President Joe Biden’s meeting with congressional leaders Tuesday on the debt limit could lay the groundwork for staff to start negotiations or, at the least, kick off a series of Oval Office conversations, according to former congressional aides who navigated similar standoffs in the past.
The White House meeting comes a little over three weeks before the federal government could run out of borrowing room and be unable to pay all its bills on time.
The “x date” could be as soon as June 1, according to Treasury Secretary Janet L. Yellen, who in an interview with CNBC on Monday warned of “economic catastrophe” and “financial chaos” if action isn’t taken in time.
Some former Democratic and Republican aides said in interviews that the best-case scenario on the path to an agreement would involve Biden and Speaker Kevin McCarthy, R-Calif., tapping key aides at Tuesday’s gathering to begin looking for consensus. Others said there could be a shift in tone toward dealmaking.
But there could be a range of outcomes, with several aides warning the worst case would be if Biden and McCarthy leave the meeting and slam each other publicly, without setting up future meeting dates.
“What will really be disturbing, I think, to markets and to others is if it’s not clear when or if they’re gonna meet again,” said Neil Bradley, a former McCarthy aide who served as deputy chief of staff to then-House Majority Leader Eric Cantor, R-Va., during the 2011 debt limit fight. During that standoff, talks went down to the last day before a deal was cut.
Working under a new deadline and with key players coming together for the first time, the meeting has the potential to begin a shift from political posturing to governing and finding a path forward, said Arshi Siddiqui, who was a top aide to former Speaker Nancy Pelosi, D-Calif.
“The president convening everybody at the White House allows a true discussion and dialogue to occur and we haven’t seen that yet, so that’s the significance from that perspective in terms of ultimately threading the needle,” said Siddiqui, now a partner at Akin Gump Strauss Hauer and Feld.
She said both Democrats and Republicans seem to be prioritizing a long-term agreement, which is promising in that both parties are interested in a solution that would offer financial markets more certainty.
Tom Kahn, who was staff director for House Budget Committee Democrats during the 2011 negotiations, said staff discussions following the White House meeting could help carve out both sides’ positions.
“One of the things that staff can do is lay out all the different options and scenarios and plans with the numbers and data to support them,” said Kahn, now a distinguished fellow at American University.
Contours of a deal
While Democrats are still largely demanding a “clean” debt limit increase without other attached provisions and Republicans are pressing for spending cuts, former aides on both sides of the aisle see paths out of the impasse.
Kahn said a final deal would have to look significantly different from the GOP-drafted bill the House passed to raise the debt limit and reduce the budget deficit, and that any spending reductions would have to be “vastly smaller” to get Democrats on board.
Kahn also believes that a debt ceiling deal could be moved on two tracks to allow both parties to argue they won out in the end.
“You can essentially link the two, so the president can say he gets his clean debt ceiling and Republicans can say we got conditions on it,” he said.
PwC’s Rohit Kumar, who was deputy chief of staff to Senate Republican leader Mitch McConnell during the 2011 fight, said some of the House-passed bill will have to be in the final agreement. He believes a deal could be struck around rescinding unspent pandemic relief funds, measures to speed up energy permitting and caps for discretionary spending.
Kumar said while there’s little time before the deadline, the issues currently on the table are much easier to negotiate than the issues that lawmakers were debating in 2011, when changes to Social Security and Medicare were a focal point.
Still, he was among former aides expecting things to go down to the wire. “My optimistic scenario… is it’s the last week, as opposed to the last days,” he said.
Resetting the clock?
The crunched timeline to find a deal has brought attention to the possibility of a short-term patch to push the x date further out. Kumar said the only way that’s viable would be to give a week or two of extra time if an agreement is close.
Bradley, who’s now chief policy officer for the U.S. Chamber of Commerce, had more confidence that a short-term extension could come into the mix, possibly with policy changes tacked on to satisfy Republicans and to show proof of motion toward a deal. He pointed to rescinding unspent pandemic aid as a possibility.
Kahn and a fellow former top Democratic aide, Wendell Primus, both said they view a short-term patch as likely.
Primus, who was Pelosi’s senior budget and health care policy adviser, said he believes there will need to be agreement on a short-term extension — possibly through the end of the fiscal year to Oct. 1 — before the Senate leaves for a pre-Memorial Day recess in about two weeks. The House is then scheduled to be in recess through the end of May.
Negotiations to agree on deficit reduction measures would follow, Primus said.
“Sometime during the month of May, I could see the Republicans agree to do a short-term [extension] with the idea that negotiations get started,” he said. “But I think it will be for a short term because both parties don’t really trust each other.”
Primus said negotiations to raise the debt limit alongside deficit reduction in 1990 and 2011 took more time. He said the concessions can’t all be spending cuts without revenue raisers or else “Democrats have really lost in some sense.”
Getting through the House
Former aides noted the balancing act that McCarthy will have to pull off — and fast — to avert a debt limit crisis, given the House’s thin GOP majority and the number of hardline conservatives who would likely reject a negotiated agreement with more moderate deficit reduction measures.
Brendan Buck, who was a spokesman for then-Speaker John A. Boehner, R-Ohio, in 2011, said that McCarthy will have to weigh a need to keep his conference read in on talks so they don’t feel surprised or betrayed in the end with a need to avoid undermining negotiations that are typically kept quiet.
He said that McCarthy expended political capital uniting most of his conference behind the GOP debt limit bill and that it raised expectations among Republicans, even though any deal with Democrats will likely involve only modest deficit reduction.
“There’s no question that he is going to face some level of blowback on the final deal,” said Buck, who also worked for Speaker Paul D. Ryan, R-Wis. “The question is how much can he cut that off ahead of time and make people feel like this is a win rather than a loss.”
Kahn, too, is expecting a showdown and set the chances of not raising the debt limit in time as high. “2011 was hellacious,” he said. “We came about as close to a default as one could imagine without doing so. And at that point we were dealing with a more powerful speaker and a more moderate Republican conference.”
Speaking to CNBC on Monday, Yellen made clear that possible workarounds if Congress doesn’t act, like prioritizing certain payments over others, are not really an option.
“The only option that really leaves our economy in good shape is … raising the debt ceiling and making clear that Congress stands behind the basic principle that America pays its bills,” Yellen said. “And if that’s compromised … that will have tremendously adverse effects on financial markets and the economy.”
Aidan Quigley contributed to this report.
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