About two weeks stand between Congress and a fast-approaching deadline from the Treasury Department forecasting the earliest the nation could risk a federal default.
Negotiations between the White House and Speaker Kevin McCarthy (R-Calif.) have picked up in recent days, but McCarthy told reporters this week that he thinks both parties are still “far apart” in reaching a compromise to keep the nation from defaulting on its debt.
“I think we’ve got to have a deal done by this weekend to be able to have a timeline to be able to pass it,” McCarthy said on Monday.
Treasury Secretary Janet Yellen has said the country could run out of money to pay its debt as early as June 1, an estimate she reaffirmed on Monday.
Here are five things to know about the ongoing battle.
McCarthy, Biden set to meet again this week
President Biden last week sat down with McCarthy, along with other congressional leaders, in the pair’s first talks on the debt ceiling since February. The Speaker said afterward that the meeting produced little movement, but that discussions would continue between staff in the days ahead before principal leaders are set to meet again.
However, he also said of the White House on Monday that it “seems like they want a default more than a deal,” underscoring the challenges both sides face in this critical stretch.
Debt ceiling talks had long been at a standstill as Republicans drew red lines against raising the debt limit without significant fiscal reforms while the White House refused to come to the bargaining table, insisting instead on a “clean” bill to raise the debt limit while pushing for bipartisan spending talks to be carried out separately.
Biden is set to meet again with leaders on Tuesday.
Areas for potential compromise emerge
As discussions continue at the staff level, details have emerged about where compromise could be found.
In a pen-and-pad discussion with reporters last week, prominent House Republicans said they see new limits on federal spending, reclaiming unobligated coronavirus funding, permitting reform and changes to work requirements for public assistance programs among the top areas ripe for bipartisan agreement.
The areas were included in a package House Republicans passed last month that paired an increase in the debt limit with a host of partisan proposals to cut spending. No Democrat voted for the bill.
Some moderate Democrats have also signaled openness to changes like clawing back some coronavirus funds or even potential changes to the student loan policies implemented under the Biden administration in recent weeks.
Biden said last week that rescinding some unspent COVID-19 funding is “on the table.”
And, asked over the weekend about work requirements, the president responded, “I voted for tougher aid programs that’s in the law now, but for Medicaid, it’s a different story. And so I’m waiting to hear what their exact proposal is.”
But there is still plenty of resistance to other proposals Republicans have offered to cut spending.
Democrats talking backup plans
As both sides look to put pressure on the other over the threat of a default, Democrats have talked up the prospect of potential backup plans to bypass working with McCarthy on the debt limit.
There’s been a lot of chatter in recent days around using the 14th Amendment, which says the public debt “shall not be questioned,” to potentially allow the president to issue debt. However, the idea has sparked serious legal questions and concerns from lawmakers who think it too risky.
Treasury Secretary Janet Yellen has also said the move could lead to a “constitutional crisis,” while warning against Washington reaching “the point where we need to consider whether the president can go on issuing debt.”
Democrats have additionally looked at using a procedure known as a discharge petition in a bid to allow the party to force a vote on a bill to raise the debt limit in the lower chamber, despite opposition from the Speaker. But that plan would also require support from at least five rebel Republicans for success, and House GOP leaders are adamant the conference is largely unified in tying any increase to the debt ceiling with cuts to spending.
Time is running short
Members on both sides are hopeful Congress can put a bow on the debt ceiling matter before June 1, the earliest the Treasury warns the nation risks defaulting on its debt, setting off a high-stakes race against the clock.
While there’s another meeting on the calendar between Biden and congressional leaders this week, the president is soon scheduled to head for Asia later this week for the Group of Seven (G7) summit. He also has trips to Papua New Guinea and Australia on the calendar before the end of the month.
Lawmakers are also short on legislative time, prompting questions around the fate of Memorial Day recess in the upper chamber as tensions escalate around the debt limit.
McCarthy, meanwhile, told reporters he believed leaders need to agree on a framework by this weekend to avert default.
All the while, both sides have been steadfast in rejecting a short-term extension to the debt limit to buy Congress more time.
Some on both sides toughen their stances
Members on both sides aren’t expecting the final deal to look much like the proposals some have dug in their heels on in recent weeks.
Reports have surfaced that negotiators are considering a two-year deal that would involve proposals aimed at limiting spending while also raising the debt limit. But Republicans are pushing for a shorter extension, as the party presses for another debt fight ahead of next year’s presidential election.
Congressional Democrats have also come out strongly against spending caps as talks heat up, posing a potential hurdle to both sides as negotiators pursue a bipartisan deal. Many also still insist that budget conversations be handled in a two-track process, separating possible cuts from the debt ceiling.
“I’m not open to any policy concessions in the context of the debt limit. We just have to do the responsible thing and prevent everyone’s mortgages from going up,” Sen. Brian Schatz (D-Hawaii), who serves on the Senate Appropriations Committee, said last week.