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Debt Limit Update

On Monday evening, President Biden and Speaker McCarthy met at the White House.  Per Speaker McCarthy, “the tone tonight was better than any other time we have had discussions.”  President Biden said he agreed that the session had been “productive.  We reiterated once again that default is off the table and the only way to move forward is in good faith toward a bipartisan agreement.”  Speaker McCarthy said he expected to speak daily with President Biden until a deal is sealed. Treasury Secretary Yellen said it’s now “highly likely” that her department will run out of sufficient funding in early June, and repeated her warning that the moment could come as soon as June 1st. The Bipartisan Policy Center stated “there’s a heightened risk of the deadline for a debt-limit deal between June 2nd and June 13th, though its official range still falls between early June and early August.”

Over the weekend, the White House proposed freezing next year’s discretionary spending at this year’s levels, a plan President Biden said would save an estimated $1 trillion over a decade compared to baseline projections.  However, House Republicans in their own debt limit bill, which passed last month (HR 2811), called for rolling back discretionary spending to fiscal 2022 levels, which the Congressional Budget Office (CBO) said would save $3.2 trillion over 10 years.  Defense spending has become another partisan flashpoint and the White House wants to impose a freeze on defense and nondefense programs alike, but Republicans have called for increasing defense spending, which would force much deeper cuts to domestic programs.

Republicans want to claw back unspent COVID-19 pandemic aid that the CBO has estimated to be about $56 billion, and the Democrats oppose this action.  Republicans want a deal to include measures to streamline the federal permitting process for energy projects to boost domestic energy production. Some Republicans have talked about including elements of the House-passed border security measure (HR 2), but it is not clear whether negotiators were still discussing that option.  Negotiators continued to battle over whether and how to impose additional work requirements on recipients of federal benefit programs such as Temporary Assistance to Needy Families (TANF) and the SNAP Program (food stamps).