U.S. Debt-Limit Talks Are Stalling on These Issues

Discussions meant to avoid a default have bogged down amid disagreements over spending caps, work requirements and new Republican proposals.

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U.S. Debt-Limit Talks Are Stalling on These Issues | INFBusiness.com

President Biden in Hiroshima, Japan, on Saturday.

President Biden and Speaker Kevin McCarthy remain far apart on key issues in discussions over raising the nation’s borrowing limit and avoiding a damaging default, including on caps for federal spending, new work requirements for some recipients of federal antipoverty assistance and funding meant to help the I.R.S. crack down on high earners and corporations that evade taxes.

The two men were set to speak by phone on Sunday in hopes of re-energizing the sputtering talks, after a weekend in which Republican leaders and White House officials have traded accusations from half a world away.

The call, as Mr. Biden wraps up the Group of 7 summit in Japan, is set to come just over two weeks before the federal government could default on its debt, potentially setting off a global financial crisis and plunging the economy into a deep recession.

Both Mr. Biden and Mr. McCarthy expressed rising optimism late last week that they could reach an agreement that would pave the way for Congress to raise the borrowing limit while also reducing some federal spending, which Republicans have insisted upon as a condition for any debt-limit increase.

Those hopes have dimmed at least slightly in the last 48 hours. Mr. Biden’s aides accused Republicans of backsliding on key areas of negotiation, and Republicans accused the White House of refusing to budge on top priorities for conservatives.

Some of the barbs appeared to be meant to shore up each party’s base. Hard-line spending hawks in the House have urged Mr. McCarthy to demand far greater concessions from Mr. Biden. Some progressive Democrats have pushed Mr. Biden to cut off negotiations and instead act unilaterally to challenge the debt limit on constitutional grounds.

The two sides have found some agreement in talks in the last week, including on clawing back some unspent funds from previously approved Covid relief legislation. They have also agreed in broad terms to some sort of cap on discretionary federal spending for at least the next two years. But they are hung up on the details of those caps, including how much to spend overall next fiscal year on discretionary programs — and how to divide that spending between the military and other programs.

The latest White House offer would hold both military spending and other spending — which includes education, scientific research, environmental protection and more — constant from the current fiscal year to next fiscal year, according to a person familiar with both sides’ proposals. That move would save about $1 trillion over a decade compared with current budget projections. But it would not reduce nominal spending before adjusting for inflation, which Republicans are pushing hard to do.

ImageSpeaker Kevin McCarthy at a news conference on debt-limit negotiations at the Capitol on Wednesday.Credit…Haiyun Jiang/The New York Times

A bill Republicans passed last month that paired spending cuts with a debt-limit increase would bring net savings of about $5 trillion over a decade, compared with current projections.

Republicans’ latest proposal includes a nominal drop in total discretionary spending next year. But that cut is not evenly distributed; in their plan, military spending would continue to rise, while other programs would face deeper cuts.

Mr. Biden’s offer would set spending caps for two years. Republicans would set them for six years.

Republicans have also proposed several efforts to save money that White House officials have objected to. They include new work requirements for recipients of Medicaid and the Temporary Assistance for Needy Families program. They would also make it harder for states to seek waivers for work requirements for certain recipients of federal food assistance who live in areas of sustained high unemployment — a proposal that was not in the Republican debt-limit bill that passed the House.

Republicans are also continuing to seek a reduction in enforcement funding for the I.R.S., a move that the Congressional Budget Office estimates would actually make the budget deficit larger, by reducing future federal tax receipts. And they have sought to include some provisions from a stringent immigration bill that recently passed the House, according to a person familiar with the proposal.

Republican leaders on Saturday continued to blame White House negotiators for what they called the deterioration in discussions.

“The White House is moving backward in negotiations,” Mr. McCarthy wrote on Twitter. In a separate post, he blamed Mr. Biden for the impasse, saying that the president did not “think there is a single dollar of savings to be found in the federal government’s budget.”

White House officials have blamed Mr. McCarthy for the difficulties in the talks, casting him as playing to his most conservative members.

“Let’s be clear: The president’s team is ready to meet any time,” Karine Jean-Pierre, the White House press secretary, said in a news release on Sunday. Republican leaders, she said, “are threatening to put our nation into default for the first time in our history unless extreme partisan demands are met.”

Mr. Biden had previously planned to travel on from Japan to Australia and Papua New Guinea, but he is cutting the trip short to focus on the negotiations. He was preparing to call Mr. McCarthy on Sunday after a news conference.

Reporters asked Mr. Biden to preview his message to Mr. McCarthy on Sunday during the summit. He declined.

Source: nytimes.com

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