on GOP demands to rescind unspent Covid-19 funding, loosen energy permitting requirements and put new caps on federal spending heading into Tuesday’s meeting.

Surprising Fact

Biden cut short a planned trip to Asia set to begin Wednesday as debt ceiling talks proceed. The president now plans to come home Sunday following a meeting with G-7 leaders in Japan—nixing later stops in Australia and Papua New Guinea.

Key Background

Treasury Secretary Janet Yellen announced earlier this month that the Treasury Department could run out of cash to pay the nation’s debts by June 1—months earlier than other predictions. The early June deadline has made debt ceiling talks a top priority for both Biden and congressional Republicans, especially with just days left in House and Senate sessions before the end of the month. Economists have warned that the federal government experiencing its first-ever default could have catastrophic economic consequences, likely sending the stock market plunging and pushing the nation into a recession. The federal government hit its $31.4 trillion debt limit on January 12, but the Treasury Department has been enacting “extraordinary measures”—like pausing new investments—to free up cash to continue paying debts. House Republicans had pushed for significant spending cuts in exchange for a debt ceiling increase, but Biden has argued in the past that any negotiations on spending should be part of the government’s annual budget process later this year and shouldn’t be tied to the debt ceiling.

Chief Critic

Biden is facing pressure from progressives to make no spending concessions in exchange for raising the debt ceiling. Congressional Progressive Caucus Chairman Rep. Pramila Jayapal (D-Wash.) warned of “backlash at the polling booth” if Biden agrees to welfare spending cuts in remarks to Axios.