WASHINGTON — With days to spare before a potential first-ever government default, President Joe Biden and House Speaker Kevin McCarthy on Sunday were finalizing a deal to raise the nation's debt ceiling while trying to wrangle enough Republican and Democratic votes to pass the measure in the coming week.
“I think we’re in good shape,” Biden said.
The compromise announced late Saturday includes spending cuts but risks angering some lawmakers as they take a closer look at the concessions. McCarthy and Biden were set to put the finishing touches on the agreement in a midafternoon call once the final legislative text was drafted. Biden told reporters at the White House upon his return from Delaware that he was confident the plan will make it to his desk and that no sticking points remained.
The days ahead will determine whether Washington is again able to narrowly avoid a default on U.S. debt, as it has done many times before, or whether the global economy enters a potential crisis.
A U.S. default could shatter the $24 trillion market for Treasury debt, cause financial markets to freeze up and spark an international financial crisis. In the United States, analysts say millions of jobs would vanish, borrowing and unemployment rates would jump, and a stock-market plunge could erase trillions of dollars in household wealth.
Anxious retirees and others were already making contingency plans for missed checks, with the next Social Security payments due soon.
Debt ceiling: What's in, what's out of the deal to avert US default
Winning enough support to pass the deal, even with buy-in from the McCarthy, R-Calif., and the White House, remained a work in progress.
McCarthy and his negotiators tried to portray the deal as delivering for Republicans though it fell well short of the sweeping spending cuts they sought. Top White House officials were phoning Democratic lawmakers to try and shore up support.
Senior administration officials, including budget director Shalanda Young, National Economic Council Deputy Director Aviva Aron-Dine and John Podesta, the White House’s senior adviser on climate, planned a virtual briefing with House Democrats in the afternoon, according to a House Democratic aide. One of Biden's chief negotiators, presidential counselor Steve Ricchetti, was making one-on-one calls to Democrats as the administration ramped up efforts to sell the deal.
McCarthy told reporters at the Capitol on Sunday that the agreement “doesn’t get everything everybody wanted,” but that was to be expected in a divided government.
A White House statement issued after announcement of the agreement in principle, reached after Biden and McCarthy spoke by phone Saturday evening, said it "prevents what could have been a catastrophic default and would have led to an economic recession, retirement accounts devastated, and millions of jobs lost.”
Biden said the agreement "represents a compromise, which means not everyone gets what they want. That’s the responsibility of governing.”
Support from both parties will be needed to win congressional approval before a projected June 5 government default on U.S. debts. Lawmakers are not expected to return to work from the Memorial Day weekend before Tuesday, at the earliest, and McCarthy has promised lawmakers he will abide by the rule to post any bill for 72 hours before voting.
Negotiators agreed to some Republican demands for increased work requirements for recipients of food stamps that House Democrats had called a nonstarter.
With the outlines of an agreement in place, the legislative package could be drafted and shared with lawmakers in time for House votes as soon as Wednesday, and later in the coming week in the Senate.
Central to the compromise is a two-year budget deal that would hold spending flat for 2024 and increase it by 1% for 2025 in exchange for raising the debt limit for two years, which would push the volatile political issue past the next presidential election.
Driving hard for a deal to impose tougher work requirements on government aid recipients, Republicans achieved some but not all of what they wanted. The agreement would raise the age for existing work requirements on able-bodied adults, from 49 to 54, without children. Biden was able to secure waivers for veterans and the homeless.
The two sides had also reached for an ambitious overhaul of federal permitting to ease development of energy projects. Instead, the agreement would put in place changes in the landmark National Environmental Policy Act that will designate “a single lead agency” to develop environmental reviews, in hopes of streamlining the process.
The deal came together after Treasury Secretary Janet Yellen told Congress that the United States could default on its debt obligations by June 5 — four days later than previously estimated — if lawmakers did not act in time. Lifting he nation's debt limit, now at $31 trillion, allows more borrowing to pay the nation's already incurred bills.
McCarthy commands only a slim Republican majority in the House, where hard-right conservatives may resist any deal as insufficient as they try to slash spending. By compromising with Democrats for votes, he risks losing support from his own rank and file, setting up a career-challenging moment for the new speaker.
“I think you’re going to get a majority of Republicans voting for this bill," McCarthy said on “Fox News Sunday," adding that because Biden backed it, "I think there’s going to be a lot of Democrats that will vote for it, too.”
House Democratic leader Hakeem Jeffries of New York said on CBS' “Face the Nation” that he expected there will be Democratic support but he declined to provide a number. Asked whether he could guarantee there would not be a default, he said, “Yes.”
A 100-strong group of moderate Democrats gave a crucial nod of support on Sunday, saying in a statement that lawmakers in the New Dems coalition were confident that Biden and his team “delivered a viable, bipartisan solution to end this crisis” and were working to ensure the agreement would receive support from both parties.
The coalition could provide enough support for McCarthy to make up for members in the right flank of his party who have expressed opposition before the bill language was even released.
Those GOP lawmakers who had concerns were “the most colorful conservatives” who “didn’t vote for the thing when it was kind of a Republican wish list," said Republican Rep. Dusty Johnson of South Dakota, one of the deal’s negotiators, on CNN's “State of the Union.”
It also takes the pressure off Biden, facing criticism from progressives for giving into what they call hostage-taking by Republicans.
Democratic Rep. Pramila Jayapal of Washington state, who leads the Congressional Progressive Caucus, told CBS that the White House and Jeffries should worry about whether caucus members will support the agreement.