The shape of a possible US debt ceiling agreement between the White House and congressional Republicans is beginning to emerge as they intensify talks in an effort to avoid an unprecedented national stumble.
The issues on the table have narrowed, people familiar with the matter said, as top Biden administration officials and aides to Republican House Speaker Kevin McCarthy prepare for new debates this weekend.
At the heart of any deal will be an agreement to limit domestic spending. Republicans are calling for deep cuts in many government programs over 10 years, while the White House wants to see more modest restrictions over two years, said a person familiar with the talks.
On Sunday, President Joe Biden said of the talks with the Republicans: “I really think there is a desire on their part as well as our desire to come to an agreement. And I think we will be able to do that.”
Biden has indicated he’s open to applying the savings from unspent Covid relief money to any deal, which could help narrow differences between the two sides.
Another component of a potential deal is legislation to speed up the authorization process for large investment projects. The legislation was endorsed by West Virginia Sen. Joe Manchin, a centrist Democrat, and has been supported by the White House and Republicans have supported it in various forms.
The White House has rejected Republican calls to repeal the clean energy tax credits that were part of the inflation-lowering act, legislation Biden signed last year, and their calls to repeal student debt relief measures implemented by the president.
Democrats also oppose a Republican request to apply labor requirements to anti-poverty programs and social safety nets in areas such as health care and nutrition, which could be a major sticking point, said the person familiar with the conversations.
On Sunday, Ro Khanna, a progressive Democratic congressman from California, called for higher taxes on billionaires.
The negotiators are operating in a toxic political climate that does not accept compromises and on short notice: the United States could default on its debt as early as next month if no deal is reached.
The source said it is unlikely that any deal will be concluded before Biden attends the G7 summit in Hiroshima next week, but it is likely that an agreement will happen after that.
Briefing reporters on Friday, Karen Jean-Pierre, the White House press secretary, expressed some optimism. “It was productive,” she said. “The talks are moving in the right direction.”
But the Republicans were more pessimistic and skeptical. “Republicans are focused on the principles of the only bill to pass a congressional body that raises the debt limit, avoids default and implements spending reforms,” said one Republican aide, referring to legislation the House passed last month that raised the debt limit. But he tied it to deep budget cuts.
McCarthy berated the Biden administration for being too slow, claiming that the White House had “no plan, no proposed savings and no evidence.” Jean-Pierre refuted that charge on Friday.
“Obviously there is a lot of urgency,” she said. “We’re talking about potentially millions of jobs being threatened by 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 to default on our full faith and credit, any financial person will tell you, is pretty disastrous,” McCall said.
Business groups are following the talks closely as US companies become increasingly concerned about the possibility of default and push for a deal. Some corporate leaders insist it is still within reach.
said Neil Bradley, chief policy officer at the US Chamber of Commerce, the largest trade lobby group.
Bradley sent a memo to the member firms on Friday outlining what a settlement might look like. I think there is a desire on both sides to get to a successful debt raise and get a deal. I still think the biggest risk is just a miscalculation,” he told the Financial Times.
For Democrats, the priority is to ensure none of their significant political achievements of the past two years are sacrificed, or they are forced to accept a level of austerity that will cripple the economy.
They also want to maintain the principle that debt-limiting negotiations should be separated from spending talks, even if they happen on two parallel tracks.
McCarthy will have to extract major concessions from the White House to win enough Republican support without endangering his spokeswoman. That task became more difficult this week after former President Donald Trump urged him to hold the line.
Additional reporting by Em Williams in Washington