House Republicans and the White House have reached a preliminary agreement to raise the nation’s debt limit, according to sources familiar with the matter.
House Speaker Kevin McCarthy (R-CA) announced the agreement and that he will deliver a statement on Saturday night.
I just got off the phone with the president a bit ago. After he wasted time and refused to negotiate for months, we’ve come to an agreement in principle that is worthy of the American people.
I’ll deliver a statement at 9:10pm ET. Watch here:https://t.co/vmn31INPH5
— Kevin McCarthy (@SpeakerMcCarthy) May 28, 2023
“I just got off the phone with the president a bit ago,” McCarthy wrote on Twitter. “After he wasted time and refused to negotiate for months, we’ve come to an agreement in principle that is worthy of the American people. I’ll deliver a statement at 9:10pm ET.”
The agreement comes as Treasury Secretary Janet Yellen warned that failing to raise the borrowing limit would result in severe hardship. Yellen, in a letter to Congress, extended the projected debt ceiling deadline to June 5, highlighting the use of extraordinary measures to maintain the country’s financial position. The government could default as early as a week from Monday.
House Speaker Kevin McCarthy acknowledged the urgency of the situation, stating that negotiations with President Joe Biden to curb federal spending and lift the borrowing limit were in a critical phase. Both parties have been working on a two-year agreement that would limit spending and extend the borrowing limit beyond the upcoming presidential election. However, differences remain, particularly regarding work requirements for recipients of government assistance.
Lawmakers left for the Memorial Day weekend, leaving anxious retirees and social service groups concerned about a potential default. The International Monetary Fund Managing Director, Kristalina Georgieva, emphasized the importance of finding a resolution, referring to the situation as the “12th hour.”
President Biden, while attending an event honoring the Louisiana State University women’s basketball team, expressed hope that a deal would be reached, mentioning one of his top negotiators. The negotiations involve discussions on spending cuts and lifting the debt ceiling for two years to cover the nation’s incurred bills.
Despite progress, the two sides remain divided on various provisions. The White House is resisting measures that could drive people into poverty or compromise their healthcare, while Republicans are reluctant to compromise on work requirements for aid recipients. The issue of defense spending and potential compromises on funding for the Internal Revenue Service are also being considered.
House Republicans have faced pressure from both the right flank, urging them not to agree to any deal, and from former President Donald Trump, who advised them to secure a favorable agreement. Democrats, on the other hand, are pushing President Biden to find a resolution.
If an agreement is reached, it will need bipartisan support to pass Congress. Even if a deal is struck, House Speaker McCarthy has committed to following the 72-hour posting rule before voting, delaying the process until next week.
In the midst of these negotiations, Fitch Ratings agency has placed the United States’ AAA credit rating on “ratings watch negative,” warning of a potential downgrade. The White House continues to argue that deficits can be reduced by ending tax breaks for wealthier households and corporations, while McCarthy has ruled out tax hikes as a solution.
Additionally, Democrats in the House have signed on to a legislative “discharge” process to force a debt ceiling vote, but they need support from at least five Republicans to move forward. It is highly likely that unspent COVID-19 funds, amounting to around $30 billion, will be reallocated now that the pandemic emergency has officially ended.