Debt Ceiling Deal Remains Elusive

Lawmakers may have only nine days to head off a default.

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House Speaker Kevin McCarthy and President Joe Biden meet in the Oval Office on May 22, 2023. (Photo by Drew Angerer/Getty Images)

House Speaker Kevin McCarthy and President Joe Biden agreed Monday night that their latest debt ceiling talks were “productive.” Yet that’s about as far as their agreements go with only nine days until the June 1 deadline for default.

Disagreement over just how much to limit government spending rests at the heart of the talks. GOP lawmakers are aiming to cut federal spending by more than $130 billion. McCarthy emphasized Monday night that, at the very least, Republicans want to spend less money in the upcoming fiscal year than Congress did in this fiscal year. The White House opposes that idea and is reportedly open to spending caps that freeze spending for many programs at current levels.

It’s not clear how the two sides will square that circle, though they could consider capping spending at fiscal year 2022 levels, adjusted for inflation, as a compromise.

The two sides also disagree on how long to impose caps on spending. Republicans want to cap annual spending growth at 1 percent for a decade, while Democrats have pushed to keep caps for just the next two years.

Republicans, meanwhile, are pressing for expanded work requirements for social safety net programs and streamlined permitting processes for energy projects as part of the talks.

The health of the global economy is in the balance, and members of Congress are running uncomfortably close to the deadline. Leaders had hoped for a deal over the weekend, but talks came in fits and starts while Biden was traveling back from the G7 summit in Japan. Congressional leaders still think lawmakers can pass legislation before June 1 if a deal emerges soon, but the House may have to vote over the weekend.

House rules require McCarthy to give members 72 hours to review bill text before voting on it—a demand GOP lawmakers could waive but aren’t likely to. McCarthy said Monday night he will abide by that rule.

Memorial Day plans are as much a driver of urgency for lawmakers as the default deadline, according to some members. “I don’t think there’s a panic,” Colorado Republican Rep. Ken Buck told CNN Monday. “There is a sense that we may not have the same Memorial Day Weekend that we thought we would.”

There may be some wiggle room on the default cutoff, but outside groups and the Congressional Budget Office largely agree with Treasury Secretary Janet Yellen’s June 1 timeline. The Bipartisan Policy Center projected this morning that the Treasury Department will most likely not have enough money to pay all of its bills sometime between June 2 and June 13.

The government hit its $31.4 trillion borrowing limit earlier this year, but the Treasury Department has been moving money around for months to avoid default using what’s known as “extraordinary measures.”

After meeting with McCarthy and Biden on Monday night, House Financial Services Committee Chairman Patrick McHenry said he sensed a “lack of urgency” from the White House to resolve the matter. He added he is concerned about markets responding poorly to delayed talks.

“It’s a very tough challenge” to reconcile the two sides’ priorities, McHenry told reporters, but “very reasonable” people are in the negotiating room. Talks are expected to continue today.

On the Floor

The House will vote on legislation this week to respond to the influx of fentanyl products into the United States. A full list of other bills the House could consider this week is available here.

The Senate is out.

Key Hearings

  • Members of the House Judiciary Committee are meeting this morning for a hearing on the Biden administration’s policies on the southern border. Information and livestream here.
  • A House Energy and Commerce subcommittee is examining federal efforts to grow American energy supply chains and manufacturing during a hearing this morning. Information and livestream here.
  • Officials from the Department of Homeland Security and the FBI will appear before a House Homeland Security panel this afternoon for a hearing on Chinese government aggression. Information and livestream here.
  • Members of the House Transportation and Infrastructure Committee will hold a hearing Wednesday morning on national emergencies and presidential authority. Information and livestream here.
  • The House Ways and Means Committee will meet Thursday morning for a hearing on customs policies. Information and livestream here.

Of Note

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U-Haul driver faces multiple charges after crashing into a security barrier near White House, police say

How Republicans are responding to Trump’s call for debt default

The Biden administration’s approach to AI, explained

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  1. Avatar photo
    Stephanie

    I read the article from the link "How Republicans are responding to Trump's call for debt default."

    As usual, Trump is stirring the pot in ways that force Republicans onto the defensive.

    It's the Daily Beast & no paywall on this article. Excerpt:

    How Trump’s Call for Debt Default Could Bite GOP in the Ass

    Onstage at his recent CNN town hall, former President Donald Trump had a message for Republicans on Capitol Hill: Relax, take a deep breath, and get ready to embrace a catastrophic default on the federal debt.
    “I say to the Republicans out there—congressmen, senators—if they don’t give you massive cuts, you’re going to have to do a default,” Trump said.

    Trump may have even given up the game, acknowledging that much of his calculation was political. When he was president, he said politicians shouldn’t use the threat of a default as a negotiating tool, but said he was now changing his tune “because now I’m not president.”

    On Friday, he was perhaps even more explicit on his Truth Social platform, saying “Republicans should not make a deal on the debt ceiling unless they get everything they want (Including the ‘kitchen sink’). That’s the way the Democrats have always dealt with us. Do not fold!!!”

    But as Republicans try to force Democrats to accept deep spending cuts in exchange for simply not defaulting on the debt, Republican lawmakers have conspicuously and repeatedly said there will not be a default.
    “Everybody knows from the beginning you’re not going to default,” Senate Minority Leader Mitch McConnell (R-KY) said in March. “It’s simply unacceptable, it's not going to happen.”

    Despite Trump’s continued influence on Capitol Hill—where many Republicans have endorsed his 2024 presidential bid—a range of GOP lawmakers uniformly steered clear of his comments about defaulting when The Daily Beast asked about them last week.

    “What any one individual says about how to dramatize it, that’s up to them,” said Sen. Mike Braun (R-IN), who has backed Trump for 2024.

    Other lawmakers blamed Trump’s default comments on the fact that he was running for president, suggesting that context spared Capitol Hill from taking him seriously.

    “You know, it is said that people campaign in poetry and govern in prose,” said Rep. Dusty Johnson (R-SD). “I think this is just another example of that.”

    “The President is running a presidential campaign,” said Rep. Ryan Zinke (R-MT), who formerly served in Trump’s cabinet. “He’s running to be president again.”

    In comparison, Zinke suggested, House members are on “the front lines of the Constitution” as they try to secure a deal that reins in what they argue is the existential threat of a ballooning federal debt.

    But Trump’s open flirtation with a default matters more than Republicans might like to acknowledge. It undermines them in that he is unreservedly teasing out the logical conclusion of the GOP’s negotiating position—in a way that could attract public blame if a default does happen.

    “Sometimes Donald Trump says the true things out loud,” said Sen. Chris Murphy (D-CT).
    “Their entire strategy is predicated on their willingness to default being real and believable,” Murphy said. “Nobody would negotiate with them over their crazy set of demands to kick thousands of kids off nutritional benefits and Head Start if you didn’t think they were.”

    Biden is negotiating with Republicans, to the increasing dismay of some Democratic lawmakers, who began the year saying the GOP shouldn’t be rewarded for leveraging the debt ceiling to advance their policy goals.
    That in itself is a win for Republicans. But there’s plenty of peril here, too—which Trump may have added to with his remarks. Out of necessity, any deal with Democrats will not contain, as Trump said, “EVERYTHING” the GOP wants. Several Republican lawmakers seem to share that lofty standard, too.

    Conspicuously, as Trump issued his renewed call on Friday for Republicans to default if they don’t get a good deal, talks between Speaker Kevin McCarthy’s camp and the White House broke down, with the Republicans leaving the negotiating table.

    Close observers of the process warn that Trump’s influence can’t be discounted.

    Trump’s default comments, said GOP lobbyist Liam Donovan, were “a real time reminder that he can bigfoot this process if he decides to and it's really the wild card at play.”

    “He has been largely invisible and absent from this process, which has been quite helpful to Republicans, but you never know when he might,” he said.

    The question will be whether conservatives conclude the deal McCarthy ultimately strikes is preferable to a default—or gives them enough cover with their voters—while being egged on by the GOP’s most dominant figure and presumptive nominee in 2024.

    According to most economists and experts, a default on the U.S. debt—which has never before happened—would cause a widespread level of economic pain that is rarely seen. Seniors, military, veterans, government employees, and other groups would stop receiving paychecks and benefits; Treasury payments would be snared, sending markets into turmoil and overall U.S. economic activity would slow by 10 percent, according to a Goldman Sachs estimate.

    Those factors would likely add up to a recession, which could take years to recover from, cost millions of Americans their jobs, and cause interest rates to skyrocket across the board.

    The federal debt is a slower-moving concern. The interest payments needed to service the debt are eating up a disproportionate share of the budget, but raising the debt ceiling is just an agreement to pay the debts the United States has already incurred. Many on the right, however, have focused on the debt battle as a way to fight “woke” federal spending and slash programs that they oppose on philosophical grounds for decades.

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    1. Avatar photo
      Ben Connelly

      ““When he was president, he said politicians shouldn’t use the threat of a default as a negotiating tool, but said he was now changing his tune “because now I’m not president.””

      So you’re telling me he finally admits he lost in 2020… ?

      Gotta look for the silver lining.

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  2. Craig B.

    I'm no economics expert, but I'm skeptical of people blowing off a default like it's no big deal and a fiction of the MSM to put pressure on to increase spending. I see a lot of guys with an R next to their name, including reps who are on Team Trump, saying a default is not an option because it will screw the proverbial pooch.

    I have no doubt President Biden will demagogue this like he does everything else during that vital 10-to-4 window when his staff allows him to give public statements, but most of what I read tells me defaulting isn't a blow-off. The U.S. Chamber of Commerce, not exactly the residence of Marxist economic thinking, says it would be dangerous so I tend to go with them instead of people who reflexively think everything is a liberal/MSM/woke plot.

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  3. Learnin4life

    Haley, I appreciate your generally measured reporting approach which focuses more on factual details than excited utterance. That element alone is why I nearly always make it to the end of your newsletters. Thank you.

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    1. Brook

      Well said. I agree.

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    2. R. James

      "The health of the global economy is in the balance, and members of Congress are running uncomfortably close to the deadline."

      ?

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  4. R. James

    It should be noted that the Treasury not paying the interest on the debt triggers a default. So, outside groups saying that the Treasury may not have enough to pay ALL of its bills cannot be used to stand on a June 1 deadline. Especially if the Treasury prioritizes the payment on the debt interest it may be able to get to June 15, which would see increased revenue and may mean the actual date for default is much later. The markets seem to be steady based on this understanding and the belief that a deal will be reached. We've all seen this movie before. Just pick a number of spending cuts and get on with it.

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  5. Noah Weiszner

    Republicans passed a $2 trillion tax cut for billionaires and corporations.
    And now they’re refusing to pay for it.

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    1. R. James

      The Trump tax cuts occurred in 2019. The Debt Ceiling was raised in 2021. This is 2023. In 2022, the Biden Administration has spent $6.2 trillion (25% of GDP). Outside of COVID and WWII the government has never spent that much relative to GDP. What is the existential emergency that requires the government to spend so much on top of a debt that is 123% of GDP? And now we are told that Biden wants to keep spending at current levels, why?

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      1. Noah Weiszner

        The POTUS is not the one who insisted on tying conditions to raising the debt ceiling, something the House
        GOP did UNCONDITIONALLY three times under Trump--even as he was adding more than 7 trillion to the debt.
        The political blame may be shared but the responsibility falls heavily on one side.

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    2. Jeffrey Sumner

      Can we stop with the "tax cut for billionaires and corporations" nonsense? The code change doubled the standard deduction, and lowered the marginal rate in ALL brackets. Every single payer of Federal income tax got a reduction - to claim otherwise is either mathematically lazy, or political grandstanding.

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      1. Avatar photo
        John N.

        It also removed the state and local taxes write off and eliminated a lots of other tax exemptions.

        It was a substantial unfunded tax scam.

        And yes, it mostly benefited the already wealthy and corporations.

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        This comment has been deleted

        1. Jeffrey Sumner

          Mentioned it, realized it doesn't apply to everybody, deleted it. But I take your point.

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          1. Avatar photo
            John N.

            Put another way, your claim applies mainly to you, not to the people who disagree with you, eh?

            "To claim otherwise is either mathematically lazy, or political grandstanding."

            Which is it for you? Laziness or grandstanding?

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      3. Avatar photo
        Stephanie

        But the wealthy and corporations got a much bigger reduction in taxes. (And the rest of us slobs will have our tax cut go away in a few years.)

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    3. Avatar photo
      JohnM.

      I got a tax cut, and I assume you did as well. Last I looked I wasn't a billionaire or a corporation.
      I do agree that tax cuts without concurrent spending cuts are extremely foolhardy.

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      1. Noah Weiszner

        were foolhardy, were

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    4. Edward Moffett

      The supposed $2.3T cost of the tax cuts was an estimate for all 10 years.

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    5. Edward Moffett

      https://www.heritage.org/taxes/commentary/the-numbers-are-trumps-tax-cuts-paid

      https://waysandmeans.house.gov/examiner-gop-tax-reform-paid-for-itself-according-to-cbo/

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      1. Avatar photo
        Stephanie

        Color me skeptical of pronouncements from pro-Trump/Republican party organs.

        What else would the Washington Examiner and Heritage say?

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        1. Edward Moffett

          The data cited are from the Congressional Budget Office (CBO).

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          1. Avatar photo
            Stephanie

            Not so--take a closer look.

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    6. GeoinGA

      Revenue's skyrocketed from roughly 3.7 in 2017 to close to 5 trillion last year in spite of covid response - both needed and extravagant. The issue was the irresponsible 1.8 T spending in the Fictitiously named Inflation Reduction Act on top of the necessary Covid emergency spending at the end of the Trump era. It really is that simple.

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      1. Noah Weiszner

        The president is not the one who insisted on tying conditions to raising the debt ceiling, something the House
        GOP did UNCONDITIONALLY three times under Trump--even as he was adding more than 7 trillion to the debt.
        The political blame may be shared but the responsibility falls heavily on one side.

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        1. GeoinGA

          agree . And that would be Biden. The only thing worse would have been if Manchin and Sinema let Biden and the Progressive regime in the house have their whole 4 trillion BBB plan - that tells you exactly what kind of people McCarthy has to deal with.
          And I doubt you are really that ignorant about where Trumps debt came from - the response to the Covid emergency. And I would also add Obama policies before were back loaded to weigh down the years after he left office in Jan 2017. A democrat president as a lame duck is a kid in a candy store.

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  6. Noah Weiszner

    If an agreement isn’t reached to prevent the United States from defaulting on its debt, the country could descend into economic disarray, affecting millions of Americans from investors to Social Security beneficiaries.

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    1. Avatar photo
      BillAZ

      Sure... and what do you want to bet that some Republicans are betting that by election day 2024 Americans will forget much of this and simply take out their misery on the incumbent?

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        2sequoia

        I sure wouldn’t bet on that.

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    2. Edward Moffett

      The US government has enough tax income to pay the interest due on its debt. The only way a default can occur is if the Biden administration decides to make it happen.

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      1. Avatar photo
        Stephanie

        Here's quote from Sen. Chris Murphy. He was committing on Trump's exhorting the House Republicans to trigger a default:

        “Sometimes Donald Trump says the true things out loud,” said Sen. Chris Murphy (D-CT).
        “Their entire strategy is predicated on their willingness to default being real and believable,” Murphy said. “Nobody would negotiate with them over their crazy set of demands to kick thousands of kids off nutritional benefits and Head Start if you didn’t think they were.”

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        2. Edward Moffett

          So what?

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            Stephanie

            Who is ACTUALLY forcing the default, if we're being straightforward here?

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      2. R. James

        Correct. And yet, the Treasury Department, the White House, and much of the media including TD seems to be ignorant of this fact.

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      3. Mmorrissey001

        Agreed. But what will failure signal to markets and investors. I'm afraid nothing good.

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        1. R. James

          The market seems to understand this and is holding stable.

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  7. Chouseworth

    "The health of the global economy is in the balance..."

    Oh, please. I expect this hyperbole from most of the MSM, but not the Dispatch.

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    1. Avatar photo
      Stephanie

      What is your information that contradicts that? You forgot to supply it.

      Go ahead and rebut these statements with some facts:
      "According to most economists and experts, a default on the U.S. debt—which has never before happened—would cause a widespread level of economic pain that is rarely seen. Seniors, military, veterans, government employees, and other groups would stop receiving paychecks and benefits; Treasury payments would be snared, sending markets into turmoil and overall U.S. economic activity would slow by 10 percent, according to a Goldman Sachs estimate.
      Those factors would likely add up to a recession, which could take years to recover from, cost millions of Americans their jobs, and cause interest rates to skyrocket across the board."
      (From the Daily Beast article Haley linked to)

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      1. Chouseworth

        Default is not the first option. Many government services would be shut down first, avoiding debt default, and it has been certainly been done before. The sun will rise tomorrow, along with the rest of the world.

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