Debt talks spiral downward as US moves towards default
Debt negotiations took a downward turn as the White House accused Republicans of taking a ‘big step’ back in rejecting their offer and Speaker Kevin McCarthy said talks were on hold until President Joe Biden returns from Japan.
Both sides have accused the other of negotiating in bad faith as the clock ticks toward the June 1st deadline to raise the country’s borrowing limit, now at $31 trillion, so the United States can pay its bills. Otherwise it will default on its debt.
A war of words began over the weekend as meetings between the two negotiating teams were canceled, re-scheduled, only to be canceled again.
President Joe Biden’s White House accused Republicans of taking a ‘big step’ back the debt talks by rejecting their offer
The White House, which had been striking a hopeful tone that a deal was in the works, released a pessimistic statement that accused Republicans of moving backward and preferring a default instead of deal.
‘The Speaker’s team put on the table an offer that was a big step back and contained a set of extreme partisan demands that could never pass both Houses of Congress,’ White House press secretary Karine Jean-Pierre said in the statement.
‘It is only a Republican leadership beholden to its MAGA wing — not the President or Democratic leadership — who are threatening to put our nation into default for the first time in our history unless extreme partisan demands are met,’ she said.
Republicans rejected an offer from the Biden administration that would have kept both non-defense and defense discretionary spending flat next year compared with the 2023 fiscal year, according to reports.
The White House argued that, with inflation, that would amount to a 5% cut in spending.
McCarthy has reportedly asked to speak to Biden, who has a full day of meetings in Hiroshima, Japan, where he is attending the G7 summit. That includes a sitdown with Ukrainian President Volodymyr Zelensky and a trilateral meeting with the leaders of Japan and South Korea.
The speaker said it was the White House who was holding out.
‘Unfortunately, the White House moved backwards,’ McCarthy told reporters on Capitol Hill. ‘I don’t think we’re going to be able to move forward until the President can get back.’
Biden is scheduled to return to the United States on Sunday evening.
‘Just from the last day to today they’ve moved backwards. They actually want to spend more money than we spend this year,’ McCarthy said of the talks.
‘I don’t think we’re going to be able to move forward until the President can get back,’ Speaker Kevin McCarthy said
McCarthy said he wants to cut non-defense spending compared to what was spent in previous years, while Democrats argue that keeping those numbers flat amounts to an effective cut because of inflation.
President Biden appointed a negotiating team and has been checking with them regularly while he is in Japan. The White House said those negotiators are ready to meet with McCarthy’s team at any time.
‘Let’s be clear: The President’s team is ready to meet at any time,’ Jean-Pierre said in her statement.
The two sides are fighting over spending cuts. Republicans are demanding them in exchange for raising the debt limit.
House Republicans passed a bill that would roll back spending to fiscal 2022 levels and impose a 1% cap on spending going forward for a decade. But it was dead on arrival in the Democratic-controlled Senate.
The White House has rejected the GOP demands as too extreme but has expressed a willingness to cut some spending.
But as the talks broke down the attacks have stepped up.
‘Republicans are taking the economy hostage and pushing us to the brink of default, which could cost millions of jobs and tip the country into recession after two years of steady job and wage growth,’ White House communications director Ben LaBolt said in a statement Saturday .
‘We are too far apart on the topline number,’ Republican Rep. Dusty Johnson, an ally of McCarthy, told CNN, referring to the level of discretionary spending for fiscal year 2024.
‘McCarthy is holding the line. He knows where the Republican convention is. And the White House doesn’t understand that Washington has a spending problem.
With Republicans holding a mere-five seat majority in the House and Democrats in control of the Senate, any deal must be bipartisan.
In order to get there, the spending cuts must be significant enough to be accepted by conservative Republicans but also acceptable to Democrats, who hold the Senate and will likely need to provide between 50 and 100 votes in the House.
Republicans, in addition to spending cuts, want to increase defense spending in the 2024 federal budget.
Democrats argue in order for that to happen social programs, education and healthcare would have to bear the burden of cuts. The progressive wing of the Democratic Party would not support that.
Additionally, Republicans have refused to roll back the Trump-era tax breaks on corporations and wealthy households as Biden has proposed.
Republican Rep. Garret Graves of Louisiana, one of the top mediators in the debt limit talks for House Speaker Kevin McCarthy, leaves a meeting on Capitol Hill
Biden, speaking in Japan on Saturday, expressed hope the two sides can come to a deal.
‘I still believe we can avoid a default and we’ll get something decent done,’ the president said.