Debt ceiling talks grind on

Behind closed doors, McCarthy urged his slim House Republican majority to “just stick together” despite their own factions as he negotiates the strongest deal possible for conservatives, said lawmakers exiting the private session.

“We’re not there yet,” McCarthy said at the Capitol, reiterating he won’t bring any bill forward “that doesn’t spend less than we spent this year.”

Rank-and-file Republican lawmakers were told they could proceed with their planned recess week around Memorial Day away from Washington, set to begin after Thursdays session. But McCarthy warned them to be on 24-hour call to return for voting on any deal.

Dragging into a second week, the negotiations over raising the nation's debt limit, now at $31 trillion, were never supposed to arrive at this point — a crisis in the making.

The White House insisted early on it was unwilling to barter over the need to pay the nation's bills, demanding that Congress simply lift the ceiling as it has done many times before with no strings attached.

But the newly elected speaker, McCarthy, R-Calif., visited Biden at the Oval Office in February, urging the president to come to the negotiating table on a budget package that would reduce spending and the nation's post-COVID ballooning deficits in exchange for the vote to allow future debt.

Both men said late Monday after a crucial meeting at the White House — after the president returned from the Group of Seven summit in Japan — that talks were productive.

But with time short to strike a deal, they are laboring to come up with a compromise that could be approved quickly by the Republican House and the Democratic Senate and be signed into law.

Negotiations are focused on finding agreement over a 2024 budget year limit. Republicans insist that next year’s government spending be less than it is now, but the White House instead is offering to freeze spending at current 2023 numbers.

Agreement on that topline spending level is vital — to enable McCarthy to deliver spending restraint for conservatives while not being so severe that it would chase off the Democratic votes that would be needed in the divided Congress to pass any bill.

The White House continues to argue that deficits can be reduced by ending tax breaks for wealthier households and some corporations, but McCarthy said he told the president at their February meeting that raising revenue from tax hikes is off the table.

The negotiators are now also debating the duration of a 1% cap on annual spending growth going forward, with Republicans dropping their demand for a 10-year cap to six years, but the White House offering only one year, for 2025.

Typically, the debt ceiling has been lifted for the duration of a budget deal, and in this negotiation the White House is angling for a two-year agreement that would push past the presidential elections.

A top Republican negotiator Rep. Patrick McHenry of North Carolina who joined the speaker at the Oval Office Monday evening, said there needs to be more urgency. Talks resumed Monday night at the Capitol for two hours, and picked up again midday Tuesday.

“What I sense from the White House is a lack of urgency,” McHenry told reporters.

But on the Senate side, Republican leader Mitch McConnell said, “Look, I think everybody needs to relax.” He said that “the last 10 times we raised the debt ceiling, there were things attached to it” — as the White House has opposed this year.

"This is not that unusual.”

However, time is growing short. The House speaker promised lawmakers he will abide by the rule to post any bill for 72 hours before voting, making any action doubtful until the end of the week — just days before the potential deadline. The Senate would also have to pass the package before it could go to Biden's desk to be signed.

After a weekend of start-stop talks, both Biden and McCarthy have declared a need to close a compromise deal. U.S. financial markets turned down last week after negotiations paused amid a jittery economy.

McCarthy faces a hard-right flank in his own party that is likely to reject any deal, and that has led some Democrats to encourage Biden to resist any compromise with the Republicans and simply raise the debt ceiling on his own, an unprecedented and legally fraught action.

On Tuesday, the leader of the conservative House Freedom Caucus Rep. Scott Perry said, “We all want to stick together. But again, it’s sticking together around the right thing.”

He and others are growing skeptical of the June 1 deadline that Treasury Secretary Janel Yellen said is when “it is highly likely” the government will be unable to pay all the nation’s bills.

Perry suggested the Treasury Department is going to be "flush with cash” come June 15 when quarterly tax payments are due.

“There’s absolutely no reason to do this and we all know it,” he said.

As the negotiators focus on the $100 billion-plus difference between the 2022 and 2023 spending plans as a place to cut, other priorities Republicans are pushing as part of the deal remain on the table.

Republicans also want to beef up work requirements for government aid to recipients in the Medicaid health care program, though the Biden administration has countered that millions of people could lose coverage.

The GOP additionally wants new cuts to food aid by restricting states’ ability to waive work requirements in places with high joblessness. But Democrats have said any changes to work requirements for government aid recipients are nonstarters.

GOP lawmakers are also seeking cuts in IRS funding and, by sparing defense and veterans accounts from reductions, would shift the bulk of spending reductions to other federal programs.

The White House has countered by keeping defense and nondefense spending flat next year, which would save $90 billion in the 2024 budget year and $1 trillion over 10 years.

All sides have been eyeing the potential for the package to include a framework to ease federal regulations and speed energy project developments. They are all but certain to claw back some $30 billion in unspent COVID-19 funds now that the pandemic emergency has officially lifted.

The president, though, said he was ruling out the possibility, for now, of invoking the 14th Amendment as a solution, saying it's an “unresolved” legal question that would become tied up in the courts.

Associated Press writers Kevin Freking and Seung Min Kim contributed to this report.