There are only six days left before America defaults on its bills in a disaster that could cause a recession and global economic chaos. Deep divisions remain between the White House and House Republicans over a potential deal in which Congress would vote to raise the government’s borrowing limit in exchange for spending cuts.
Although negotiators from both sides Thursday worked to find gaps, the first signs of potential damage to the economy – such as early bands of rain before a large hurricane – began to wash over Washington.
Credit rating agency Fitch has put the top US credit rating on a negative watch, effectively warning that it could downgrade the US debt if lawmakers fail to pass a bill – a measure that could permanently raise federal borrowing costs and change the economy. And the 30-year fixed mortgage rate rose to 6.57% due to uncertainty over the impending debt crisis. The reality is starting to dawn again that if the US can’t borrow more money on or around June 1, Social Security payments for millions of seniors could be quickly disrupted.
As the early warning signs mount, it also becomes clearer how complicated it will be to get any deal Biden and House Speaker Kevin McCarthy can reach through Congress — more than enough time to avert an economic disaster. . In a new complication, far-right Republicans have warned they won’t vote for any deal that lowers their wish list of demands already passed by the House, which Biden and the Democrats control the Senate. This is a significant threat because McCarthy could only lose four votes to pass a bill given the narrow majority of the GOP in the chamber.
In a letter to the speaker, a bloc of 35 hardliners issued new demands – including provisions to increase border security and halting a plan for a new headquarters for FBI, which pro-Donald Trump conservatives have accused of persecuting the former president for politics. reasons.
The Republican Rep. Florida’s Byron Donalds warned that his would be a tough vote to get if a final deal doesn’t align closely with previous GOP demands. “What I’m trying to really emphasize is that at some point, the American people need to understand exactly what’s going on in this room because if an agreement is made just to try to save on the face of both sides of the aisle, history tells us that’s a terrible thing,” Donalds said.
Some House Democrats, meanwhile, registered dismay at the White House’s strategy, making it clear that they believed Biden could be included in the talks after previously refusing to negotiate with Republicans whom he accused of holding benefits. the economy of millions of American hostages. Democratic opposition is important because if McCarthy can’t unite his entire conference behind a deal, he may need support from moderate Democrats to pass a bill — even if such a measure hardline Republicans trying to destroy him could be dangerous.
Democrats are now warning that their support for a deal is not guaranteed. In a closed-door meeting on Thursday, Pennsylvania Rep. Susan Wild told her caucus that the White House did not approve the votes of House Democrats, CNN’s Annie Grayer, Manu Raju and Melanie Zanona reported. He has raised concerns about vulnerable members like himself being put in a precarious political position in some White House deal-making.
The Democratic Rep. Emanuel Cleaver is among many in his party who oppose Republican efforts to increase work requirements for social safety net programs, which would make it harder for needy Americans to get benefits. The Missouri lawmaker told Raju that such measures are a non-starter, “because most of the people we’re talking about are elderly people and children.”
“One of the things I’ve taken from a lot of my colleagues today, and I’m surprised but happy, a lot of these people are saying, you know, ‘There’s no surrender. We’re not going to surrender,'” Cleaver said. .
His comments underscore the fact that the more radical Republicans demand the concessions honored by McCarthy, the more difficult it will be for the speaker to get Democratic votes, if necessary, to prevent debt default.
Under a potential deal, the debt ceiling would be raised for two years while also capping federal spending — except for defense and veterans spending — for the same period, two sources familiar with the negotiations said. CNN Thursday night. A separate source familiar with the negotiations said the length of the spending caps is still ongoing.
Meanwhile, Biden appeared to be preparing the political groundwork for any final deal with McCarthy that could prove unpopular with some rank-and-file Democrats. He tried to counter the impression that Democrats may not have anything in return for Congress fulfilling its statutory duty to allow the government to borrow more money to pay for spending it has already approved.
“I want to be clear that the negotiations we’re having with Speaker McCarthy (are) about the outlines of what the budget will look like, not about the default. It’s about competing visions for America,” said Biden, seeking to dispel the idea that he dropped his refusal to negotiate on the debt limit while insisting that he was, in fact, bargaining in the form of long-term spending.
The president has vowed to block what he says are “massive cuts” that Republicans are demanding in key programs, including the number of teachers and police officers. This way, if Biden appears to have lost some of the GOP’s priorities, he can still claim to be serving as a champion of regular Americans as he sets his bid for reelection.
But Republicans have Biden – who, as president, has obligations to protect all Americans instead of partisan motivations – in a non-toxic position. If he pushes the negotiations with McCarthy over the edge and refuses to offer concessions, the economy could fall off a cliff and lose millions of jobs and fall into a great recession. While the GOP may be to blame, the damage to the person will be very painful for the country. Given his own weak political position — Biden’s favorable rating is 35% in a new CNN/SSRS poll released Thursday — it’s also clear that he can’t handle the political changes of a loan default.
A source familiar with the negotiations told CNN that the administration and House Republicans are negotiating a deal that would raise the debt ceiling through 2024 while placing caps on the 12 annual spending bills that Congress must pass in end of the year. Such a framework would at least save Biden from another disastrous run-in with Republicans on the debt limit in his reelection year. And McCarthy could argue that he has curbed what he says is irresponsible presidential spending.
But doubts remain over whether such a compromise would satisfy either side of the House, meaning a nervous season could be ahead for Biden, McCarthy, global markets and other powerhouses. world closely tied to the US economy.
However, a veteran Congress watcher, Rohit Kumar — a former deputy chief of staff for Senate Republican leader Mitch McConnell — says the increased criticism from lawmakers is not necessarily a no-no. good omen.
“The fact that you have 35 House Republicans, the House Freedom types, who wrote a letter saying we don’t plan to vote on this thing, is actually a good sign. They’re not going to be a coalition of ready for a bill to be signed into law by a Democratic Senate through the signature of President Biden,” Kumar told CNN’s Jim Sciutto.
“So the breaking of the lips is actually a sign that a deal is coming together.”
Seth Harris, a former deputy director of the National Economic Council under Biden, however, warned that Republicans are taking a “huge” risk to the economic well-being of millions of Americans.
“It shows that some of the party’s extremists are more interested in politics than making sure Americans have a good life.”