Joe Biden and House Speaker Kevin McCarthy are getting closer to completing a “slimmed down” deal to raise the debt limit in exchange for cuts in discretionary spending.
Reuters is reporting that the two sides are just $70 billion apart in inking an agreement that would be very short on details but would instead provide top-line numbers including military spending and allow Congress to fill in the blanks.
The result would be to limit future discretionary spending ± about 27% of the total budget.
“You have to spend less than you spent last year. That’s not that difficult to do,” House Speaker Kevin McCarthy (R., Calif.) told reporters. Democrats beg to differ.
“I think we’ve made some progress working down there. So that’s very positive … and we’ll continue to work through to try to get a solution,” McCarthy told reporters late Wednesday afternoon. Earlier that day, he said, “Things are better than they were yesterday.” Meanwhile, Rep. Patrick McHenry (R-N.C.), one of the negotiators, cautioned Thursday that “nothing’s done until you actually have a complete deal.”
As the talks progressed, it seems certain that McCarthy will need at least a handful of Democratic votes to get a deal through Congress. The numbers being hammered out are coming in far below the spending cuts that Republicans passed earlier this month. Several Republicans indicated that they wouldn’t vote for an increase in the debt limit unless the cuts to the budget passed in the House bill were agreed to.
And far-left Democrats are livid that there are any negotiations at all. Minority Leader Rep. Hakeem Jefferies (D-N.Y.) thinks so. “It seems to me that if there’s a resolution that involves a spending freeze that the spending freeze should also match the length of time the debt ceiling is suspended,” he said at a press briefing.
What’s good for President Biden – and the economy – might not feel so good for congressional Democrats, who are largely in the dark on the deal’s specifics and concerned they’ll be forced to support a bill that eviscerates programs they have long championed.
Those Democrats are pinning their hopes on Biden forcing House Speaker Kevin McCarthy (R-Calif.) to accept a deal that will need a big block of Democratic votes to win passage.
“[W]hile Democrats know they will have to eat a turd sandwich, the Republicans will have to put some Nutella spread on it first,” one House Democrat told Axios.
With an attitude like that, you can see why investors are preparing for the inevitability of a default.
Just days or weeks before the government faces a possible funding shortfall, investors are shunning U.S. Treasury bills that will mature over the next several months while paying a premium to buy debt issued by Microsoft MSFT 3.76%increase; green up pointing triangle and Johnson & Johnson JNJ -1.38%decrease; red down pointing triangle, two of the highest-rated U.S. companies.
Sen. Mike Lee (R-Utah) already has his hatchet ready and is prepared to blow up the deal without structural reforms in the budget.
“I will use every procedural tool at my disposal to impede a debt-ceiling deal that doesn’t contain substantial spending and budgetary reforms. I fear things are moving in that direction. If they do, that proposal will not face smooth sailing in the Senate,” Lee tweeted Thursday.
All Republicans agree that something has to be done about the budget, about deficits, and about the national debt. Democrats probably are concerned too, but they’re far more terrified of facing angry activists who see cutting one dollar from their sacred social spending programs akin to committing a sacrilege.
The White House believes that McCarthy will have to rely on as many as 100 Democratic House members to get a debt limit passed. If that’s the case, McCarthy will have a hard time hanging on to his speakership as hard-right Republicans will see a deal needing 100 Democrats to pass as a bridge too far.