Negotiators find compromises to avoid default but still have key conflicts

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Updated May 26, 2023 at 3:51 PM ET

WASHINGTON (NPR) — Negotiators have hashed out some details of a deal to prevent the country from a default on its debt as soon as next week, according to a source familiar with the talks.

The contours of a debt ceiling deal are largely worked out – including on discretionary spending and defense spending — but sticking points include work requirements and permitting, the source told NPR.

House Speaker Kevin McCarthy told reporters Friday morning that it’s “crunch time.”

“We know it’s not easy, but we’re going to make sure we’re not just trying to get an agreement,” he said. “We’re trying to get something that’s worthy of the American people that changes the trajectory.”

The deal being worked out by negotiators would raise the government’s borrowing limit for two years, while putting two-year caps on federal spending, said the source, who was not authorized to speak about the ongoing negotiations. Preliminary details were first reported by the New York Times.

The two sides are also close to an agreement on IRS funding, which Republicans are hoping to cut. But both sides are dug in on whether to add work requirements for able-bodied adults without dependents who rely on federal assistance programs, such as food stamps and Medicaid. Republicans are also seeking to make changes to the Temporary Assistance for Needy Families program.

House Speaker Rep. Kevin McCarthy, R-Calif., speaks to members of the media after arriving at the U.S. Capitol on Friday.
House Speaker Rep. Kevin McCarthy, R-Calif., speaks to members of the media after arriving at the U.S. Capitol on Friday. [Win McNamee | Getty Images]

Work requirements remain a redline for White House and GOP

“Democrats right now are willing to default on the debt so they can continue making welfare payments for people that are refusing to work,” said Louisiana Rep. Garrett Graves, one of McCarthy’s negotiators. “If you’re really going to fall on the sword for that versus actually negotiating something that changes the trajectory of the country for spending, I mean, it’s crazy to me that we’re even having this debate.”

Graves added that he is not willing to drop work requirements.

“Hell no. Not a chance. Not happening,” he told reporters before heading out to an event at the White House with Biden celebrating the Louisiana State University women’s basketball team.

On Monday, Treasury Secretary Janet Yellen reiterated the warning that Congress has until about June 1 to raise or suspend the debt limit. McCarthy has vowed to give members 72 hours to review text before putting it to a floor vote. The Senate will then have to vote on the measure if passed by the House.

When asked if negotiators could reach a deal this weekend, Graves said it’s possible and “certainly that’s the objective.”

On Friday morning, Deputy Treasury Secretary Wally Adeyemo told CNN that defaulting should not be an option.

“We’re making progress and our goal is to make sure that we get a deal because default is unacceptable,” Adeyemo said in an interview on CNN. “The president has committed to making sure that we have good-faith negotiations with the Republicans to reach a deal because the alternative is catastrophic for all Americans.”

He added that Biden would not invoke the 14th amendment as an option to avoid default.

Most economists agree an actual default could result in a recession. A default would severely affect financial markets, increase mortgage rates and interest rates on credit cards, could cause government workers and Social Security recipients to go unpaid, and could make it difficult for businesses and citizens to borrow money.

McCarthy told reporters Friday that negotiators worked through the night on Thursday, and he believes they made progress.

“There is forward progress but each time there’s forward progress the issues that remain become more difficult and more challenging,” Rep. Patrick McHenry, one of McCarthy’s negotiators, told reporters Friday afternoon.

Negotiators for the administration are currently not scheduled to meet with McCarthy in person on Friday, McHenry said, but the two groups continue to talk virtually.

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