Debt limit talks halted again at Capitol as Republicans, White House face ‘real differences’

WASHINGTON — Debt limit talks broke up late Friday at the U.S. Capitol shortly after resuming, another sudden turn of events in negotiations to avoid a potentially catastrophic government default that had come to an abrupt standstill earlier in the day when Republican House Speaker Kevin McCarthy said it’s time to “pause” negotiations, and the White House acknowledged there are “serious differences.”

President Joe Biden’s administration is reaching for a deal with Republicans led by McCarthy as the nation faces a deadline as soon as June 1 to raise the country’s borrowing borrowing limit, now at $31 trillion, to keep paying the nation’s bills and avoid a default that would send shockwaves through the global economy. Republicans are insisting on steep spending cuts, while Biden’s team has tried to limit their impact.

Top Republican negotiators for McCarthy said after the evening session that they were uncertain on next steps. But the White House publicly expressed optimism that a resolution could be reached if parties negotiated in “good faith.”

“We reengaged, had a very, very candid discussion, talking about where we are, talking about where things need to be, what’s reasonably acceptable,” said Rep. Garret Graves, R-La., a top McCarthy ally leading the talks for his side.

Another Republican negotiator, Rep. Patrick McHenry of North Carolina, said they would be briefing McCarthy on the latest developments. Asked if he was confident an agreement over budget issues could be reached with the White House, McHenry said, “No.”

As the White House team left the nighttime session, counselor to the president Steve Ricchetti, who is leading talks for the Democrats, said he was hopeful. “We’re going to keep working,” he said.

The president, who has been in Japan attending the Group of Seven summit, had no immediate public comment, but press secretary Karine Jean-Pierre said he was being continually updated on the discussions in Washington. Jean-Pierre said Biden was “still optimistic” that a deal could be reached to avert default, but acknowledged, “There’s no question we have serious differences.”

Biden had already planned to cut short the rest of his trip and he is expected to return to Washington Sunday night.

The White House has refused to publicly discuss the sticking points between the two sides, though Jean-Pierre insisted that Biden believed he was not negotiating on raising the borrowing limit, despite the clear linkage in talks between securing a budget deal and raising the debt ceiling.

“It is not negotiable — we should not be negotiating on the debt,” she said.

It was not immediately clear what precipitated the brief return to the negotiating table Friday evening.

Earlier in the day, McCarthy said resolution to the standoff is “easy,” if only Biden’s team would agree to some spending cuts Republicans are demanding. The biggest impasse was over the fiscal 2024 top-line budget amount, according to a person briefed on the talks and granted anonymity to discuss them. Democrats staunchly oppose the steep reductions Republicans have put on the table as potentially harmful to Americans.

“We’ve got to get movement by the White House and we don’t have any movement yet,” McCarthy, R-Calif., told reporters at the Capitol. “So, yeah, we’ve got to pause.”

Jean-Pierre said the president’s team is working hard towards a “reasonable bipartisan solution” that can pass both the House and the Senate.

Wall Street turned lower as negotiations on raising the nation’s debt limit came to a sudden halt, raising worries that the country could edge closer to risking a highly damaging default on U.S. government debt. Experts have warned that even the threat of a debt default would could spark a recession.

Republicans want to extract steep spending cuts, arguing the nation’s deficit spending needs to get under control, rolling back spending to fiscal 2022 levels and restricting future growth. But Biden’s team is countering that the caps Republicans proposed in their House-passed bill would amount to 30% reductions in some programs if Defense and veterans are spared, according to a memo from the Office of Management and Budget.

Any deal would need the support of both Republicans and Democrats to find approval in a divided Congress and be passed into law. Negotiators are eyeing a more narrow budget cap deal of a few years, rather than the decade-long caps Republicans initially wanted, and clawing back some $30 billion of unspent COVID-19 funds.

Still up for debate are policy changes, including a framework for permitting reforms to speed the development of energy projects, as well as the Republican push to impose work requirements on government aid recipients that Biden has been open to but the House Democratic leader Hakeem Jeffries has said was a “nonstarter.”

“Look, we can’t be spending more money next year,” McCarthy said at the Capitol. “We have to spend less than we spent the year before. It’s pretty easy.”

But McCarthy faces pressures from his hard-right flank to cut the strongest deal possible for Republicans, and he risks a threat to his leadership as speaker if he fails to deliver. Many House Republicans are unlikely to accept any deal with the White House.

The internal political dynamics confronting the embattled McCarthy leave the Democrats skeptical of giving away too much to the Republicans and driving off the Democratic support they will need to pass any compromise through Congress.

As Republicans demand spending cuts and policy changes, Biden is facing increased pushback from Democrats, particularly progressives, who argue the reductions will fall too heavily on domestic programs that Americans rely on.

Some Democrats want Biden to invoke his authority under the 14th amendment to raise the debt ceiling on his own, an idea that raises legal questions and that the president has so far said he is not inclined to consider.

Pressure on McCarthy comes from the conservative House Freedom Caucus, which said late Thursday there should be no further discussions until the Senate takes action on the House Republican plan. That bill approved last month would raise the debt limit into 2024 in exchange for spending caps and policy changes. Biden has said he would veto that Republican measure.

In the Senate, which is controlled by majority Democrats, the Republican leader Mitch McConnell has taken a backseat publicly, and is pushing Biden to strike a deal directly with McCarthy.

“They are the only two who can reach an agreement,” McConnell said in a tweet. “It is past time for the White House to get serious. Time is of the essence.”