WASHINGTON – President Joe Biden and House Speaker Kevin McCarthy reached an “agreement in principle” Saturday to raise the nation’s debt ceiling and cut government spending, according to a source familiar with talks, capping a rollercoaster round of negotiations that has brought the nation to the brink of a default and economic disaster.
The tentative deal, finalized during an hour-and-a-half phone call between Biden and McCarthy Saturday night, would raise the limit on how much the government can borrow through the end of 2024.
In return, it would cap annual discretionary spending for two years, essentially keeping spending levels flat for domestic programs, and deliver on a host of other cuts that Republicans demanded while not closing tax loopholes on the wealthy like Biden wanted.
McCarthy is set to hold a conference call with Republican House members at 9:30 p.m. to discuss the parameters of the agreement.
Other details of the deal were unclear. But the compromise is expected to include provisions to rescind COVID-19 rescue funds, expedite permitting on oil and gas projects, and in another concession to Republicans, roll back $10 billion of $80 billion in IRS funding approved in Biden’s Inflation Reduction Act last year that was designed to crack down on wealthy Americans and corporations that evade taxes.
One of the final holdups was expanded work requirements for food stamps and other welfare programs, which Republicans coveted and the White House fought. The details on a work-requirement agreement weren’t immediately available.
Biden has been racing to reach a budget deal with House Republicans to get their support to raise the debt ceiling before the U.S. runs out of money, which Treasury Secretary Janet Yellen said Friday is on track to happen June 5.
Yet to avert a default, the deal still needs approval in Congress, which is not guaranteed to pass a bill to raise the debt ceiling in with the backing of Biden and McCarthy.
Some hardline conservative Republicans in the House have signaled they won’t vote for a negotiated deal on the debt ceiling regardless of the details, while others made new 11th-hour for border-security measures that aren’t in the deal.
Many House Democrats have raised concerns about Biden caving on spending cuts without getting adequate concessions in return and urged him to bypass the debt limit by invoking the 14th Amendment. Wally Adeyemo, deputy Treasury secretary, ruled out the 14th Amendment as an option to work around the debt ceiling in an interview Friday on CNN.
And the deal faces a complicated logistical path for passage before the Thursday June 1 deadline. Members of Congress are set to return from the long Memorial Day weekend on Tuesday. McCarthy has also told Republicans he will follow a rule giving members 72 hours to read a bill before holding a vote.
The deal follows a months-long standoff between Biden and McCarthy over raising the nation’s borrowing limit as the nation veered toward an economic crisis.
The federal government hit its borrowing limit of $31.8 trillion on Jan. 19, forcing the Treasury Department to take extraordinary measures to pay the nation’s bills.
Yellen warned repeatedly that the government could run out of money to pay its bills as early as June 1, putting Social Security benefits, military paychecks and other programs in jeopardy. The White House said a default would cause an economic recession that would result in about 8 million lost jobs.
The rating agency Fitch on Wednesday put the country’s “AAA” credit rating on a negative watch ahead of possible inaction by Congress to raise the debt ceiling.
Biden called for an unconditional increase in the debt limit. But he began negotiating a separate budget agreement with McCarthy after the Republican-controlled House approved a debt ceiling bill with $4.8 trillion in cuts.
McCarthy and other Republicans pushed for elimination of what they call “wasteful spending in Washington” as part of a deal to raise the debt ceiling.
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Michael Collins and Joey Garrison cover the White House. Follow Collins on Twitter @mcollinsNEWS and Garrison @joeygarrison.
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