WASHINGTON – House Speaker Kevin McCarthy White House negotiations on raising the U.S. debt limit on Wednesday were still hanging over a disagreement over future spending, indicating the two sides are drifting apart with just eight days before the government faces in an unprecedented default.
A tangible government spending spree in exchange for hiking the debt ceiling is a basic GOP demand, but a red line so far for the White House. Increasing the borrowing limit does not allow for new spending.
As the US moves closer to default and possible economic chaos, McCarthy blames Democrats for the holdup.
“And the off ramp here is to solve the problem to spend less than we spent last year,” he said during the press conference at the Capitol.
The California Republican has reintroduced a partisan spending bill passed by House Republicans in April without votes from Democrats as the only option to raise the debt ceiling. “Don’t blame us Republicans when we put up a reasonable bill,” McCarthy said.
Stocks fell in the lower session following McCarthy’s comments, as investors watched the talks closely for any sign of progress.
“I think we can make progress now,” McCarthy said, but he ignored a question about whether talks had progressed in the past 24 hours.
After a week of meetings outside McCarthy’s office, Republican negotiators went to the White House on Wednesday, where they are expected to continue marketing an office building adjacent to the mansion.
The talks have hit a “speed bump,” a Democratic official familiar with the situation told NBC News on Wednesday.
But outside the Beltway, concerns grew about whether McCarthy and President Joe Biden can reach a deal to cut government spending enough to get the GOP votes needed to pass a bill that would raise the debt ceiling on the left it’s still June 1.
Secretary of the Treasury Janet Yellen said Wednesday that he already sees “some tension in financial markets,” driven by fears that the US could stumble into a first-ever debt default.
Stress related to the debt ceiling is affecting Treasury markets in particular, Yellen said at a Wall Street Journal event. These signs of stress “should be a reminder of the importance of reaching a timely agreement.”
But after a week of daily sessions led by a team of veteran negotiators, people on both sides say the gap between what House Republicans want and what is ready to give the White House more than ever.
For example, one of the top delegates for the Republicans, Rep. Patrick McHenry of North Carolina, revealed on Tuesday night what up to the point was only implied, when a reporter asked him what concession the Democrats got as part of the talks, to get their votes in House.
“The debt ceiling,” he said.
“That’s what they get,” added Rep. Garret Graves of Louisiana, another GOP negotiator.
This view last week as one in which the Democrats were forced to accept the demands of the Republicans, while the Republicans in turn only offered the opportunity to avoid a catastrophic debt default, angering the Democrats and reducing the possibility of a deal. The GOP has pushed for spending cuts as part of any deal to raise the debt ceiling, which itself does not allow for new spending.
A default would damage the US economy and force millions to at least temporarily lose the government benefit payments that many rely on to survive.
With talks of an apparent break point for the second time in a week, and the possibility of a deal in the next 24 hours – when the House will make an agreement into a bill and vote for this before the weekend – looking very slim , McCarthy appeared open to allowing House members to leave DC for the Memorial Day weekend without a deal.
“I haven’t made that decision yet,” he told reporters Tuesday, but added, “I would, depending on where we are at that moment, send them home and come back.”
With Republicans only appearing to harden their position over time, Democrats on Wednesday accused McCarthy of pressure from the far right in his caucus. They say he has yielded to members who have made a laundry list of demands, yet is unlikely to vote for a debt ceiling increase, regardless of its content.
One of the laundry lists was released Wednesday by Rep. Chip Roy, R-Texas, is a member of the ultraconservative House Freedom Caucus. Presented as a memothe list contains seven provisions that were included in the debt limit bill House Republicans passed this spring, but that was dead when it arrived in the Democratic controlled Senate.
“The following reforms are part of the Limit, Save, Grow Act – each is critical and none should be left out just for the sake of finding a ‘deal,'” Roy’s memo read.
Pressure like this from hardliners within his own party made McCarthy’s path to passing a bill more treacherous, as he needed Democratic votes.
Biden has offered compromises, the Democratic official told NBC News, including a spending freeze, recovery of unspent COVID funds and placing a two-year spending limit.
But McCarthy rejected these concessions.
“Let me be very clear, we’re not putting anything on the floor that won’t cost less than we’ve spent this year,” he said Tuesday.
This is a developing story, please check for updates.