(Bloomberg) — President Joe Biden instructed his advisers to schedule a phone call with House Speaker Kevin McCarthy on Sunday after the top Republican accused the White House of backtracking on talks to raise the US debt limit to have done.
Most Read by Bloomberg
Biden received updates on the stalled negotiations on Saturday night and Sunday morning in Japan, where he is attending the Group of Seven leaders’ summit, according to a White House official. The President wants to call the speaker on Sunday morning (Washington time) after the conclusion of the summit.
McCarthy said Saturday that the impasse is unlikely to be resolved while the president is still abroad.
“I don’t think we can move forward until the President can come back into the country,” McCarthy told reporters inside the Capitol. “Just from the last day to today they have taken a step backwards. They actually want to spend more money than we do this year.”
McCarthy’s comments confirmed a renewed shift in tone toward mutual blaming as the White House indicated Republicans were negotiating in bad faith and said a GOP budget proposal presented on Friday was a step backwards. As talks falter, the clock is ticking after Treasury Secretary Janet Yellen said the US may not be able to pay all of its bills by June 1.
Biden team response
Republicans and the White House are at odds over spending cuts that Republican lawmakers are demanding as the price of raising the state borrowing limit. Although there were signs of progress earlier in the week, lawmakers are stepping up their attacks on each other.
“We need to spend less than we’re spending this year,” McCarthy reiterated his core demand.
Republicans rejected a White House proposal that would have kept discretionary spending on nondefense and defense unchanged next year compared to fiscal 2023, according to two people familiar with the talks. McCarthy has said he wants year-over-year cuts on non-defense spending, while Democrats argue that keeping the budget on hold due to inflation is an effective cut.
The story goes on
Republicans have also said they want an increase in the Pentagon’s budget in addition to the cuts. This met with opposition in the White House, which believes the combination of both demands would result in domestic priorities such as health and education programs being cut even further.
Disputes about changes to the tax code were also included in the negotiations. Democrats continue to advocate closing certain loopholes that benefit fossil fuel and pharmaceutical companies and cryptocurrency traders.
Republicans have rejected any proposals that would raise tax rates while pushing for the renewal of Trump-era tax cuts that are due to expire as early as 2025.
Republicans presented their own offer Friday night, White House press secretary Karine Jean-Pierre said. However, she described the package as “a series of extreme partisan demands that could never pass both houses of Congress”.
The GOP’s offer was a “major step backwards,” Jean-Pierre said in a statement, adding that Republican leaders appeared “dedicated to their MAGA wing.”
Read more: The debt limit deal is unlikely to materialize until the fight is on the cusp
Biden earlier on Saturday signaled that he remained confident the US government could avoid a catastrophic default.
For a deal to succeed, the cuts must be significant enough to placate conservative Republicans, who supported McCarthy’s presidency on the condition that he enact serious spending reforms without raising taxes or cutting military spending and veterans’ benefits.
But a plan must also be acceptable to Democrats, who hold a majority in the Senate and likely need between 50 and 100 votes in the House of Representatives. Few in the President’s party want domestic programs to be cut, especially without corresponding cuts in the Pentagon budget or the closing of tax loopholes used by wealthy and large corporations.
The desire to wait for Biden may stem from Republicans’ belief that the president will ultimately decide to sacrifice progressive priorities to defuse the biggest threat to the economy ahead of his re-election campaign. In fact, the President has already backed out of his promise not to negotiate a debt ceiling hike.
The battle for the debt ceiling, which could lead to the first default in the US, threatens to damage the global economy. It has overshadowed Biden’s trip abroad and the President had previously decided to cut short his trip to return to Washington for the final stages of negotiations.
Previous: US debt limit meetings take place, McCarthy says talks are ‘mediocre’
Republicans’ exit from talks in Washington on Friday dashed hopes that negotiators were close to an agreement to raise the credit limit, sending equity markets down.
McCarthy had hoped to reach at least agreement on a draft deal this weekend to prepare for next week’s vote in the House of Representatives on legislation.
The Senate left Washington for its Memorial Day recess, but senators have been told to be ready to return 24 hours in advance if necessary.
According to the White House, Biden will meet with Ukrainian President Volodymyr Zelenskyy on Sunday during the G7 summit. He is scheduled to return to Washington late Sunday Japanese time.
– With support from Justin Sink and Kailey Leinz.
(Recalls Biden’s efforts to call McCarthy)
Most Read by Bloomberg Businessweek
©2023 Bloomberg LP