Debt ceiling talks still stuck on federal spending levels

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WASHINGTON — Speaker Kevin McCarthy said Tuesday that bipartisan negotiators are not close to a deal but added that there was still time left to avert a potentially catastrophic default on the nation’s debt obligations by next week’s deadline.

“We’re not there yet,” McCarthy, R-Calif., told reporters after huddling behind closed doors with rank-and-file House Republicans, adding that the two sides could still strike a deal by June 1, when Treasury Secretary Janet Yellen has said the nation will run out of money to pay its bills.

Inside the private meeting at the Republican Party's Capitol Hill Club — steps from the Capitol, a venue where lawmakers are legally permitted to talk electoral politics that can't be hammered out inside government buildings — McCarthy’s message to his GOP colleagues about the state of debt talks was that “Nothing has been done. Nothing has changed,” said Rep. Ralph Norman, R-S.C.

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Later Tuesday morning, a trio of White House negotiators returned to the speaker’s suite in the Capitol for another round of talks following a late-night meeting that stretched past 11 p.m. — a positive sign that negotiations were continuing for a second straight day. But the White House officials — Shalanda Young, Steve Ricchetti and Louisa Terrell — departed the Capitol a little more than two hours later without providing any updates.

The two sides do not plan to meet again Tuesday, but expect to convene on Wednesday morning, a Democratic source familiar with the talks said. McCarthy and Biden are also not expected to speak by phone on Tuesday, the source added.

“We’re trying to give negotiators room,” the source said.

McCarthy had described Monday’s one-on-one meeting with President Joe Biden as “productive” while cautioning reporters that it shouldn’t be confused with “progress.” McCarthy suggested that the divide on federal spending levels remained a major sticking point in the talks. Democrats have said they are OK with freezing spending at current levels. But House Republicans want to cut spending to the level that was approved in 2021, reversing increases that have happened in the intervening years.

“Why are we in the problem we’re in? People have spent too much money and the Democrats want to even spend more than we spent last year. That is not going to happen,” McCarthy said Tuesday. “They still want to spend more money next year than we spent this year. That’s a red line.”

A source familiar with the talks said once differences over the spending issue get resolved, it would "help a lot" in terms of getting a deal. Due to inflation, the source argued, a spending freeze would amount to a cut in real dollars.

Returning to the negotiating table on Tuesday, Republicans sounded pessimistic about the state of debt ceiling talks and continued to express frustration that their White House counterparts were not acting with more urgency.

“I don’t think things are going well,” said Rep. Garret Graves, R-La., whom McCarthy appointed as his representative in the room. “Until the White House understands that they have a spending crisis, they have a tax crisis, they have a debt crisis, we’re not going to be able to make this deal.”

Walking alongside Graves, McHenry said there is a “lack of urgency” from the White House team to understand how long it will take to move a bill through Congress, a phrase the powerful Financial Services Committee chairman also uttered after McCarthy’s meeting with Biden the night before. “What we need is a team that is fully empowered by the White House to get the thing done.”

“It’s very important to recognize that urgency should be the order of the day,” McHenry continued. “And that is not currently … the vibes I’m getting.”

But Senate Minority Leader Mitch McConnell, R-Ky., added a note of caution when asked by reporters in Lexington Tuesday morning if he was concerned, saying, “Everybody needs to relax."

“Regardless of what may be said about the talks on a day-to-day basis, the president and the speaker will reaching agreement, it will ultimately be passed on a bipartisan vote in both the House and the Senate," he said.

On Monday, Yellen warned McCarthy and other congressional leaders that June 1 remained the date when the U.S. could default on its debt barring a bipartisan deal to raise the debt ceiling. But as Republican lawmakers emerged from the Tuesday morning meeting, hard-right conservatives suggested that the Treasury secretary was offering empty threats.

“I don’t buy June 1,” Norman, a member of the conservative House Freedom Caucus, said when asked about Yellen’s so-called X-date. “We need to subpoena her and get her plan.”

Rep. Matt Gaetz, R-Fla., echoed that skepticism.

“If Janet Yellen can really prove that the receipts and deposits create this default on June 1, she should come to Congress and prove that,” Gaetz said.

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