Biden, McCarthy debt ceiling meeting postponed, spending cuts on table

[May 12, 2023]  By Jarrett Renshaw and Jeff Mason

WASHINGTON (Reuters) - A debt limit meeting between U.S. President Joe Biden and top lawmakers that had been scheduled for Friday has been postponed, and the leaders agreed to meet early next week, a White House spokesperson said on Thursday.

Aides from both sides have started to discuss ways to limit federal spending, as talks on raising the government's $31.4 trillion debt ceiling to avoid a catastrophic default creep forward, people familiar with the discussions said.

"Staff will continue working and all the principals agreed to meet early next week," the spokesperson said.

The aides to Biden, Republican House Speaker Kevin McCarthy, Democratic Senate Majority Leader Chuck Schumer, top Senate Republican Mitch McConnell and top House Democrat Hakeem Jeffries and met Wednesday and Thursday to discuss raising the debt ceiling, the White House said earlier.

McCarthy told reporters at the Capitol that the delay was not a sign of trouble in the talks but that he believed the staff negotiators who had been meeting this week needed to continue to talk before the principals met again.

"I don't think there's enough progress for the leaders to get back together," he said. He also said one of the Congress members wasn't able to make the Friday meeting.

White House officials acknowledge that they must accept some spending cuts or strict caps on future spending if they are to strike a deal, two sources said, while insisting they must preserve Biden's signature climate legislation that passed along party lines last year.

The House Republican bill to suspend the borrowing limit passed in April would cut government spending to 2022 levels, cap its future growth below inflation and repeal incentives for renewable energy, electric vehicles and other climate-friendly technology passed in the Biden legislation.

The two sides are also debating how long to push out the next potential debt ceiling showdown, sources said. Biden and Democrats would prefer a two-year window, pushing any legislative action beyond the 2024 presidential election, but they may have to accept larger spending cuts or stricter caps to get more time, the sources said.

U.S. President Joe Biden delivers remarks on the federal government's debt limit during a visit to SUNY Westchester Community College Valhalla in Valhalla, New York, U.S., May 10, 2023. REUTERS/Kevin Lamarque

"Spending levels is the key," Republican Representative Daniel Webster said before the talks were rescheduled. "Spending cuts is a place where we're stuck. Not with all of them, but with a list of them. Not necessarily in any order, just that we want some."

Biden's fiscal 2024 budget request relies on tax increases to reduce deficits while proposing to increase discretionary spending by 5 percent next year. That represents a more than $200 billion difference with House Republicans, however, who want to cut agency budgets on average by 8 percent while increasing defense and veterans spending — meaning other programs would face steeper cuts.

The fact that spending cuts and caps are under discussion could be a sign of progress in talks where Democrats have long pushed for an unconditional lifting of the debt ceiling, while Republicans have demanded a slew of policy changes in addition to sharp spending cuts.

The White House portrayed the postponement as a positive development, with meetings progressing.

The U.S. federal government could run out of money to pay its bills as soon as June 1, the Treasury said, unless the debt ceiling is raised. Biden is set to leave the country next week to attend the G7 meeting in Japan, and there are just a few days left when he and House and Senate leadership will be in town before that deadline.

(Reporting by David Morgan, Jeff Mason, Jarrett Renshaw and Rami Ayyub, writing by Heather Timmons; Editing by Scott Malone and Alistair Bell)

[© 2023 Thomson Reuters. All rights reserved.]This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.