Biden, McCarthy strike deal to raise debt ceiling, cap spending

WASHINGTON – President Joe Biden and House Speaker Kevin McCarthy reached an agreement in principle Saturday to raise the nation’s debt limit and cut government spending, capping a rollercoaster round of negotiations that has brought the nation to the brink of default and economic disaster.

The tentative deal, finalized during an hour-and-a-half phone call between Biden and McCarthy Saturday night, would raise the limit on how much the government can borrow through the end of 2024.

In return, it would cap annual discretionary spending for two years, keeping non-defense spending levels flat next year and raising it by 1% in 2025, while delivering on a host of other cuts that Republicans demanded.

"We still have a lot of work to do," McCarthy said in a brief address from the Capitol. "But I believe this is an agreement in principle that's worthy of the American people. It has historic reductions in spending, consequential reforms that will lift people out of poverty into the workforce and reins in government overreach."

McCarthy said he expects to post the text of the legislation Sunday and hold a House vote on the bill Wednesday.

The compromise includes provisions to rescind unspent COVID-19 rescue funds, expedite permitting for energy projects by speeding up environmental reviews, and in another concession to Republicans, roll back $10 billion of $80 billion in IRS funding approved in Biden's Inflation Reduction Act last year that was designed to crack down on wealthy Americans and corporations that evade taxes.

The deal includes no measures to close tax loopholes used by high-income earners and corporations like Biden pushed.

One of the final holdups was expanded work requirements for food stamps and other welfare programs, which Republicans ultimately secured despite the White House's opposition.

The deal includes no changes to Medicaid, but contains additional work requirements for recipients of the Temporary Assistance for Needy Families program.

It would also overhaul the Supplemental Nutrition Assistance Program by setting time limits for how long able-bodied adults 54 years old or younger without dependent children can receive food stamps if they don't meet certain work requirements. The changes, which sunset in 2030, also include expanding food stamps for veterans and the homeless.

Biden called the agreement "an important step forward that reduces spending while protecting critical programs for working people and growing the economy for everyone." Despite the White House's concessions, he said the deal protects Democrats' "key priorities and legislative accomplishments."

"The agreement represents a compromise, which means not everyone gets what they want. That’s the responsibility of governing," Biden said in a statement, adding that the deal is "good news for the American people because it prevents what could have been a catastrophic default."

Debt ceiling deal faces uncertain outlook in Congress

Biden urged Congress to "pass the agreement right away." The president has been racing to reach a budget deal with House Republicans to get their support to raise the debt ceiling before the U.S. runs out of money, which Treasury Secretary Janet Yellen said Friday is on track to happen June 5.

Yet to avert a default, the deal still needs approval in Congress, which is not guaranteed to pass a bill to raise the debt ceiling even with the backing of Biden and McCarthy.

Some hardline conservative Republicans in the House have signaled they won't vote for a negotiated deal on the debt ceiling regardless of the details, while others made new 11th-hour for border-security measures that aren't in the deal.

McCarthy held a conference call with House members late Saturday night to sell them on the deal.

Many House Democrats have raised concerns about Biden caving on spending cuts without getting adequate concessions in return and urged him to bypass the debt limit by invoking the 14th Amendment. Wally Adeyemo, deputy Treasury secretary, ruled out the 14th Amendment as an option to work around the debt ceiling in an interview Friday on CNN.

A Democratic source familiar with negotiations said Biden's priority regarding COVID-19 funding was to "protect public health money, which we were able to do."

The deal also keeps intact the Inflation Reduction Act − the president's signature climate and prescription drug bill − and the president's program to forgive student loan debt for millions of Americans. Republicans targeted both.

Even with an agreement in place, a complicated logistical path looms for passage before June 5. Members of Congress are set to return from the long Memorial Day weekend on Tuesday. McCarthy has also told Republicans he will follow a rule giving members 72 hours to read a bill before holding a vote.

The deal follows a months-long standoff between Biden and McCarthy over raising the nation’s borrowing limit as the nation veered toward an economic crisis.

The federal government hit its borrowing limit of $31.8 trillion on Jan. 19, forcing the Treasury Department to take extraordinary measures to pay the nation’s bills.

Yellen warned repeatedly that the government could run out of money to pay its bills in early June, putting Social Security benefits, military paychecks and other programs in jeopardy. The White House said a default would cause a recession that would result in about 8 million lost jobs.

The rating agency Fitch on Wednesday put the country's "AAA" credit rating on a negative watch ahead of possible inaction by Congress to raise the debt ceiling.

Biden called for an unconditional increase in the debt limit. But he began negotiating a separate budget agreement with McCarthy after the Republican-controlled House approved a debt ceiling bill with $4.8 trillion in cuts last month.

More: How you can prepare financially amid the debt ceiling fight

More: Debt ceiling battle: Does it matter to your 401(k)? Some are hedging their bets

Michael Collins and Joey Garrison cover the White House. Follow Collins on Twitter @mcollinsNEWS and Garrison @joeygarrison.

This article originally appeared on USA TODAY: Debt ceiling deal reached by McCarthy, Biden to try to avert default