Debt ceiling: ‘Progress,’ but no deal, as Washington barrels closer to default

Bipartisan negotiators racing to secure a debt ceiling deal have moved closer to an agreement over the last 48 hours but haven’t reached a consensus as Washington heads into the Memorial Day weekend — and the country barrels closer to a potential June 1 default.

Deputies for President Biden and Speaker Kevin McCarthy (R-Calif.) are reportedly eyeing a two-year increase in the debt ceiling, to be accompanied by spending caps of the same duration — a timeline that would push the threat of default beyond the 2024 elections, a key demand of Democrats.

Wally Adeyemo, the Treasury Department deputy secretary, said Friday morning the two sides are “making progress.” 

“Our goal is to make sure that we get a deal, because default is unacceptable,” he told CNN.

But another source familiar with the negotiation pushed back on the reports, saying there is no agreement yet on top-line spending levels, nor is there agreement on a one- or two-year extension of the debt limit. The deal cannot come together, the source said, until there is an agreement on nondefense discretionary spending versus defense spending. 

“I don’t know if it’s the next day or two or three but it’s got to come together,” Rep. Patrick McHenry (R-N.C.), one of McCarthy’s lead negotiators, told reporters on when a deal will be struck.

“There is forward progress but each time there’s forward progress the issues that remain become more difficult and more challenging. So that is step by step, small step by small step, and at some point this thing can come together or go the other way,” he added.

McCarthy, returning to the Capitol on Friday after a morning bike ride with his designated negotiator Rep. Garret Graves (R-La.), struck an optimistic tone.

“I thought we made progress yesterday. I want to make progress again today,” McCarthy said.

Multiple House Republicans said Thursday that they saw a draft plan that could lift the debt limit by up to $4 trillion, which would last past the 2024 election — far more than the $1.5 trillion proposed in the House GOP debt limit increase bill that passed in April.

House conservatives are up in arms that those provisions stray too far from the steep spending cuts included in their debt ceiling package, which would have slashed spending next year and capped increases at 1 percent over the next decade. No Democrat voted for the bill.

On Thursday, as the House was leaving Washington for the long holiday week, a host of conservative lawmakers — most of them representing the far-right Freedom Caucus — suggested they would oppose any bill that included the changes. 

“Watering it down is just not the answer,” said Rep. Ralph Norman (R-S.C.).

Conservatives are also frustrated that the emerging deal seems to exclude a number of policy reforms featured in the GOP’s House-passed bill, including provisions to repeal green-energy subsidies, end Biden’s student loan forgiveness program and increase congressional authority over federal regulations.

McCarthy brushed off those concerns on Friday.

“You’re talking to people who don’t know what’s in the deal, so I’m not concerned about anybody making any comments right now about what they think is in or not in,” McCarthy said. “Whenever we come to an agreement we’ll make sure we will first brief our entire conference.”

Across the aisle, a number of Democrats are sending warning signals of their own, fearful that Biden might have moved too far in the direction of Republicans. 

House Democrats huddled in the Capitol on Thursday afternoon in search of a unifying strategy, and many emerged with warnings that they won’t support a package that includes some of the top GOP priorities, including tougher work requirements for social benefit programs and regulatory reforms easing the path to energy infrastructure projects. 

The warnings were directed not only at Republicans, but also to Biden and his negotiating team.

“We just need the president to continue to hold firm, to make sure that any final deal doesn’t sell out the American people, because there are going to be votes that are going to be required by House Democrats,” said Rep. Steven Horsford (D-Nev.), chairman of the Congressional Black Caucus. “And we can’t vote for something that goes against our constituents and their interests.”

House Minority Leader Hakeem Jeffries (D-N.Y.) has also sent warnings to the White House, particularly on the work requirement piece, which he has deemed a “nonstarter.” 

On Thursday, Jeffries reportedly spoke by phone with Steve Ricchetti, one of the top White House negotiators, though what they discussed remains unknown. 

On the work requirements issue, the White House appears to be holding the line. Rep. Garret Graves (R-La.), one of the Republicans leading the negotiations, said Thursday night: The White House is “refusing to negotiate” on the issue. 

Another point of contention is whether the debt limit deal will include any clawback of an $80-billion funding boost to the IRS that Democrats passed last year, with the intention of upping enforcement among the wealthy. Multiple outlets reported Thursday evening that negotiators are considering a clawback of $10 billion, which could offset cuts to other domestic discretionary programs.

Rep. Richard Neal (Mass.), senior Democrat on the tax-code writing Ways and Means Committee, said Thursday that House Democrats aren’t ready to give up any of the IRS funding, which would empower the agency to collect unpaid taxes, largely from wealthy individuals and corporations that declare their own earnings. 

“I’m not going to do that, because that plays into their hands,” he said. “That’s an unnecessary concession when you consider we’re back to the same issue: The people who pay their taxes through their withholding, they pay them on time.” 

White House spokesperson Michael Kikukawa said in a statement that Biden and his negotiators are “fighting hard for his agenda, including for IRS funding so it can provide better customer service to taxpayers and crack down on wealthy tax cheats.”

Since the beginning, leaders on both sides have faced heavy pressure to hold the line on their party’s priorities. But the squeeze has only intensified in recent days, as negotiators have inched closer to a bipartisan deal — and further away from the wish-list proposals Biden and McCarthy had pushed at the launch of the talks. 

The pushback comes as no surprise. 

Any legislation that can pass through both the GOP-controlled House and win Biden’s signature will necessarily require support from both parties. And lawmakers on the far-left and far-right, who are complaining most loudly about the concessions each side has made, were never expected to support a final deal in any event. 

Still, leaders in both parties will face an intense challenge in cobbling together enough support from moderates and leadership allies to win 218 votes in the House.

Mychael Schnell contributed. Updated at 1:13 p.m.