What to Know in Washington: Negotiators Closer To Debt Deal

Republican and White House negotiators are moving closer to an agreement to raise the debt limit and cap federal spending for two years, according to people familiar with the matter.

The two sides have narrowed differences in talks over recent days, according to the people, though the details agreed to are tentative and a final accord is still not in hand. The two sides have yet to agree on the amount of the cap.

Photographer: Al Drago/Bloomberg

Under the terms of the emerging agreement, defense spending would be permitted to rise 3% next year in line with President Joe Biden’s budget request.

The accord would also include a measure to upgrade the nation’s electric grid to accommodate renewable energy while speeding permits for pipelines and other fossil fuel projects that the GOP favors. The deal would cut $10 billion from an $80 billion budget increase for the IRS that Biden won as part of his Inflation Reduction Act.

What is taking shape would be far more limited than the opening offer from Republicans, who called for raising the debt ceiling through next March in exchange for 10 years of spending caps. House conservatives were already balking Thursday at the notion of a small deal, with the House Freedom Caucus sending a letter to McCarthy demanding he hold firm.

“We know where our differences lie,” Speaker Kevin McCarthy (R-Calif.) told reporters at the Capitol, adding that he planned to work through the holiday weekend there.

Should a deal be reached soon, Tuesday is emerging as the likely day for a House vote. The Senate would then have to act quickly to send it to Biden’s desk before June 1, the date by which Treasury Secretary Janet Yellen has said her department could run out of cash. Read the full story from Akayla Gardner and Justin Sink.

More Debt Limit Developments

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US on ‘Borrowed Time’ as Debt Cap Drives Cash Below $50 Billion

The amount of money the government has to pay its bills tumbled to the lowest since 2021, posing a risk the administration will run out of funds by early next month if the statutory debt limit isn’t raised or suspended before then.

Biden’s 2024 Bid Set to Collide With Debt Deal’s Economic Hit

The economic impact of a deal on the debt ceiling will have ripple effects for presidential candidates in 2024 — and 2028.

BIDEN’S AGENDA

• At 2 p.m., Biden and the first lady host the Louisiana State University Tigers women’s basketball team at the White House to congratulate them on their NCAA championship.
• At 5 p.m., Biden welcomes the University of Connecticut Huskies men’s basketball team to the White House to celebrate their NCAA championship.
• At 6:30 p.m., the president and first lady depart for Camp David.

CONGRESS’ SCHEDULE

• House lawmakers left yesterday for Memorial Day recess but were told they should be ready to return within 24 hours to vote on a possible debt ceiling deal.
• The Senate is due to return Tuesday.

BGOV Webinar: Bloomberg Government reporters and analysts held a webinar to discuss the possible consequences of a default, the status of negotiations, and policy priorities from Republicans and Democrats. Download the webinar slides here and tune into a recording of the event here .

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Hyundai Motor, LG Plan $4.3 Billion EV Battery Plant in US

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Editor’s Note: BGOV’s What to Know won’t publish on the Monday, May 29th federal holiday. Publication resumes Tuesday, May 30th.

To contact the reporters on this story: Brandon Lee in Washington at blee@bgov.com; Michaela Ross in Washington at mross@bgov.com

To contact the editor responsible for this story: Kayla Sharpe at ksharpe@bloombergindustry.com