Hang with me: House Speaker Kevin McCarthy told House Republicans the two sides are nowhere reach a deal to avert a default. He said previously a deal needs to come together this week to allow time to draft legislative language and allow Republicans to review it

House Speaker Kevin McCarthy said Tuesday the two sides are ‘nowhere near’ a deal that would avoid a U.S. default, just hours after both he and President Joe Biden declared negotiators had made progress.

Even as negotiators for the White House and the speaker’s office sat down again in earnest Tuesday, the messaging war ramped up as McCarthy issued a memo titled ‘reasonable Republicans and default Democrats’ that blasted Biden for failing to engage in talks sooner. 

‘Make no mistake: any default would be the Biden Default,’ he wrote.

One of his top negotiators, Louisiana GOP Rep. Garret Graves said he had barely seen progress.

‘I don’t think things are going well. They are refusing to truly change the trajectory, to truly reduce spending, and that is a red line,’ he said.

McCarthy was blunt in a meeting with fellow Republicans – a day after saying any final deal should move on a bipartisan basis, meaning Democratic support is likely required to clear the House.

‘We are nowhere near a deal,’ he told fellow Republicans. ‘I need you all to hang with me,’ he urged.

Hang with me: House Speaker Kevin McCarthy told House Republicans the two sides are nowhere reach a deal to avert a default. He said previously a deal needs to come together this week to allow time to draft legislative language and allow Republicans to review it

Hang with me: House Speaker Kevin McCarthy told House Republicans the two sides are nowhere reach a deal to avert a default. He said previously a deal needs to come together this week to allow time to draft legislative language and allow Republicans to review it

His remark was an indication of how McCarthy’s own fate is wrapped up in the high stakes negotiations. He holds a narrow majority and only achieved his speakership after a lengthy process.

He is urgently trying to force Biden to accept spending cuts that demonstrate McCarthy’s commitment to the conservative faction that ultimately handed him the gavel. 

The stark assessment comes after McCarthy on Monday evening emerged from his Oval Office meeting with President Joe Biden to say negotiations have been ‘productive’ as the nation faces potential default – but didn’t identify any concrete areas of agreement.

He said the two sides were able to ‘focus’ and even praised White House negotiators, after warning a deal needed to be reached this week to allow time for the House to process it by a looming expected June 1 default deadline. 

McCarthy, who urged Biden to engage in talks for weeks even while Biden refused to negotiate directly on a debt limit increase, said he doesn’t like government ‘by chaos.’

In one development, McCarthy brought along Rep. Patrick McHenry (R-N.C.), who has been in on the staff talks.

McCarthy also praised Biden’s negotiators as the ‘most professional I’ve ever seen.’ On top of that, he called them ‘intelligent and ‘respectful.’ 

McHenry, back on Capitol Hill, told reporters Monday he sensed a ‘lack of urgency’ with the White House team. 

Steve Ricchetti, counselor to the president, left, and Shalanda Young, director of the Office of Management and Budget, rejoined talks in the Capitol Tuesday, with a debt default date just days away

Steve Ricchetti, counselor to the president, left, and Shalanda Young, director of the Office of Management and Budget, rejoined talks in the Capitol Tuesday, with a debt default date just days away

'I don't think it's a revenue problem. It's a spending problem,' Speaker Kevin McCarthy told reporters, asked about President Joe Biden comments about closing tax 'loopholes' as a revenue source in tense budget talks

‘I don’t think it’s a revenue problem. It’s a spending problem,’ Speaker Kevin McCarthy told reporters, asked about President Joe Biden comments about closing tax ‘loopholes’ as a revenue source in tense budget talks 

‘We should have a sense of urgency from the White House team that was not evident in this meeting,’  McHenry said. 

The speaker’s claims of progress and praise of the White House team, even without sharing any concessions by either side, come as markets and nation states are closely eying a potential default that could shake the global economy. 

McCarthy completely ruled out an idea that Biden had pitched moments before the meeting – raising revenue by closing tax loopholes. 

He pointed to high government revenues and made comparisons to household income.

‘I don’t think it’s a revenue problem. It’s a spending problem,’ McCarthy said, responding to a question by DailyMail.com.

‘So if you don’t tackle the problems that have created [the situation], you’re never going to solve it.’

House Budget Committee Jodey Arrington had trashed the idea on Sunday. 

‘No. 1, it’s not on the table for discussion. No. 2, taxes right now would only be passed on to consumers at higher prices. So we will exacerbate inflation,’ Arrington told ABC’s ‘This Week.’ 

Meanwhile, the two sides are at odds over what constitutes a spending cut. Biden’s team offered freezing 2024 spending at 2023 levels – which they say amounts to a cut since spending levels would not be adjusted for inflation. Republicans want to return spending to fiscal year 2022 levels, adjusted for inflation. 

The White House wants to cap spending at a one percent increase for only two years, while Republicans want to cap it at a one percent increase for 10 years.  

McCarthy, who came to power after saying Ukraine wouldn’t get a ‘blank check’ from the U.S., advocated for exempting defense spending from cuts – pointing both to the China threat and the billions the U.S. has spent arming Ukraine.

McCarthy again predicted any agreement would be bipartisan – an indication he may need some Democratic votes to pass it through the House. 

A growing swell of Democrats has been pushing Biden to give up on negotiations over the debt limit and bypass Congress to do so with the 14th Amendment. 

Section 4 of the 14th Amendment states: ‘The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.’

The Amendment – which granted citizenship to former slaves and extended ‘equal protection under the law’ among other provisions – essentially states that the nation’s debts must be paid by the federal government in full.

Experts have interpreted that to mean Biden may have some authority to go above Congress and lift the debt borrowing cap – although there would be expected legal challenges if he bypassed the legislative branch in this manner.

On Sunday, Biden said he believed he had the authority to do so. ‘I’m looking at the 14th Amendment as to whether or not we have the authority — I think we have the authority,’ he told reporters. 

McCarthy told DailyMail.com in a news conference he doesn’t get the sense the president is seriously considering invoking the amendment. 

‘No. I don’t think anybody with a legal mind would think the 14th Amendment would even work.’ 

President Joe Biden said he was 'optimistic' about making progress in talks with Speaker Kevin McCarthy, even with the nation days away from being unable to meet its debt obligations

President Joe Biden said he was ‘optimistic’ about making progress in talks with Speaker Kevin McCarthy, even with the nation days away from being unable to meet its debt obligations

Biden also spoke about the risks of failure.

‘The American people would have a real kick in their economic wellbeing. As a matter of fact, the rest of the world would too,’ he said.

But in a sign of the gulf that remains, Biden repeated his demands for closing tax ‘loopholes’ and making sure the wealthy ‘pay their fair share’ – referencing tax changes that House Republicans have consistently rejected.

‘I think we should be looking at tax loopholes and make sure the wealthy pay their fair share’ and not raising taxes on anyone earning more than $400,000 per year.

His comment comes amid reports that the two sides have discussed closing the so-called ‘carried interest loophole’ that allows hedge funders to pay a lower rate than those who take ordinary income. It was a staple of Biden’s presidential campaign. 

‘We still have some disagreements but I think we may be able to get where we have to go,’ said Biden. 

Biden said the two also ‘agree we need to reduce the deficit,’ and pointed out prior reductions of $1.7 trillion as the nation bounced back from covid.

‘It matters. So I’m all for continuing to reduce the deficit,’ he said.

McCarthy spoke briefly and also referenced ‘disagreements,’ while pointing to record government revenue.

‘I think at the end of the day we can find common ground, make our economy stronger, take care of this debt, but more importantly get this government moving again with inflation, make us less dependent on China and make our appropriations system work when we get done’ he said.

When asked if overall spending was the way to solve the impasse – with both sides clashing over an annual cap on spending – Biden responded, ‘Not alone. Not that alone.’ 

The two men met after Treasury Secretary Janet Yellen warned McCarthy earlier Monday that the nation would soon no longer be able to meet its debts.

Yellen wrote McCarthy Monday about the Treasury’s ‘ability to continue to finance the operations of the federal government’ having breached the statutory debt limit and exhausted extraordinary measures.

She updated a her last estimate, saying that ‘with an additional week of information now available, I am writing to note that we estimate that it is highly likely that Treasury will no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1.’

She applied pressure hours before McCarthy is set to sit down with Biden, after a breakdown in negotiations during Biden’s trip to Japan. The two men agreed to meet Monday during a phone call while Biden was flying home on Air Force One.

‘We could get a deal tonight, we could get a deal tomorrow, but you’ve got to get something done this week to be able to pass it and move it to the Senate,’ McCarthy told reporters in the Capitol.

He referenced a commitment he made to rank-and-file members during his arduous bid to get elected speaker to provide members with three days to review legislation.

That was in response to years of leaders cutting deals and rushing them to the floor before members got the chance to pore over the details.

House Speaker Kevin McCarthy is calling for a deal this week in order to get any agreement before lawmakers in time to avoid a potential default. He sits down with President Joe Biden on Monday at the White House

House Speaker Kevin McCarthy is calling for a deal this week in order to get any agreement before lawmakers in time to avoid a potential default. He sits down with President Joe Biden on Monday at the White House 

Treasury Secretary Janet Yellen warned it is 'highly likely that Treasury will no longer be able to satisfy all of the government's obligations' if Congress doesn't act to lift or suspend the debt limit by June 1

Treasury Secretary Janet Yellen warned it is ‘highly likely that Treasury will no longer be able to satisfy all of the government’s obligations’ if Congress doesn’t act to lift or suspend the debt limit by June 1

President Joe Biden went after MAGA Republicans in Japan. He agreed to negotiate directly with McCarthy on the budget

President Joe Biden went after MAGA Republicans in Japan. He agreed to negotiate directly with McCarthy on the budget

He also noted it takes time for staff to put any agreement into writing, and some time for the Senate to act – although the chamber has been known to speed through legislation when it is facing a high pressure deadline. 

‘We’ve got the teams back together, working. You know, time is of the essence,’ he said in response to questions in the Capitol by CNN. ‘Time is critical. We’ve got 10 days to go.’ 

McCarthy also indicated the final vote may be bipartisan – amid speculation conservative Republicans may balk over even challenge his speakership if he moves too far in Biden’s direction.

 ‘I firmly believe what we’re negotiating right now, a majority of Republicans will see that it is a right place to put us on the right path,’ he said.

The GOP House majority is just 222-213, with Democrats holding a 51-49 Senate majority.

In the Capitol, White House aides Shalanda Young, Louisa Terrell and Steve Ricchetti have been meeting with GOP Reps. Garret Graves and Patrick McHenry to try to reach the outlines of a deal. Talks continued Sunday night, with no signs the two sides had reached agreement on spending cuts demanded by Republicans.

McCarthy signaled Monday his deputies would work through the night and he said he would meet with Biden ‘every day,’ if not in person then by phone until a deal is done.  

In her letter, Yellen spoke about the costs of debt limit brinksmanship. 

‘We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States. In fact, we have already seen Treasury’s borrowing costs increase substantially for securities maturing in early June. If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests,’ she wrote.

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