LISA MASCARO and STEPHEN GROVES (Associated Press)
WASHINGTON (AP) — Rebellious House speaker Kevin McCarthy said Wednesday that the debt-ceiling situation was “not my fault” as he sent Republican negotiators to the White House to finish the talks but warned both sides they needed more trying to reach a budget deal with President Joe Biden.
McCarthy said he remains optimistic that they can reach an agreement ahead of schedule as early as next week, when the Treasury Department may run out of cash to pay the bills. Financial markets wobble as Washington approaches a debt crisis that would be unprecedented these days, sending shockwaves across the globe.
The White House blamed McCarthy-led Republicans for risking a catastrophic default that would affect “every part of the country” as they demand “extreme” spending cuts that would hurt millions of Americans.
“We won’t go bankrupt,” said McCarthy of California.
The Republican speaker said negotiators had “made some progress” at the White House. “I want to work as hard as possible and keep going.”
The debt ceiling negotiations focus on a classic problem that has divided and disrupted Washington before, especially the last time Republicans used the debt ceiling as a lever to prioritize ten years ago: Republicans want to undo federal government spending, while Biden and other Democrats want to they do not.
From the White House, Press Secretary Karine Jean-Pierre denounced what the administration called a “fabricated crisis” sparked by Republicans pushing “extreme proposals” that would hurt “every part of the country, whether or not you’re in the red state.” or blue state.
There is little time to conclude a contract. Treasury Secretary Janet Yellen said on Wednesday that it “seems almost certain” that the US will not get through early June without a default. This would be catastrophic as the government is in danger of running out of cash to pay its bills as early as June 1.
“We’re already seeing some tension in the Treasury markets,” Yellen told the Wall Street Journal event.
Failure to raise the country’s debt ceiling, now at $31 trillion, would risk a potentially chaotic federal default that would almost certainly trigger economic turmoil at home and abroad. Concerned retirees and welfare groups are among those drawing up default contingency plans.
While Biden has ruled out invoking the 14th Amendment to raise the debt ceiling himself for the time being, House Democrats announced that they had all agreed to a legislative “liberation” process that would force a vote on the debt ceiling. But they need five Republicans to break with their party and get the majority to go ahead with the plan.
“Sign the bill!” Democrats screamed in the House after Republican Majority Leader Steve Scalise, R-La., announced lawmakers could put plans on hold for Thursday’s recess but could be called back to the vote.
Negotiations on raising the country’s debt ceiling, dragging on for three weeks, would never get to this point.
The White House insisted from the beginning that it did not want to haggle over having to pay the national bills, demanding that Congress simply raise the ceiling, as it has done many times before, with no strings attached.
The newly elected speaker visited Biden in the Oval Office in February, urging the president to come to the negotiating table for a budget package that will cut spending and the country’s growing deficit in exchange for a vote to allow future debt.
Supported by the heavily charging conservative majority of the House of Representatives that brought him to power, McCarthy was not persuaded by a White House counteroffer to freeze spending instead. “Freezing won’t work,” McCarthy said.
“We have to spend less than we spent last year. This is the starting point.”
Negotiations are focused on reaching an agreement on the 2024 budget cap. Republicans dropped their demand to cap spending to 2022 levels, but say next year’s government spending needs to be lower than it is now. Instead, the White House proposed to freeze spending at the current 2023 level.
By sparing defense and some veteran accounts from cutbacks, Republicans would shift most of the spending cuts to other federal programs, breaking Congress’s tradition of budget cap parity.
Agreement on this level of spending is crucial. This would enable McCarthy to cut spending for conservatives while not being so harsh that it would drive out the Democratic votes that would be needed in a divided Congress to pass any bill.
But what, if anything, the Democrats would gain if they agreed to deeper spending cuts than Biden’s team proposed is uncertain.
McCarthy and his Republican negotiators said Democrats get a debt ceiling increase – usually something that both sides take responsibility for.
“The problem is not the White House. The problem is Kevin McCarthy and extreme Republicans,” said Pramila Jayapal, D-Wash., president of the progressive caucus. “They are the ones holding this economy hostage that are putting all these cutbacks on the American people.” The White House continued to argue that deficits could be reduced by removing tax credits for wealthier households and some corporations, but McCarthy said he told the president at a February meeting that increasing revenue from tax hikes was not an option.
Negotiators are also now debating the duration of the 1% cap on annualized spending growth in the future, with Republicans lowering their demand for a 10-year cap to six years, but the White House offering only one year, for 2025.
Republicans are pressing for additional priorities, however, as negotiators focus on the more than $100 billion gap between the 2022 and 2023 spending plans as a place to cut.
They want to increase the job requirements for government assistance for recipients of food stamps, cash assistance, and the Medicaid health care program that the Biden administration says will affect millions of people who depend on aid.
All parties are looking at the potential of the package, which includes a framework to ease federal regulations and accelerate the development of energy projects. Everyone is pretty sure they will recover around $30 billion in unspent COVID-19 funds now that the pandemic emergency has officially been lifted.
The White House responded by keeping defense and non-defense spending steady next year, which would save $90 billion in FY2024 and $1 trillion over 10 years.
McCarthy promised lawmakers he would abide by the rule of publishing bills 72 hours before the vote, making any action questionable until the weekend – days ahead of a potential deadline. The Senate would also have to pass the package before it could go to Biden’s desk for signature.
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Associated Press writers Seung Min Kim, Fatima Hussein, Kevin Freking, Darlene Superville, and Mary Clare Jalonick contributed to this report.