WASHINGTON — President Biden and congressional leaders emerged Tuesday from a meeting on the debt limit expressing optimism they could reach a deal but acknowledged major hurdles remain as the clock ticks toward a default.
With the federal government potentially unable to pay all its bills as soon as June 1, the White House said Biden would cut short his upcoming trip to Asia to personally resume negotiations. In the meantime, the president deputized two top aides to continue talks with House Speaker Kevin McCarthy, a California Republican.
“We just finished another good productive meeting with our congressional leadership about a path forward to make sure that America does not default on its debt for the first time in its history,” Biden said at an unrelated White House event after the hourlong meeting. He added there was “still work to do” and he will return early from Asia so he could participate in “the final negotiations.”
Biden has insisted he would not negotiate over raising the debt limit, which he said is Congress’s obligation, but Republicans have balked at an increase without spending cuts and other changes, including new work requirements for people receiving government assistance. So Biden has pursued a strategy that separates an increase in the debt limit from budget talks that launched last week.
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But the president seems intent on playing dealmaker even as he insists he’s not negotiating over a debt limit increase, but rather just a budget deal. The two-track approach could smooth the path for a deal because Democrats and Republicans both could claim success, with Biden and the Democrats saying the components are separate while Republicans say they are linked.
“It’s a face-saving way to get both sides to say that they won,” said Thomas Kahn, a fellow at American University’s Center for Congressional and Presidential Studies and former Democratic staff director of the House Budget Committee. A veteran of the contentious 2011 debt limit showdown, Kahn said he thinks that’s the most logical solution.
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But before they can spin a debt limit deal, Biden and congressional leaders must have one in hand before the June 1 deadline.
At the end of the hourlong meeting, the second in two weeks between congressional leaders and the White House, the two sides remained “very far apart,” McCarthy said. McCarthy met in the Oval Office with Biden, Republican Senate minority leader Mitch McConnell of Kentucky, and New York Democrats Senate majority leader Chuck Schumer and House minority leader Hakeem Jeffries. Vice President Kamala Harris also joined Tuesday’s meeting.
“I think we set the stage to carry on further conversations,” McCarthy told reporters. “But we’ve got a lot of work to do in a short amount of time.”
Still, McCarthy said he thought a deal could be reached by the end of the week, and that Biden had taken the “productive” step of appointing presidential counselor Steve Ricchetti and Office of Management and Budget Director Shalanda Young to work directly with McCarthy’s team.
Biden leaves on Wednesday for a Group of Seven summit in Japan. But because of the debt limit deadline, the White House said he will return on Sunday, several days earlier than planned, skipping stops in Papua New Guinea and Australia.
Last month, House Republicans approved legislation on a party-line vote to increase the debt limit by $1.5 trillion or suspend it until March 31, 2024, (whichever comes first) in exchange for about $4.8 trillion in deficit reduction over the next decade and other changes, including increased work requirements for recipients of government assistance such as Medicaid and food stamps.
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The bill won’t pass the Democratic-controlled Senate and Biden has threatened to veto it anyway, calling the measure too extreme. Biden indicated over the weekend he was open to a Republican request to add some additional work requirements for people receiving government assistance from programs such as food stamps. McCarthy said on Tuesday that work requirements would have to be in any deal on the debt limit.
But the work requirements emerged as a potential obstacle, this time in Biden’s own camp, as several liberal Democrats in Congress publicly objected.
“People enrolled in these programs are already walking a tightrope to make ends meet. Now, Republicans want to use an old trick to make it even harder by bogging applicants down with a maze of burdensome and unnecessary paperwork,” Senator Elizabeth Warren, a Massachusetts Democrat, said on the Senate floor. “Republicans call these rules ‘work requirements.’ I call them ‘unworkable requirements.’ ”
Representative Pramila Jayapal, a Washington Democrat who chairs the Congressional Progressive Caucus, said this was not the time to be adding new work requirements.
“I think this is a nonstarter for so many of us who are caring for people in our districts who are suffering with the highest levels of hunger ... since COVID times,” she said.
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Biden has insisted that he is not negotiating on the debt limit while acknowledging what his top economic adviser, Lael Brainard, has described as “parallel discussions on the budget.”
“For decades, both parties have regularly worked out their differences about spending and revenues throughout the appropriations process,” Biden told reporters Sunday. “That is what is happening right now, while we separately but simultaneously work to avoid default.”
Representative Tom Cole, an Oklahoma Republican, said it would be ridiculous for Biden to claim any deal to raise the debt limit did not involve negotiating over it.
“The reality is they’ve already lost that argument. They’re negotiating now. And they weren’t doing it before,” Cole said. “So, whatever face-saving dance they need to make is up to them.”
“We’re talking semantics,” added Senator Mitt Romney, a Utah Republican. “The House has passed a debt limit increase. Accept it or do a deal.”
Greg Valliere, chief US strategist for AGF, an asset management company based in Toronto, and a longtime Washington policy analyst for financial firms, said there’s an implicit understanding that the debt limit and budget talks are linked. Still, a deal could involve separate bills on each moving in tandem through Congress.
“I guess everybody wants to save face, but I think the issues are connected and they’ll pass that way,” he said. “I can’t see one passing without the other.”
But presenting a debt limit increase as distinct from a budget deal is important and “certainly plan A” for Democrats, said Senator Tim Kaine, a Virginia Democrat. Biden and other Democrats have pointed out that raising the debt limit simply allows the government to pay for spending already authorized by Congress and it’s inappropriate to use the risk of default as leverage.
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“You don’t negotiate about the debt limit because it’s Congress just owning up to Congress’s actions,” said Kaine, who serves on the Senate Budget Committee. “But we have a debate about the budget every year. So that’s not unusual to have a debate about spending and revenue issues.”
The 2023 fiscal year budget doesn’t expire until Sept. 30, but Biden and Democrats have agreed to accelerate the budget process this year because the House is now under Republican control, Kaine said. He anticipates a debt limit increase and budget agreement would be separate Senate votes.
Treasury Secretary Janet Yellen reiterated to congressional leaders in a letter Monday that the department’s best estimate, based on incoming tax revenues and upcoming payments, is that the federal government would be unable to pay all its bills as early as June 1.
“It is essential that Congress act as soon as possible,” she told a banking conference on Tuesday. “In my assessment and that of economists across the board, a US default would generate an economic and financial catastrophe.”
Globe correspondent Jorja Siemons contributed to this report.
Jim Puzzanghera can be reached at jim.puzzanghera@globe.com. Follow him on Twitter: @JimPuzzanghera.