White House and McCarthy teams agree to meet directly on debt negotiations following Tuesday talks

(CNN) — Congressional leaders from both parties emerged from their meeting with President Joe Biden at the White House on Tuesday unable to convey how they’re on a clear path to raise the nation’s borrowing limit and avoid a historic default. And in a sign that Biden will have to be hands-on as debt talks continue, the White House has scrapped part of his upcoming trip abroad.

Time is running short to raise the borrowing limit ahead of June 1, which is the earliest date the Treasury Department says the government could be unable to pay its bills.

While a deal hasn’t been reached, talks are now getting more direct between House Speaker Kevin McCarthy’s team and the White House.

After Tuesday’s meeting, McCarthy announced Louisiana Republican Rep. Garret Graves and the speaker’s staff will negotiate with Office of Management and Budget Director Shalanda Young and White House aide Steve Ricchetti going forward on the debt limit. McCarthy said the difference in the process now is they have they “have a format, a structure.”

At a Jewish American Heritage Month event at the White House Tuesday evening, Biden called the meeting with congressional leaders “productive” and said he is “confident” they will “continue to make progress toward avoiding default.” He added there was “an overwhelming consensus” in the meeting that “defaulting on the debt is simply not an option.”

The president also took a swipe at Republicans, saying it’s “disappointing” that Republicans are unwilling to discuss raising revenues. But he added that “policy differences between the parties should not stop Congress from avoiding default.”

McCarthy also told reporters it is “possible” to get a deal by the end of the week but said that he and the White House are still very far apart in negotiations.

Democratic leaders said everyone in the room agreed that default is not an acceptable option, marking a shift from last week, when McCarthy appeared to refuse to take default off the table.

Senate Majority Leader Chuck Schumer said the leaders agreed that they “need to pass a bipartisan bill with bipartisan support in both chambers” in order to raise the debt limit. He said that McCarthy also agreed the bill needed to be bipartisan.

“We all agreed that over the next few weeks, we have to proceed with the fierce urgency of now in order to make sure we can reach that bipartisan common ground agreement so that we can protect the health and safety and economic well-being of the American people,” House Minority Leader Hakeem Jeffries said.

 

Sticking points

 

Tuesday’s meeting was originally scheduled for last week, but both sides decided to postpone in order to give the staff-level talks space to proceed.

Ahead of the White House meeting McConnell criticized Biden for only scheduling two meetings with McCarthy and other congressional leaders in recent months as the pressure for resolving the debt ceiling crisis has increased.

“The speaker presented his case to the president back in February. House Republicans passed legislation to raise the debt ceiling back in April. But as of mid-May, the President of the United States has found just to two more occasions to sit down and discuss an agreement to preserve the nation’s full faith and credit,” McConnell said Tuesday.

Earlier Tuesday, Schumer tried to drive home the point that Democrats see any possible agreement on spending cuts as a separate negotiation from the debt ceiling talks, which he insists must be increased without conditions.

But after the White House meeting, he tried to downplay a reality for Democrats that after months of saying they would not negotiate over the debt ceiling, they are engaged in robust talks with Republicans on a host of issues from spending cuts to permitting to work requirements all as part of negotiations over increasing the country’s borrowing limit.

“We have to do default on its own, but at the same time we always said there was a lot of room using the appropriations process and the budget process to negotiate both revenues and spending … We have not budged from our position that default should not be used as hostage taking,” Schumer said.

Aides meeting at the staff-level have been working to identify issues with the highest potential for progress ahead of Tuesday’s meeting in the Oval Office. That includes limits on federal spending, clawing back some unspent pandemic aid and changes to permitting rules for domestic energy production.

It also includes the potential for tougher work requirements for some government aid programs, something Republicans have proposed in the discussions. Biden sounded guardedly open to such a provision Sunday.

“I voted for tougher aid programs (that are) in the law now, but for Medicaid it’s a different story,” he said. “And so I’m waiting to hear what their exact proposal is.”

Other Democrats have balked at the idea of bolstering work requirements.

Jeffries has told his colleagues he won’t accept new work requirements for social safety net programs, according to a person familiar with the matter. And Senate Majority Whip Dick Durbin said it’s “ridiculous” that work requirements are at the center of debt ceiling negotiations. Massachusetts Sen. Elizabeth Warren and Rhode Island Sen. Jack Reed have warned that they would not back a bill imposing new work requirements on Medicaid.

McCarthy, however, has said the issue is a red line.

“Every, every data point shows that it helps people move forward. So the public wants it, both parties want it, the idea that they want to put us into a default because they will not work with us on that is ludicrous to me,” McCarthy said of work requirements.

House Majority Leader Steve Scalise on Tuesday acknowledged that there is a chance the bill House Republicans passed to raise the nation’s debt ceiling will not be the final product if negotiations yield a deal both sides can agree to. But he also questioned how seriously Democrats are taking negotiations, saying he hopes Biden comes into the meeting and either says he supports the House GOP plan or has specific proposals as a counter offer.

“The president needs to come with very specific ideas,” Scalise said. “If the President goes into that meeting today and gives more empty rhetoric like he has in the past meetings, that will show he is not serious,” he added.

Prior to the White House meeting, Graves, McCarthy’s top confidant on the debt ceiling, told CNN’s Manu Raju a main issue between both parties is still spending levels, with work requirements for Medicaid emerging as a significant sticking point.

Jeffries has indicated that he believes a deal could include a debt limit increase through 2024 and changes to permitting laws to ease the approval of energy projects. He also thinks there could be some caps on discretionary spending and some Covid funds could be reclaimed.

But Graves on Tuesday emphasized that House Republicans are still not ready to discuss a short-term solution to give the principals more time to negotiate. “I’m not prepared at all, and I don’t think the speaker is, to put anything like that on the table,” he said.

Shalanda Young, the director of the Office of Management and Budget, outlined the impact of proposed Republican spending cuts in a new memo Tuesday, warning that if the GOP preserves funding for the Departments of Defense, Veterans Affairs and Homeland Security as they’ve suggested, it could lead to a 30% cut in spending for other federal agencies.

 

Biden’s upcoming travel abroad

 

Perhaps the greatest challenge to negotiators is the timeline.

Biden had been scheduled to depart Wednesday for a trip to Japan, Papua New Guinea and Australia. But shortly after Tuesday’s meeting, the White House confirmed the trip will be cut short, canceling the final two legs of what was supposed to be a weeklong trip in the Pacific region. Biden will return to the US on Sunday in “order to be back for meetings with Congressional leaders to ensure that Congress takes action by the deadline to avert default,” White House press secretary Karine Jean-Pierre said in a statement.

Biden is still expected to travel to Japan, where world leader will gather for a Group of 7 meeting.

According to the White House, Biden will “check in” with McCarthy and other top lawmakers this week by phone and meet with them when he returns from his trip to Japan.

McCarthy said Monday a deal needs to be reached by this weekend in order for Congress to vote on it before the June 1 deadline. He was not optimistic that was possible.

“You got to have something by this weekend and we are nowhere near any of that,” he said.

Senate Minority Whip John Thune warned, “If we really are working on a June 1 deadline, then things need to start happening fairly quickly here.”

On Tuesday, McCarthy appeared to caution against the trip.

“Look, the President is the President of the United States. He can make that decision one way or another. But all I know is we got 16 more days to go. I don’t think I would spend eight days somewhere out of the country,” the speaker said. “I think the country wants an American president focused on solving American problems. That’s exactly what the House is doing.”

This story has been updated with additional developments.

The-CNN-Wire
™ & © 2023 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.