President Biden will welcome Speaker Kevin McCarthy and other top congressional leaders to the White House on Tuesday for a crucial round of discussions about the country’s taxes, spending and debt as a potentially catastrophic government collapse quickly approaches.
The talks come just weeks before the United States is expected to run out of money to pay its bills unless the country’s borrowing ceiling is lifted. Like previous booms, the discussions are reminiscent of 2011 and 2013, when Republicans in Congress refused to raise the debt ceiling unless a Democratic president agreed to curb federal spending and cut budget deficits. The same dynamic is now underway, but with a crucial difference: the parties are close to disagreeing on tax and spending proposals designed to reduce the growth of the US government debt of $31.4 trillion.
The meeting is not expected to yield anything close to final agreement on a tax plan that could include an increase in the debt limit. But even small points of agreement can be difficult to come by.
Mr. Biden wants to expand federal spending and reduce future debt, largely by raising taxes on high earners and large corporations. Republicans have passed a bill to cut federal discretionary spending — a category that includes national parks, education and more — and eliminate tax breaks for certain low-emission energy sources that were part of Mr Biden’s landmark climate bill. Republicans have pledged to extend the 2017 tax cuts, which were approved by President Donald J. Trump and expire at the end of 2025.
While both sides say they want to reduce the country’s future debt burden, there is almost no overlap in how they want to achieve that outcome. The only point of agreement so far is on the one thing that Mr. Biden and Mr. McCarthy consider off limits in budget talks: Social Security and Medicare, the main sources of projected federal spending growth in coming decades.
The gap over fiscal issues is one of many complicating factors in debt limit discussions, which the government technically reached earlier this year. Officials have essentially used accounting maneuvers to continue to pay all government bills on time without exceeding the current $31.4 trillion limit. But Treasury Secretary Janet L. Yellen warned in a letter last week that those efforts will no longer be possible from June 1, with the risk that a debt burden economists warn could trigger a financial crisis and recession.
Mr Biden has refused to negotiate the limit directly, saying Republicans must vote to raise it without conditions as it simply allows the government to pay for spending that lawmakers in both parties have already approved. But he invited Mr. McCarthy and other congressional leaders to the White House on Tuesday for what he called a separate fiscal policy negotiation — even though it is effectively tied to the debt cap drama.
Still, White House officials said over the weekend that Mr. Biden has been adamant publicly and privately that he will not negotiate with Republicans about raising the limit. “Let’s get it straight: They’re trying to hold the debt hostage to get us to agree to some draconian cuts, extremely difficult and damaging cuts,” Biden said Friday at a meeting of cabinet members and other economic officials.
Republicans say they won’t raise the cap without major cuts. On Monday, 43 Republican senators sent a letter to New York Senator Chuck Schumer, the Majority Leader, warning that “we will not vote for a bill that raises the debt ceiling without substantial spending and budget reform.” That would be a group large enough to block a vote on such a bill.
Republicans took the same position in 2011 and 2013, under President Barack Obama, when Mr. Biden was Vice President. They made no similar demands to raise the limit when they controlled Congress at the start of Mr. Trump’s term and helped Republican votes effectively raise the limit.
In 2011, Mr. Obama negotiating debt limits with a series of proposed cuts. They include a five-year freeze on discretionary spending not related to national security, a separate two-year freeze on federal workers’ salaries, and the elimination of an air-to-air missile program and combat vehicle for the Marine Corps. Republicans responded with a budget that included major cuts in federal health care spending, privatization of Medicare for future beneficiaries, and new tax cuts.
Republicans eventually agreed to raise the debt limit in exchange for budget amendments targeting limits on discretionary spending — essentially an adjustment and extension of the spending freeze that Obama had proposed in his budget.
Unlike Obama more than a decade ago, Biden has never agreed with the Republicans’ argument that federal spending has gotten too big. He has proposed scaling back the growth of the national debt, but his aides reject the Republican claim that the debt’s current path poses a significant threat to economic growth.
Mr Biden’s most recent budget included $3 trillion in proposals to reduce future deficits. The savings would largely come from tax increases for the wealthy and big business, along with cutting government spending on health care by increasing Medicare’s ability to negotiate prescription drug prices.
Republicans have rejected all tax hikes and criticized Biden earlier this year for not proposing to spend more on the military than he already did.
House Republicans have not drafted or passed a budget. The bill they passed last month would increase the debt limit by $1.5 trillion or until March 2024, whichever comes first. According to the nonpartisan Congressional Budget Office, it would reduce future deficits by nearly $5 trillion, largely by freezing certain federal spending for a decade.
It also included new support for fossil fuels, a rollback of Mr Biden’s climate change agenda and an end to the president’s attempt to cancel student loan debt for most borrowers, likely to be ruled by the Supreme Court anyway. turned down.
Neither side has found anything nice in the other’s starting position. Republicans “have not drafted a budget,” New York Representative Hakeem Jeffries, the Democratic leader, who will accompany Mr. McCarthy at the White House meeting, told NBC News on Sunday. “What they did was produce a ransom note.”
Representative Jodey C. Arrington of Texas, the chairman of the Budget Committee, countered that Mr. Biden should concede and negotiate with Republicans.
Mr. Biden “has negotiated increases in the debt ceiling as vice president and senator, with sensible spending controls and fiscal reforms,” Mr. Arrington on Fox News on Sunday. “And we just ask him to be a responsible leader and do that again.”
