Debt Ceiling Talks Continue
- Reports of progress, but as of this writing, no deal has been struck.
- The Republicans' Freedom Caucus argues that House Speaker McCarthy is giving up too much, but the progressive wing of the Democratic party is making similar claims about President Biden.
- Republican demands will likely focus on a budget cap, energy policy, and stronger work requirements for government assistance programs. Democrats will likely demand that the debt ceiling be extended until after the 2024 elections.
Talks between the White House and the House Republicans were continuing as of Friday afternoon. While there have been reports of progress, no deal has been struck.
The outlines of a deal have been discussed for a while and include some sort of budget cap for the next fiscal year, permitting reform for energy projects, and clawing back to the Treasury unspent Covid program funding. Furthermore, Republicans seem likely to insist on some strengthening of work requirements for some food and social programs. Most importantly, the White House is likely to insist that the deal extends the debt ceiling for two years until after the 2024 elections.
On Friday, Treasury Secretary Janet Yellen formally notified Speaker McCarthy that the so-called X-date is likely to arrive on June 5. However, with the massive cash flows of the US Government it is hard to be precise or certain about the date.
The negotiators all agree that a deal could come together at just about any point in the next few days. While a lot has been written about Congress going home for the Memorial Day break and the time constraints in moving legislation through the process, that can all be overcome to avoid default.
As I and others have expected, the conservative Freedom Caucus is already complaining that the Speaker is giving up too much, and on the other side of the political divide, progressive Democrats are expressing concern that the Biden White House is giving up too much. However, most big compromise deals are done in the middle. While some Democrats may feel compelled to vote NO, in the end the President always has enormous sway over the Members of their own party, and most Democrats should vote for a deal Biden signs onto.
With markets closed on Monday, watch for back and forth headlines over the long weekend. A deal could come at any time. Stay tuned!
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