Debt limit standoff brings tough talks, little action as Biden and world leaders monitor progress

WASHINGTON (AP) — Debt limit negotiations between the White House and House Republicans dragged on over the weekend with tough rhetoric but little action, as President Joe Biden and world leaders were watching from afar hoping that high-stakes talks would avert a potentially catastrophic federal default.

Sign of a new negotiation session, food was brought into the Capitol’s negotiation room on Saturday morning, to be taken away a few hours later. No meeting was scheduled. It was another start-and-stop day with no outward signs of progress, although talks could intensify again on Sunday.

The Biden administration and House Speaker Kevin McCarthy, R-California, are racing for a budget deal that would pave the way for an increase in the country’s debt limit. Republicans are demanding deep spending cuts that Democrats oppose as too severe. Both sides face a deadline as early as June 1 to raise their borrowing limit, now at $31 trillion, so the government can keep paying the nation’s bills.

“The president’s team put an offer on the table that was a big step backwards and contained a set of extreme partisan demands that could never pass through both houses of Congress,” said press secretary Karine Jean. -Pierre in a press release on Saturday evening.

“Let’s be clear: the president’s team is ready to meet at any time,” said Jean-Pierre, adding that the Republican leadership is indebted to its extreme wing by threatening to default.

McCarthy tweeted that it was the White House that was “backing down in negotiations.”

He said the “socialist wing” of the Democratic Party appears to be in control, “especially with President Biden out of the country.”

Biden, who was attending a meeting of world leaders in Japan, tried to reassure them on Saturday that the United States would not default, a scenario that would rattle the global economy. He said he felt the talks were progressing.

“The first meetings weren’t that progressive, the second ones were, the third one was,” he said. The chairman added that he thinks “we can avoid a default and we will do something decent”.

For months, Biden had refused to engage in debt limit talks, insisting that Congress should not play political games by trying to use the borrowing limit vote as leverage to extract other political priorities.

But as the deadline looms as early as June 1, when the Treasury says it could run out of money, and Republicans put their own legislation on the table, the White House has kicked off a budget deal that would unlock the vote on the debt limit.

The latest White House proposal would hold discretionary spending steady between current levels in 2023 and fiscal year 2024, according to a person familiar with the talks who spoke on condition of anonymity to discuss it.

This would essentially reduce spending in real terms, after adjusting for inflation, the person said. The spending changes proposed by the White House would produce about $1 trillion in deficit reduction. Biden’s team has been pushing for revenue-boosting policies to further increase deficit cuts, but McCarthy’s representatives refuse to consider them.

The proposal likely falls short of what McCarthy wants for a deal as he faces a restless far-right flank demanding budget cuts. House Republicans have passed their own bill that would bring spending back to fiscal year 2022 levels and impose a 1% cap on future spending for a decade.

In negotiations, House Republicans called for increased defense spending for the upcoming fiscal year 2024, even though they want overall spending to come down, the person said. The person said education, health care, meals on wheels and other programs “would then bear the full burden of the severe cuts.”

Republicans have refused to roll back Trump-era tax breaks for corporations and wealthy households, as proposed in Biden’s own budget.

Negotiations heading into the weekend had been dizzying. McCarthy said Friday it was time to “pause” the talks, but the two sides met again in the evening, only to quickly halt for the night.

“We re-engaged, had a very, very candid discussion,” Rep. Garret Graves, R-La., a negotiator on McCarthy’s side, said Friday night.

As the White House team left the nightly session, Biden adviser Steve Ricchetti, who is leading the talks for Democrats, said he was hopeful. “We will continue to work,” he said.

McCarthy had said resolving the standoff was “easy,” if only Biden’s team agreed to some spending cuts Republicans are demanding. The biggest stalemate was over the amount of the main budget for the fiscal year 2024, according to a person briefed on the talks and whose anonymity was granted to discuss it. Democrats argue that the deep cuts Republicans have proposed would potentially hurt Americans, and they insist Republicans agree to tax increases on the wealthy, in addition to spending cuts, to make up for the deficit.

Wall Street fell on Friday as trading came to a sudden halt. Experts have warned that even the threat of a default could trigger a recession.

Republicans argue that the country’s deficit spending needs to be brought under control, with the goal of bringing spending back to fiscal 2022 levels and restraining future growth. But Biden’s team counters that caps proposed by Republicans in their House-passed bill would equate to 30% cuts in some programs if Defense and veterans were spared, according to a memo from the Office of Justice. management and budget.

Any deal would need the support of Republicans and Democrats to be approved by a divided Congress and passed. Negotiators are eyeing a tighter budget cap deal of a few years, rather than the ten-year caps initially wanted by Republicans, and claw back some $30 billion in unspent COVID-19 funds.

Policy changes remain up for debate, including a framework for reforms to accelerate the development of energy projects, as well as the Republican push to impose work requirements on recipients of government aid that Biden has been open to, but the leader House Democrat Hakeem Jeffries of New York said he was a “non-starter.”

McCarthy faces pressure from his far-right flank to get the strongest deal possible for Republicans, and he risks a threat to his leadership as president if he fails to deliver on his promises. Many House Republicans are unlikely to accept a deal with the White House.

Biden is facing increased resistance from Democrats, especially progressives, who say the cuts will fall too heavily on domestic programs Americans rely on.