May 25, 2023 Latest on debt ceiling negotiations

The White House and House Republicans are discussing a deal that would lift the debt ceiling through 2024 while placing caps on the 12 annual spending bills that Congress must pass by the end of the year, a source familiar with the negotiations tells CNN.

Such a mechanism would allow Congress to pass 12 appropriations bills at agreed upon spending levels, and if they don’t, establish a short-term bill to automatically pare back spending to those levels.

The exact spending levels are still being determined, the source added.  

This agreement would create a process around spending cuts and give Congress the room to figure out how specifically to meet those cuts.

Remember: Each chamber of the US Congress has 12 appropriations subcommittees that produce one bill each year to determine government spending on their area of oversight.

Federal Reserve Bank of Boston President Susan M. Collins said in a moderated discussion on Thursday that not raising the debt ceiling would have a significant impact.

Fed officials were concerned about the possibility of the United States defaulting on its debt when they voted to raise interest rates by a quarter point earlier this month, minutes from that meeting showed.

St. Louis Fed President James Bullard said at an event hosted by the American Gas Association on Monday that raising the debt ceiling is “a must-pass” vote for Congress.

Fed officials, Wall Street economists and other professional forecasters have all estimated that the economic effects of a US default, which could come as soon as one week from Thursday on June 1, would be substantial.

Members of the hard-right House Freedom Caucus are signaling they could oppose a deal between House Speaker Kevin McCarthy and the White House, while also warning that dropping some of the spending cuts they have pushed for would "collapse the Republican majority for this debt ceiling increase."

Asked how many House Republicans could vote against a deal, Good replied that "a majority" could find it unacceptable.

"I don’t want to make predictions because ... I’ve just heard some rumors that there may be some sort of a deal that would be less than desirable I believe to a majority of Republicans, and so if that’s true I’m disappointed that that would be the case," he said.

Rep. Ralph Norman, a Republican from South Carolina, said he is also concerned about the direction of the talks.

"Yeah, I am," he said. "It looks like we’re watering it down, which is not acceptable."

Rep. Chip Roy, a Republican from Texas and member of the House Rules Committee, warned it will take a hefty price to get his vote for the debt ceiling. He also would not commit to backing anything in the rules committee until he sees it.

On his own, Roy doesn’t have the power to block anything, but it is another sign of how conservatives are viewing the emerging deal.

Rep. Byron Donalds, a Republican from Florida, signaled he'd be a hard conservative to win if the deal with the White House isn’t similar to the debt limit bill passed by House Republicans in April.

Donalds said he didn't feel members are being kept in the loop on the closely held negotiations.

“I am trying to be calm with my statements, but what I am trying to really stress is — at some point the American people do need to understand exactly what’s happening in this room, because if a deal is made just to try to save face on both sides of the aisle, history tells us that is a terrible thing.”

House Speaker Kevin McCarthy said earlier Thursday he's not concerned about conservative Republicans not supporting an eventual deal, saying "they just need to be updated."

Democratic Rep. Jamaal Bowman, a House progressive, pressed President Joe Biden to stop negotiating with House Republicans on the debt limit and labeled the GOP as “economic terrorists.”

“I’m very frustrated. I called on the president to invoke the 14th Amendment and mint a coin and do not negotiate with hostage-takers,” he told CNN’s Manu Raju. His comment to "mint a coin" refers to the decade-old idea that the president can issue a $1 trillion “commemorative” coin and deposit it with the Federal Reserve.

“I mean, we don’t negotiate with terrorists globally, why are we gonna negotiate with the economic terrorists here that are the Republican party?” Bowman continued.

He added that he is “very concerned” that Biden will give in to Republican demands for spending cuts.

More background: The US Chamber of Commerce has strongly pushed back against efforts from progressives to urge the White House to use the 14th Amendment to avoid a default.

The Chamber, a pro-business trade group that often supports Republicans, sent Biden a letter Friday warning of economic, financial and legal turmoil should the administration attempt to take this controversial route to address the debt ceiling.

Experts have also warned that invoking the 14th Amendment would likely spark a constitutional crisis and Treasury Secretary Janet Yellen recently cast doubt on the idea.

CNN's Matt Egan contributed reporting to this post. 

House Speaker Kevin McCarthy told reporters Thursday that he would not cut any funding for the Pentagon as part of the debt ceiling negotiations.

When asked by CNN about the timeline, McCarthy would not guarantee Thursday that a deal to raise the debt limit will pass by June 1, the possible "X-date" for default. Instead, McCarthy pointed to the debt ceiling bill passed through the GOP-led House in April, saying Republicans have "done everything they can" to avoid the current stalemate.

"There is a bill that has passed the House that sits in the Senate,” he told CNN’s Manu Raju. “I sat down with the President February 1, we passed a bill in April, long before they ever said the deadline was June 1."

The bill was considered a political win for the speaker and believed to strengthen his hand for negotiations to come — but also dead on arrival in the Senate. Senate Majority Leader Chuck Schumer has said he won’t bring the Republican bill to the floor.

Asked whether he seemed more cheerful today because he had made a concession in negotiations, moving Republicans closer to a deal with the White House, McCarthy replied: “I'm always an optimist and I don't give up on anything. And I thought yesterday was a productive day and we still could have a more productive day today.”

The speaker said a deal could come “at any time.”

“I thought we could have had a deal back in February, so at any time. Just trying to get things finished," he told CNN’s Lauren Fox.

On other Republicans: McCarthy said he is not concerned about conservative Republicans opposing any deal that doesn’t have the spending cuts they have pushed for, even after Rep. Chip Roy said this morning that he doesn’t like the direction negotiations are moving.

“Not at all, I just think they just need to be updated,” he said.

McCarthy said he checked in with Senate Minority Leader Mitch McConnell yesterday, and had also spoken to the former president.

“I did talk to President Trump the other day. It came up, but just for a second,” added McCarthy. “He was talking about: 'Make sure you get a good agreement as you move forward.'”

As debt ceiling negotiations hit a more urgent pace Thursday, with some key figures expressing optimism about the prospect of a deal, a lead GOP negotiator said the two sides still have a long way to go.

Asked by CNN if spending levels have been resolved, McHenry said: “Nothing is resolved.”

McHenry said he’s “sincerely worried” about a potential downgrade of US credit rating.

“I am worried about the consequences of us not coming to terms and raising the debt ceiling. I made that very clear,” McHenry said.

In the last 24 hours, debt ceiling negotiations have hit a much more urgent pace, a source familiar with the situation tells CNN, prompting some of the optimism reflected this morning. 

While little has been closed out in talks, progress is slowly being made on all the corners of this negotiation — from permitting reform to a potential caps deal.

One of the trickier issues that could bedevil these negotiations in upcoming days is the issue of work requirements, which haven’t been as widely hashed out yet. The White House has shown little interest in touching requirements on Medicaid, but as CNN's Manu Raju reported last night, there are active talks over dealing with state waiver issues in Temporary Assistance for Needy Families (TANF) and age requirements in Supplemental Nutrition Assistance Program (SNAP). 

One thing both sides do seem to be settled on is recapturing unspent Covid-19 pandemic funding. The source warned that money is going out, so it’s hard to pin down an exact amount that would bring into government coffers, but it’s probably around $30 billion.  

Remember: As is true in any negotiation, these talks can come together — and fall apart — several more times before a deal is actually reached. But at the moment, things are on a swifter track than they had been, with the June 1 deadline looming and Fitch credit ratings agency's warning Wednesday of a potential downgrade if Congress doesn’t take action soon.

No meetings are currently scheduled, but that is expected to change. 

House Speaker Kevin McCarthy said negotiators worked late into the night and are inching closer to a potential debt ceiling deal.  

"We worked well past midnight last night and yesterday ... was a very good day. I thought we made some progress. There's still some outstanding issues, and I've directed our teams to work 24/7 to try to solve this problem," McCarthy told reporters Thursday morning on Capitol Hill.

In a separate interview on Fox News also this morning, while McCarthy still expressed positivity about the negotiations, he said, “I don’t know if we will have a deal today.” 

“This deal won't solve all the problems. The president took a lot of things off the table,” he said, insisting that his conference is “very united in this process.”

On the Hill, he reaffirmed that he believes the June 1 deadline is a real deadline, despite some allegations from conservatives that Treasury Secretary Janet Yellen is playing games with it. 

Meanwhile, in the Fox interview, McCarthy brushed off that it would be an economic catastrophe if the date passes without a deal, saying “look, we know there's money coming in. We know there's ability to get things done.” 

“Whoever the Treasury Secretary is, whatever they say the date is, I will take. But there's money that comes in every single day. You get to the 15th, a lot of money comes in,” he said.

McCarthy would not tell reporters about specific areas where there is agreement in negotiations, but CNN has reported that the two sides have agreed on recapturing unspent Covid-19 funds. Pushed by CNN on whether Democrats have agreed to spending less money next year, McCarthy wouldn't get into details but said if there is going to be a deal, they'll have to agree to that. 

McCarthy was pressed on what impact the Fitch credit ratings agency's warning has had on the negotiations and if it makes him nervous about getting a deal sooner. McCarthy reiterated that is why he met with Biden and asked repeatedly to get back together. 

"If you wait 97 days not to negotiate, you must never be concerned about that," he said of threat of downgrade. 

Asked about the timeline for when this must be done, McCarthy said, "every hour matters." 

"That's why we worked well past midnight last night. The team they have is very professional, very bright. They know where the differences are and we're gonna work 24/7," he reiterated.

Republican negotiator Rep. Garret Graves said that there’s still more to do on differences over spending, and he does not have plans to go to the White House today but spoke with them this morning. 

“Still have a good bit to do, the speaker’s made it clear that this is a top priority,” he said.

He added that he has “been in touch with the White House this morning, going to keep talking to them, and obviously objective is to get this closed as quickly as possible.”

When asked by CNN if he plans to go back to the White House today, he said, “not right now.”