1 big thing: McCarthy pulls it off

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South Korean President Yoon Suk Yeol and his wife, Kim Keon Hee, pose with President Biden first lady Jill Biden before a  State Dinner at the White House on April 26, 2023.

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Axios Sneak Peek

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National

President Biden and House Speaker Kevin McCarthy (R-Calif.) have reached a tentative deal to raise the debt ceiling to 2025, Axios has learned from sources in both parties.

Why it matters: The deal could put Congress on track to increase the debt ceiling — and avoid a catastrophic default by the U.S. government — before the June 5 deadline laid out by Treasury Secretary Janet Yellen on Friday.

Details: The deal between Biden and McCarthy — who spent 90 minutes on the phone Saturday evening — would raise the debt ceiling until January 2025 in exchange for spending cuts and deficit reduction measures, according to  sources familiar with the negotiations.

Spending: Non-defense discretionary spending would be kept roughly flat in 2024, with a 1% increase in 2025 and no caps on growth afterward.

Welfare work requirements: Changes to Temporary Needy Assistance for Needy Families (TANF) and phased-in time limits for Supplemental Nutrition Assistance Program (SNAP) recipients under age 54 until 2030. Medicaid is unchanged.

Defense: The plan includes $885 billion Biden sought in his 2024 budget proposal, up from just under $800 billion in the 2023 budget. Veterans Affairs spending also would be increased.

Permitting reform: Streamlines the environmental review process to speed up approval for new energy projects.

COVID aid: Claws back $29 billion in unspent COVID aid.

IRS funding: Rescinds $1.9 billion of the $70 billion in funding for new Internal Revenue Service agents in the Inflation Reduction Act.

What’s next: McCarthy told reporters that legislative text will be released on Sunday in preparation for the House voting on Wednesday.

This story is breaking news. Please check back for updates.

White House and GOP reach tentative debt ceiling deal

House Republicans are scheduled to have a call on the deal.

McCarthy at a press conference. Photo: Alex Wong/Getty Images

Debt ceiling

Politics & Policy

Congressional Democrats are dreading a potential debt default. They are also dreading a potential debt ceiling deal.

Why it matters: What’s good for President Biden – and the economy – might not feel so good for congressional Democrats, who are largely in the dark on the deal's specifics and concerned they'll be forced to support a bill that eviscerates programs they have long championed.

Those Democrats are pinning their hopes on Biden forcing House Speaker Kevin McCarthy (R-Calif.) to accept a deal that will need a big block of Democratic votes to win passage. 

“[W]hile Democrats know they will have to eat a turd sandwich, the Republicans will have to put some Nutella spread on it first," one House Democrat told Axios.

Driving the news: McCarthy was mildly positive Wednesday after the negotiating teams spent four hours in the Eisenhower Executive Office Building.

“Things are going a little better,” he said on Fox Business. 

But the speaker insisted that a final deal still required Biden to accept deeper spending cuts.

Fitch Ratings announced Wednesday evening it was reviewing whether the U.S. should keep its top credit rating, citing “brinkmanship over the debt ceiling.”

The Treasury Department was quick to seize upon the potential downgrade, saying it "underscores the need for swift bipartisan action by Congress to raise or suspend the debt limit and avoid a manufactured crisis for our economy,” according to Lily Adams, a department spokesperson. 

The big picture: Behind the big policy differences on spending levels and work requirements, there's a tactical disagreement between McCarthy and Biden on how to get to 218 votes.

If they cut programs too deeply, House progressives — and maybe some Democratic centrists — will vote no.

If they don't cut deeply enough, House conservatives will try to blow up the deal.

"We have been clear any deal that the White House strikes has to be something that we House Democrats also are a part of and at the table for," said House Progressive Caucus Pramila Jayapal (D-Wash.).

By the numbers: With Social Security and Medicare off the table, McCarthy and Biden are debating how much to cut the discretionary spending portion of the federal budget.

McCarthy is opposed to cutting the Pentagon’s portion, meaning that most of the cuts will fall on the non-defense side side of the equation. 

The White House estimates that programs in that category — including grants to states for education and transportation to foreign aid — would face cuts as high much as 30% of their budget.

What they are saying: Progressives are sounding the alarm about what Republicans are proposing.

"Let's understand what's going on here," Rep. Jim McGovern (D-Mass.) said of GOP plans to add new work requirements for some welfare benefits.

"The people that will be adversely impacted are veterans, people who are homeless, people who are just graduating out of foster care, are people with undiagnosed mental illness.

The other side: Other Democrats seemed more likely to accept a potential deal. “We have to make compromises but in a way that will not hurt our economy and even further,” said Rep. Andre Carson (D-Ind.).

“Concessions are relative,” said Rep Dean Phillips (D-Minn.) "I know some of my colleagues will consider anything damaging or destructive.”

Between the lines: White House officials have unofficially calculated that McCarthy will have to rely on 100 Democratic votes to pass a compromise bill, Politico reported.

While McCarthy has accepted that any potential deal will need to be bipartisan, he’s never publicly estimated how many Republican votes he’s prepared to lose – and how many Democrats he’ll need to cover his defection.

Axios' Eugene Scott contributed reporting. 

Democrats filled by debt ceiling dread

"Democrats know they will have to eat a turd sandwich," one House Democrat told Axios.

Congressional Democrats are dreading a potential debt default. They are also dreading a potential <a class="gtmContentClick" data-vars-link-text="debt ceiling deal" data-vars-click-url="https://www.axios.com/2023/05/19/debt-ceiling-house-progressives-biden-letter" data-vars-content-id="37442fed-f98c-4d4b-baac-c7e9a5c55b6c" data-vars-headline="Democrats filled by debt ceiling dread" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2023/05/19/debt-ceiling-house-progressives-biden-letter" target="_self">debt ceiling deal</a>.Why it matters: What’s good for <a class="gtmContentClick" data-vars-link-text="President Biden" data-vars-click-url="https://www.axios.com/politics-policy/joe-biden" data-vars-content-id="37442fed-f98c-4d4b-baac-c7e9a5c55b6c" data-vars-headline="Democrats filled by debt ceiling dread" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/politics-policy/joe-biden" target="_self">President Biden</a> – and the economy – might not feel so good for congressional Democrats, who are largely in the dark on the deal&#x27;s specifics and concerned they&#x27;ll be forced to support a bill that eviscerates programs they have long championed.

Rep. Chip Roy (R-Texas) is calling on Speaker Kevin McCarthy (R-Calif.) to accept nothing less than steep cuts in debt ceiling negotiations.

Why it matters:  In a memo sent to House Republicans on Wednesday, Roy — one of the most influential voices in the House Freedom Caucus — said it “shouldn’t be about a deal it should be about saving the country.”

Roy and a sizable amount of conservatives have repeatedly asserted that McCarthy should not accept anything that does not include cuts and reforms similar to what was included in the House-passed bill. 

"I hope these help as Speaker McCarthy continues to pressure President Biden to do what is right for the American people. We give him the strongest hand by: 1) making clear we are unified to hold the line; and 2) messaging the specific purposes behind the Limit, Save, Grow Act," he wrote. 

Multiple conservative lawmakers have publicly questioned Treasury's June 1 "X-date" deadline, alleging that the White House hasn't acted with a sense of urgency and needs to move in their direction. 

The big picture: Both sides are far apart on key components despite the looming deadline. 

Conservative hardliners have repeatedly voiced that they won't support a bill without steep cuts — potentially posing issues for McCarthy's stability in his leadership position if he brings a bill to the floor that doesn't have the majority of GOP support.

And progressives have also stated they won't back a bill with any cuts, creating an additional hurdle for leadership on both sides of the aisle.

House GOP and White House officials are meeting again on Wednesday, but key players in the talks have noted the difficulties in striking an agreement.

Top Democrats including Senate Majority Leader Chuck Schumer (D-N.Y.) have asserted that the House-passed bill is dead on arrival in the Senate, but have conceded that some concessions will need to be made.

The bottom line: McCarthy has voiced that negotiators need to strike a deal before the end of the week if they are going to meet their deadline

The California Republican is considering keeping members in over the weekend in hopes of striking and passing a deal. 

Freedom Caucus eggs on McCarthy's debt ceiling push

"I hope these help as Speaker McCarthy continues to pressure President Biden."

Rep. Chip Roy (R-Texas) is calling on Speaker Kevin McCarthy (R-Calif.) to accept nothing less than steep cuts in <a class="gtmContentClick" data-vars-link-text="debt ceiling negotiations." data-vars-click-url="https://www.axios.com/2023/05/21/gop-white-house-budget-debt-ceiling" data-vars-content-id="56eecc37-75ac-4599-b269-4d31d7637815" data-vars-headline="Freedom Caucus eggs on McCarthy&#x27;s debt ceiling push" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2023/05/21/gop-white-house-budget-debt-ceiling" target="_self">debt ceiling negotiations.</a>Why it matters: In a memo sent to House Republicans on Wednesday, Roy — one of the most influential voices in the House Freedom Caucus — said it “shouldn’t be about a deal it should be about saving the country.”

Sen. Kyrsten Sinema (I-Ariz.) has inserted herself into the debt ceiling negotiations, working with both sides to try to bridge differences on permitting reform, according to people familiar with the matter.

Why it matters: Her late entrance is a sign that negotiators are willing to explore new avenues to resolve thorny issues before June 5, the new deadline from Treasury Secretary Janet Yellen for when the U.S. government will run out of money.

Permitting reform — a catch-all category that includes both Republican and Democratic plans to improve energy production and transmission — is emerging as a tough-to-resolve disagreement between the White House and congressional negotiators.

Republicans want to change the National Environmental Policy Act (NEPA) with the goal of cutting red tape for oil and gas companies when they develop new projects. Democrats want to make it easier for solar and wind farms to access transmission lines. 

Negotiators also are at an impasse on a demand from House Speaker Kevin McCarthy (R-Calif.) to add new work requirements to welfare benefits, according to Biden administration officials.

But the two sides are making progress on overall spending levels, with the goal of capping spending for two years at lower levels. In exchange, the debt ceiling would be raised past the 2024 elections.

Driving the news: By removing any wiggle room on the government's default date, Yellen's new pronouncement is adding urgency to the negotiations.

“We’re within the window for which we meet the June 5 deadline,” Rep. Patrick McHenry (R-N.C.) told reporters on Capitol Hill. "It’s not over. We’re not done.”

House Majority Whip Tom Emmer (R-Minn.) told his team late Friday that negotiators still didn't have a deal, but that they should be prepared to find the votes to pass it when the details are finalized, lawmakers said. 

Zoom in: Sinema is trying to use her status as an independent senator — and her experience as a key vote in last year's showdown over the legislation that became President Biden's Inflation Reduction Act — to find common ground.

But some Democratic lawmakers are privately concerned that her 11th-hour effort to save the day will water down key green energy provisions.

A spokesperson for Sinema declined to comment; the White House also had no comment.

Zoom out: Both parties' ideological bases — Democratic progressives and the most conservative Republicans -- have voiced concerns about the contours of a potential deal.

Divided by ideology, the two groups essentially are saying the same thing: Their leaders aren't fighting hard enough for their party's core principles.

What they're saying: “If rumors are accurate, and I certainly hope they are not, the negotiated deal would be devastating to the nation’s fiscal future,” said Rep. Bob Good (R-Va.)

Biden “needs to continue to stand firm against cruel eligibility requirements on TANF or SNAP programs,” said Rep. Steven Horsford (D-Nev) chair of the Congressional Black Caucus, referring to the Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF).

Go deeper: On energy permitting revisions, Rep. Garret Graves (R-La.), a top McCarthy negotiator, have made NEPA reform a priority. 

Democrats, for the most part, oppose significant changes to NEPA, but they do want to make it easier for renewable energy sources to plug into the electricity grid.

Sen. John Hickenlooper (D-Colo.) and Scott Peters (D-Calif) are pushing legislation that would incentivize the construction of new transmission lines and require different power regions to have the capacity to transfer up 30% of their electricity to each other.

Sinema wants to explore ways to lower that 30% power-sharing requirement, which would make the transition slower, but easier for the energy industry.

The bottom line: McCarthy and Biden still need to nail down a plan that allows them to cobble together a coalition of 218 votes in the 435-member House — and energy permitting is a key issue standing in the way.

Scoop: Sinema enters debt ceiling negotiations

Her late entrance signals that negotiators are exploring new ways to solve thorny issues.

Sen. Kyrsten Sinema (I-Ariz) is interviewed on Capitol Hill earlier this month. Photo: Al Drago/Bloomberg via Getty Images

Sen. <a class="gtmContentClick" data-vars-link-text="Kyrsten Sinema" data-vars-click-url="https://www.sinema.senate.gov/" data-vars-content-id="6285af10-1e58-4213-ba9f-003a0b0d51d8" data-vars-headline="Scoop: Sinema enters debt ceiling negotiations" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.sinema.senate.gov/" target="_blank">Kyrsten Sinema</a> (I-Ariz.) has inserted herself into the <a class="gtmContentClick" data-vars-link-text="debt ceiling negotiations" data-vars-click-url="https://www.axios.com/2023/05/18/progressives-debt-ceiling-tensions-biden" data-vars-content-id="6285af10-1e58-4213-ba9f-003a0b0d51d8" data-vars-headline="Scoop: Sinema enters debt ceiling negotiations" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2023/05/18/progressives-debt-ceiling-tensions-biden" target="_self">debt ceiling negotiations</a>, working with both sides to try to bridge differences on permitting reform, according to people familiar with the matter.Why it matters: Her late entrance is a sign that negotiators are willing to explore new avenues to resolve thorny issues before June 5, <a class="gtmContentClick" data-vars-link-text="the new deadline" data-vars-click-url="https://www.axios.com/2023/05/26/yellen-warns-that-us-will-run-out-of-money-on-june-5" data-vars-content-id="6285af10-1e58-4213-ba9f-003a0b0d51d8" data-vars-headline="Scoop: Sinema enters debt ceiling negotiations" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2023/05/26/yellen-warns-that-us-will-run-out-of-money-on-june-5" target="_self">the new deadline</a> from Treasury Secretary Janet Yellen for when the U.S. government will run out of money.

House Speaker Kevin McCarthy and President Biden finally have their debt ceiling deal. Now comes the hard part: Rushing it through an uneasy Congress in just one week, before the government's projected default on June 5.

Why it matters: The stakes are especially high for McCarthy (R-Calif.), whose survival as speaker could be at stake if he can't contain the anger of right-wing Republicans who already are panning the compromise.

A source close to the House GOP leadership told Axios that perhaps 60 conservative Republicans won't vote for it. That means McCarthy could need votes from nearly that many Democrats to get the plan through the divided House. 

Biden will have to deliver those votes despite wariness among progressives about some aspects of the deal — and a broader frustration among Democrats that the White House is already losing the public relations battle over it.

State of play: Like any compromise, the Biden-McCarthy deal has some wins and losses for both sides.

It raises the debt ceiling until 2025 and keeps non-defense discretionary spending steady, which Democrats see as victories.

Republicans wanted, and got, new work requirements for people who are on welfare, a boost in defense spending, clawbacks of unspent COVID aid and some IRS funding. 

Another significant GOP win is what's not in the deal: tax increases or any other revenue-raisers.

Zoom in: On a Saturday night call to brief House Republicans 0n the deal, McCarthy called it a total win for Republicans and said no concessions were made to Democrats.

His deputies rushed to sell that framing. "There are no real wins for Democrats other than the debt ceiling is being raised," Rep. Stephanie Bice (R-Okla.) told Axios in an interview.

Some conservative Republicans weren't buying it: Freedom Caucus members Bob Good (R-Va.), Lauren Boebert (R-Colo.), Ralph Norman (R-S.C.) and Dan Bishop (R-N.C.) all made clear they won't vote for the bill.

"Bulls***," is how one senior conservative source described the deal.

But Rep. Dusty Johnson (R-S.D.) said he talked with three dozen House members across the GOP's ideological spectrum late Saturday — including "among the most conservative" — and, "I think they understand what a significant win this is."

Between the lines: McCarthy can likely afford to lose dozens of conservatives' support when the House votes on the plan later this week. What he can't do, however, is anger those members so much they trigger a motion to oust him.

Under rules McCarthy agreed to in January to secure enough conservative GOP votes to be elected speaker, just one House member can bring a "motion to vacate," and force a vote to remove the speaker.

So far, no one has threatened that, but the rhetoric was heated Saturday.

"If Speaker’s negotiators bring back in substance a clean debt limit increase," Bishop tweeted Saturday morning before the deal was struck, "[I]t’s war."

The other side: Some Democrats, already fuming about being excluded from the negotiating table, are distressed that the White House isn't doing enough to give them cover to vote for the bill.

The latest source of concern: That the White House is waiting until nearly a day after McCarthy outlined the plan to Republicans before briefing congressional Democrats.

"The White House has a communication problem," one Democratic House member said. "McCarthy's on the phone telling his Republicans, 'The Democrats didn't get anything,' and [the White House] has got to get out there and start selling ... People are not happy."

Progressives are worried about the work requirements and energy permitting changes in the deal, according to two House Democrats.

A Democratic source told Axios that the White House has been circulating materials and talking points about the deal, and making calls to Democratic leaders and members of Congress.

What we're watching: Several Republicans told Axios that their key concerns on the final vote count — rather than GOP defections — are Democratic ones.

This story was updated to include information about the White House's outreach to Congress. 

fuming about being kept from the negotiating table

McCarthy and Biden's big test on the debt ceiling deal

The stakes are especially high for McCarthy, whose survival as speaker could be at stake.

President Biden and House Speaker Kevin McCarthy (R-Calif.) depart the U.S. Capitol after a luncheon on March 17. Photo: Drew Angerer/Getty Images

Kevin McCarthy

House Speaker Kevin McCarthy and <a class="gtmContentClick" data-vars-link-text="President Biden" data-vars-click-url="https://www.axios.com/politics-policy/joe-biden" data-vars-content-id="cd25f83b-0537-40bc-96d3-3dd40bc37c38" data-vars-headline="McCarthy and Biden&#x27;s big test on the debt ceiling deal" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/politics-policy/joe-biden" target="_self">President Biden</a> finally have their debt ceiling deal. Now comes the hard part: Rushing it through an uneasy Congress in just one week, before the government&#x27;s projected default on June 5.Why it matters: The stakes are especially high for McCarthy (R-Calif.), whose <a class="gtmContentClick" data-vars-link-text="survival as speaker" data-vars-click-url="https://www.axios.com/2023/05/16/democrats-mccarthy-debt-ceiling-motion-vacate" data-vars-content-id="cd25f83b-0537-40bc-96d3-3dd40bc37c38" data-vars-headline="McCarthy and Biden&#x27;s big test on the debt ceiling deal" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2023/05/16/democrats-mccarthy-debt-ceiling-motion-vacate" target="_self">survival as speaker</a> could be at stake if he can&#x27;t contain the anger of right-wing Republicans who already are panning the compromise.

Juliegrace Brufke

Stories

McCarthy and Biden's big test on the debt ceiling deal

White House and GOP reach tentative debt ceiling deal

Scoop: Sinema enters debt ceiling negotiations

Democrats filled by debt ceiling dread

Freedom Caucus eggs on McCarthy's debt ceiling push

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🚨 McCarthy pulls it off