How the debt ceiling deal got done

Right up until the end, the White House was exploring contingency plans in case the high-stakes talks with Republicans to raise the debt ceiling and avert economic disaster collapsed.The White House was considering the unprecedented step of bypassing Congress altogether and invoking the Constitution’s 14th Amendment, which states that “the validity of the public debt … shall not be questioned.” President Joe Biden worried that there wasn’t enough time for the inevitable court challenge to play out if he went down that road. But he took the idea seriously — so seriously that the White House counsel’s office consulted at least two outside legal experts about the 14th Amendment just days before the deal was announced, people familiar with the matter said. A lead House negotiator in the showdown with Biden, Rep. Garret Graves, R-La., told reporters Wednesday that had Republicans spurned negotiations and let the nation default on its debt, it would have resulted “in the president trying to invoke the 14th Amendment,” as well as a missed opportunity for Republicans to press for spending cuts.But that break-glass option wouldn’t be needed. Biden and House Speaker Kevin McCarthy, R-Calif., announced a deal Saturday night, and the House passed it Wednesday, capping a 36-day scramble at the White House and on Capitol Hill to avert economic catastrophe ahead of the Treasury Department’s deadline of Monday. Senate leaders are working to pass the measure quickly. The House passage was a big hurdle, though it’s possible there could be turbulence in the Senate.Breaching the debt ceiling would roil the global financial markets. It would wipe out jobs and plunge the U.S. into a recession. Default would shatter the common presumption after World War II that America would always make good on its obligations. There had been two close calls in the Obama presidency, but default had never happened before. This time, there was good reason to worry that the U.S. would tumble over the cliff. After all, months went by before the high-wire talks even took place. Biden refused to meet with McCarthy until House Republicans put forward a budget that would be the basis for negotiations. And then, in April, McCarthy did just that. ‘Surprise’ in the White HouseDemocratic leaders were stunned.For months they’d been taunting McCarthy, challenging him to unify the fractious Republican caucus and pass a bill. McCarthy had been demanding spending cuts in return for raising the debt ceiling, a necessary step to avoid a catastrophic default. But if he couldn’t so much as produce a bill laying out what he wanted, there was nothing to discuss, Democrats argued. “What are they going to talk about, the weather?” Senate Majority Leader Chuck Schumer, D-N.Y., quipped repeatedly in March.Both sides were dug in. Biden’s stance was simple if ultimately untenable: He wouldn’t negotiate over the debt ceiling. Dusting off a metaphor from the Obama era, he said he wouldn’t let Republicans hold the U.S. economy hostage in exchange for concessions. Republicans had to raise the debt ceiling; case closed.Then McCarthy, who’d gotten the speaker’s job three months earlier after a tense 15 rounds of voting, muscled through a debt ceiling bill with just one vote to spare on April 26. The White House reaction, according to three Democratic sources on Capitol Hill, was “flat-footed” and “surprised.” Biden had “underestimated” McCarthy’s influence in his conference, one said. (A White House aide said Wednesday that Biden and his senior advisers had been conferring with congressional Democrats all along, part of a strategy meant to force Republicans to release a plan of their own. “We weren’t going to negotiate with ourselves,” an official said.)Each side looked at the other with suspicion, if not outright contempt. Biden worried that the House’s far-right lawmakers were perfectly happy to see the economy collapse if only to damage his re-election chances. Back when he was vice president, Biden would reach out to an old colleague from his Senate days, Republican leader Mitch McConnell, to cut budget deals. They were the closers. This time, McConnell was sitting it out. It was up to Biden and McCarthy to break the impasse, McConnell maintained. It was time to start negotiating, and Biden knew it. But it wouldn’t be easy.“You’ve got two Irish guys that don’t drink,” Rep. Patrick McHenry, R-N.C., another key negotiator, said of Biden and McCarthy on Wednesday.This account of the fevered negotiations that followed as the nation careened toward default stems from interviews with more than two dozen lawmakers, outside advisers and congressional and White House aides. Many spoke on condition of anonymity to discuss the internal strategy surrounding the talks.“Everyone in Washington is going to look terrible if we were actually to go over the brink and default,” former Treasury Secretary Larry Summers said in the days before the deal was reached. Tense days of negotiations To win the speaker’s job, McCarthy had to placate both moderates and a right-wing faction closely aligned with former President Donald Trump, who called on Republicans to let the country default unless all their demands — including the “kitchen sink” — were met. Any one member can force a vote to oust him under the strict terms in which McCarthy was chosen. That gave McCarthy little room for error as he plunged into the most delicate and far-reaching negotiations of his career. He and other congressional leaders met with Biden in the Oval Office on May 9, when anxieties were rising. By that point, the deadline for default was only four weeks away.Biden was dropping his refusal to negotiate, and employed a bit of verbal gymnastics to mask his retreat. He insisted he was bargaining over spending levels — not a ransom for avoiding default. But Biden was negotiating in deadly earnest to stave off economic calamity. The key points of the emerging Biden-McCarthy deal were laid out just two days later, on May 11, at a low-key news briefing in the Capitol. Graves told reporters that he saw four main areas where a deal could be reached: reforming how permits are issued, clawing back unspent Covid funds, capping spending and imposing new work requirements on people getting federal aid. Soon afterward, McCarthy tapped Graves to lead negotiations with the White House. Biden, meanwhile, deputized several trusted aides to lead the talks on his behalf: senior adviser Steve Ricchetti, legislative affairs chief Louisa Terrell and budget director Shalanda Young, a former congressional aide who hails from the Baton Rouge district Graves represents. The two Louisianans developed a rapport and began cooking up a deal. “He said he makes better gumbo than me, so we were really trying to hash that out,” Young said as she left a meeting with Graves in the Capitol.“She conceded,” Graves said later after the deal was struck. “It’s all about the roux.” As both sides inched toward a deal, they faced mounting resentment from inside their ranks.After he left a meeting with Biden on May 16, McCarthy sounded upbeat, predicting that a deal could come together by the end of the week. That worried conservatives who feared that McCarthy would negotiate on the margins rather than insist on sweeping budget cuts — or that Republican leaders would use budget “gimmicks” to forge a deal they could sell to their caucus as the deadline loomed. They agreed they would need to ensure that McCarthy held the line, according to sources familiar with the conversations. A behind-the-scenes player in the bubbling conservative revolt was Russell Vought, who was a budget director in Trump’s White House. He had the ear of lawmakers who were skeptical of McCarthy’s willingness to deliver real cuts, said a person familiar with the talks. Vought was instrumental in leading the fight for speaker that forced McCarthy through so many rounds of votes.Working with budget hawks based in conservative think tanks — who view the fight as part of a larger battle within the party over whether cuts to federal spending matter — GOP hard-liners ramped up pressure on McCarthy to hold fast. They preferred a deal that would lift the debt ceiling for only one year rather than two, giving themselves more leverage with Biden when he was up for re-election in 2024.Heeding the warnings from conservatives, House negotiators pressed “pause” on May 19 after, they said, the White House stood firm against budget cuts. They briefly left the negotiating table and returned with a tougher public line. “Washington has to spend less. It’s as simple as that,” McCarthy tweeted. Budget hawks were pleased by the pause.…

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