WASHINGTON (AP) — President Joe Biden and House Speaker Kevin McCarthy reached an “agreement in principle” late Saturday on raising the country’s statutory debt ceiling as they negotiate a deal to limit federal spending and stave off a debt crisis fought possibly catastrophic US default.
However, the deal risks angering both the Democratic and Republican sides with the concessions made to achieve it. Negotiators agreed to some Republican calls for higher work requirements for food stamp recipients, which had caused uproar among House Democrats as non-starters.
Bipartisan support will be required to get Congressional approval next week before the June 5 deadline.
The Democratic president and Republican spokesman reached the agreement after the two spoke by phone earlier Saturday night, McCarthy said. The country and the world I have watched and waited for a resolution to a political standoff that was threatening the US and world economy.
“The agreement represents a compromise, which means not everyone gets what they want,” Biden said in a statement late Saturday night. “That is the government’s responsibility,” he said.
Biden called the agreement “good news for the American people because it averts a catastrophic default that would have led to an economic recession, the destruction of retirement accounts and the loss of millions of jobs.”
McCarthy said in brief remarks at the Capitol that “we still have a lot of work to do.”
But the Republican spokesman said, “I believe this is a fundamental agreement worthy of the American people.”
Once the outlines of an agreement are in place, the legislative package could be drafted and submitted to lawmakers in time for votes early next week in the House of Representatives and later in the Senate.
At the heart of the package is a two-year budget deal that would freeze spending until 2024 and set ceilings for 2025 in exchange for a two-year debt ceiling hike, which would postpone the sensitive political issue beyond the next presidential election.
The agreement would limit eligibility for food stamps for working-able adults up to age 54, but Biden was able to push through exemptions for veterans and the homeless.
Both sides had also sought an ambitious overhaul of federal permits to facilitate the development of energy projects and transmission lines. Instead, the agreement provides for changes in the National Environmental Policy Act that designate “a single lead agency” for audit development, in hopes of streamlining the process.
The deal came after Treasury Secretary Janet Yellen told Congress the United States could default on its debt obligations by June 5 — four days later than previously thought — unless lawmakers acted in time to raise the federal debt ceiling. The extended “X-date” gave the two sides a little more time while fighting for a deal.
Biden also spoke to congressional Democrat leaders earlier in the day to update the talks.
The Speaker of the Republican House of Representatives had gathered his key allies behind closed doors in the Capitol as negotiators pushed for a deal that would avoid a first-ever sovereign default while delivering the spending cuts House Republicans are demanding.
But as another day dragged on and financial disaster loomed ever closer, it seemed that some of the political issues that had plagued talks all week remained unresolved.
Both sides have pointed out that one of the main obstacles was an attempt by the GOP to increase labor requirements for recipients of food stamps and other federal assistance programs, a long-standing Republican goal that Democrats have vigorously opposed. The White House said the Republican proposals were “cruel and pointless.”
Biden has said the job requirements for Medicaid are unrealistic. Despite objections from ordinary Democrats, he seemed potentially open to negotiating minor changes to food stamps, now known as the Supplemental Nutrition Assistance Program (SNAP).
McCarthy, who left before lunch on Saturday and returned with a large box of takeout at the Capitol, declined to elaborate on those discussions. One of his negotiators, Louisiana Rep. Garret Graves, said there was “no chance” Republicans would relent on the job requirements issue.
Americans and the world watched with unease as the risky negotiations threaten to wreak havoc on the US economy and undermine the world’s confidence in the country’s leadership.
Worried retirees and others were already making contingency plans for missed checks as the next Social Security payments are due next week.
Yellen said failure to act by the new date would “create great hardship for American families, harm our global leadership position and raise questions about our ability to defend our national security interests.”
The President, who spent part of the weekend at Camp David, continued to hold meetings with his negotiating team several times a day, matching offers and counter-offers.
Any agreement would have to be a political compromise in a divided Congress. Many of the far-right Trump-aligned Republicans in Congress have long been skeptical of Treasury Department projections and are urging McCarthy to hang on.
Memorial Day weekend lawmakers are not expected to return to work until Tuesday at the earliest, and McCarthy has promised lawmakers he will abide by the rule of posting every bill 72 hours before the vote.
The Democrat-dominated Senate has largely stayed out of the negotiations, leaving the talks to Biden and McCarthy. New York Senate Majority Leader Chuck Schumer has promised to quickly send a compromise package to Biden’s desk.
After weeks of talks, no agreement could be reached, in part because the Biden administration refused to negotiate with McCarthy for months, arguing that the country’s full faith and credit should not be used as leverage to impose other partisan priorities.
But Republicans in the House of Representatives agreed on a plan to cut spending and narrowly passed legislation in late April that would raise the debt ceiling in return for spending cuts.
Associated Press writers Zeke Miller, Stephen Groves, Fatima Hussein, Farnoush Amiri, Seung Min Kim, and video journalist Rick Gentilo contributed to this report.