The White House explored contingency plans right up to the end in case high-stakes negotiations with Republicans on raising the debt ceiling failed.
The White House considered the unprecedented move of bypassing Congress and invoking Constitution’s 14th Amendment which states that the “validity of the public debt… shall not be challenged.”
Joe Biden was concerned that if he took this route, there wouldn’t be enough time to allow the inevitable legal challenge to take place. He took it seriously, so seriously in fact that the White House Counsel’s Office consulted two outside legal experts on the 14th Amendment days before the deal announcement.
Rep. Garret G. Graves (R-La. ), a leading House negotiator, said to reporters on Wednesday that if Republicans had spurned the negotiations and allowed the country to default on its debt it would have led to “the president invoking the 14th Amendment” as well as missed opportunities for Republicans to push for spending reductions.
The break-glass option would not be necessary. Biden and House Speaker Kevin McCarthy (R-Calif.) announced a deal on Saturday night. The House then passed it on Wednesday. This ended a 36-day scramble in the White House, as well as Capitol Hill, to avoid economic disaster before the Treasury Department deadline of Monday. Senate leaders are trying to get the measure passed quickly. It was difficult to get the measure through the House, but it is possible that there will be some turbulence within the Senate.
Breaching the debt limit would cause global financial markets to be agitated. The U.S. would be plunged into recession and lose jobs. A default would shatter the widespread assumption that America always met its obligations after World War II. Default had never occurred before, despite two close calls during the Obama administration. There was reason to be concerned that the U.S. might fall off the cliff this time.
After all, it was months before high-wire discussions even happened. Biden refused McCarthy’s invitation to meet until the House Republicans presented a budget as a basis for negotiation. McCarthy finally did this in April.
White House ‘Surprise!’
Democratic leaders are stunned.
McCarthy had been taunted for months, and he was challenged to unite the divided Republican caucus in order to pass a bill. McCarthy demanded spending cuts as a condition for raising the debt limit, which was necessary to avoid a catastrophic failure. Democrats said that if McCarthy couldn’t even produce a bill outlining his demands, then there was no point in discussing it.
In March, Senate Majority leader Chuck Schumer of New York repeatedly quipped, “What will they talk about? The weather?”
Both sides dug in. Biden’s position was simple, but ultimately unsustainable: he wouldn’t negotiate the debt ceiling. He re-used an Obama-era metaphor to say that he would not allow Republicans to hold the U.S. economic system hostage for concessions. Case closed. Republicans had to increase the debt ceiling.
McCarthy, who had been elected speaker three months prior after 15 rounds of tense voting, pushed through a bill to raise the debt ceiling on April 26, with only one vote left. Three Democratic sources said that the White House was “flat-footed”, “surprised” by McCarthy’s impact at his conference. Biden “underestimated McCarthy’s influence,” one source added. A White House aide claimed Wednesday that Biden, his senior advisors and congressional Democrats had been in constant contact as part of a strategy to force Republicans into releasing their own plan. Officials said that “we weren’t going negotiate with ourselves.”
Both sides looked at each other with suspicion, and sometimes even contempt. Biden was worried that House far-right legislators were happy to see the economic collapse, if only to harm his reelection prospects. Biden, when he served as vice president, would contact Mitch McConnell from the Republican Party, an old friend from his Senate days to negotiate budgets. They were the closest. McConnell sat it out. McConnell insisted that it was up to McCarthy and Biden to break the impasse. Biden was aware that it was time to begin negotiations. But it would not be easy.
Rep. Patrick McHenry (R-N.C.), another key negotiator said on Wednesday that McCarthy and Biden were “two Irish men who don’t drink.”
Interviews with over two dozen members of Congress, advisers outside the House and White House staffers have been used to create this account of the frenetic negotiations that followed when the country was on the verge default. Many people spoke under condition of anonymity about the internal strategy around the talks.
Former Treasury Secretary Larry Summers stated in the days leading up to the agreement that “everyone in Washington will look terrible” if we actually defaulted.
Tensions in the air during negotiations
McCarthy needed to win the Speaker’s position by appeasing both moderates and the right-wing group closely aligned to former President Donald Trump. Trump had called on Republicans not to allow the country to default until all of their demands were met, including ” the kitchen sink“. McCarthy’s selection was based on strict rules that allow any member to force a vote for his removal. McCarthy had little margin for error when he entered the most complex and delicate negotiations of his life.
On May 9, as anxiety was rising, he and other congressional leaders met Biden in Oval Office. The deadline for default had only been four weeks.
Biden dropped his refusal to bargain and used a little verbal gymnastics in order to disguise his retreat. He claimed he was negotiating over spending levels, not as a ransom to avoid default. But Biden was in a desperate attempt to stave off an economic catastrophe.
Two days later, at a low key news briefing held in the Capitol on May 11, the main points of the Biden-McCarthy agreement were revealed. Graves said that he could see four areas in which a deal might be possible: changing the way permits are issued; clawing back Covid funds not spent; capping spending, and imposing work requirements for people receiving federal aid.
McCarthy appointed Graves as the lead negotiator with the White House shortly after.
Biden deputized a number of trusted aides, including senior adviser Steve Ricchetti and legislative affairs chief Louisa Terrell, as well as budget director Shalanda Youth, a former congressional assistant who is from the Baton Rouge District Graves represents.
The two Louisianans began to develop a rapport, and they started cooking up a business deal.
Young, as she left the Capitol after a meeting with Graves, said: “He said that he made better gumbo than I do. We were trying to resolve this.”
Graves later said, “She gave in,” after the deal had been struck. “It’s about the roux.”
Both sides faced growing resentment within their own ranks as they moved toward an agreement.
McCarthy was optimistic after he left his meeting with Biden, on May 16. He predicted that a deal would be reached by the week’s end. This worried conservatives, who were afraid that McCarthy would not insist on major budget cuts but instead negotiate at the margins.
Sources familiar with the conversation say that they agreed to make sure McCarthy stayed on course.
Russell Vought was an important player behind the scenes in the conservative revolt. He was the budget director at Trump’s White House. A person with knowledge of the discussions said that he had the ear and respect of the lawmakers who questioned McCarthy’s commitment to delivering real cuts. Vought played a key role in the struggle for the speakership that forced McCarthy to go through many votes.
McCarthy was under pressure to stand firm, working with conservative budget hawks in conservative think tanks. They saw the fight as a part of a bigger battle within the GOP over the importance of federal spending cuts. They wanted a deal to lift the debt limit for one year, not two. This would give them more leverage when Biden is up for reelection in 2024.
House negotiators , heeding conservative warnings, pressed “pause” after the White House, they claimed, stood firm against cuts to the budget. They briefly walked away from the table before returning with a more aggressive public position. “Washington must spend less.” McCarthy said that it’s simple.
Budget hawks welcomed the pause. Sources familiar with the discussions described the pause as a negotiation technique. They said Republican leaders had to ensure they backed up their members in the area of spending cuts. Between 50 and 60 Republicans held a firm position on this issue. Source said that they were still loyal to McCarthy and maintained public unity.
Graves said later that the moment was concerning.
He said that the White House negotiators were “effectively thrown out”. “That was probably the lowest point. The meetings became tense and the language was intense.
The pause occurred in Japan, where Biden attended a meeting of leaders from other advanced democracies. . Biden’s staff, who briefed him at odd times back home due to the 13-hour difference in time, saw the GOP’s stance as a troubling move backward, according officials of the White House.
McCarthy was in an awkward position; he had to appease those on the extreme right. Both the House and Senate would need to approve the debt ceiling agreement. Mike Lee, a Utah conservative senator, said he would ” use every procedural tool ” to delay any deal lacking “substantial Reform.”
Democrats worried that Biden would lose the war of messages. McCarthy was all over the place. McCarthy would give long news conferences after meeting with Biden at the White House, and then do the same with reporters moments later in the Capitol. He would stop to chat with reporters as he walked through the Capitol’s halls. Biden was not as accessible. Biden, unlike Barack Obama in the 2011 Debt Ceiling fight never delivered a prime time address on the issue.
In the days leading up to the agreement, a Democratic legislator said that the White House had failed miserably in filling in the message void. Kevin [McCarthy] has been out every day. There is no response. There is no frame. There’s nothing. Is [Biden] away? Is this ‘Weekend At Bernie’s’? “Where is the guy?”
Officials at the White House countered that there was a good reason for Biden to remain silent. He was focused on getting a good deal and worried that too many speeches criticizing Republicans could jeopardize talks, according to aides. White House advisors described his approach as “prioritize winning.”
While House Democratic leaders scrambled. Hakeem Jeffries (D-N.Y.), Minority Leader, met with his top lieutenants to discuss strategy in his Capitol Office on the evening of the 22nd, as Biden and McCarthy were meeting at the White House. They decided that they would counter McCarthy by holding daily press conferences, accusing the “extreme MAGA Republicans,” of putting the economy at risk through a default. Three days later, almost 90 Democrats took to the floor of the House to condemn their GOP counterparts who had left town without a deal for Memorial Day weekend.
still didn’t seem to understand the gravity of. Many Americans seemed to think that a default was similar to government shutdown which has happened in the U.S. several times over the past few years. A default, on the other hand, would have a global impact.
According to Predata, a FiscalNote product, people searched more often as the talks progressed, but they were more interested in government shutdowns rather than the effects of default.
Let’s be clear: I was not sane.
McCarthy and Graves cycled together 10 miles in Washington on the morning of the long Memorial Day Weekend, going around the National Mall, and then south. Graves was doing his second workout for the day. He told his colleagues earlier in the House gym, that although negotiators had been “close”, they still had disagreements over spending caps and allowing reform.
Graves left the Capitol’s speaker’s room around midnight with a cup coffee and some gummy worms to prepare for the night. When asked Wednesday how he kept his sanity during weeks of intense talks, Graves joked: “Let’s not be sane. I was also a cop.” He confessed to having stolen the bike, or borrowing it from the police. He said, “I returned it so it feels more like a loan.”
McCarthy, along with his colleagues, left the Capitol on Saturday to go get lunch at Chipotle. They brought back chips and queso as a treat for the reporters who were camped out in front of the speaker’s offices.
Biden attended the presidential retreat in Camp David, Maryland. He met with aides, and approved various counterproposals and offers, according to a White House official.
Both sides announced a breakthrough on Saturday night – a agreement that neither group of negotiators liked, but both could accept. Biden won on an important point. The debt ceiling suspension would last two years. This means he won’t have to renegotiate when he runs for reelection in 2024.
The reaction came immediately. Liberals deemed that the federal assistance cuts and work requirements for the Supplemental Food Assistance Program (SNAP) were too harsh; conservatives thought they were too modest.
McCarthy said on Fox News that a majority in his conference backed the deal on Sunday. A House Republican sent a text to a reporter immediately to refute him. The lawmaker replied: “That is a lie.” The text [of the bill] is not even out yet, and I know more than that.”
McCarthy’s aim was to demonstrate confidence and reduce Republican defections. The aim was to reduce the number of Democratic votes needed.
McCarthy and his allies wanted to give members a talking-point by leaking a Congressional Budget Office report — which was privately conveyed to GOP leadership according to two sources. The report stated that the legislation could lead to $2.1 trillion of cuts if six-year targets are met.
This was a trick: only two years’ worth of caps were binding, the rest of them aspirational. Elise Stefanik, the chair of the GOP Conference in New York, hosted a conference call on Monday afternoon. She repeatedly highlighted the wide ideological range of legislators who supported the bill. It won 149 Republican vote in the end.
Democrats were largely coy and refused to reveal how many votes they would provide. A source said that progressives voiced their concerns on a Monday private call about “fossil energy permitting, work requirements and budget cuts.”
Rep. Ro Khanna (D-Calif.), opposed the bill but declared before the vote: “Many House progressives said that if they needed our vote, then we would be there.” This was a sign of the mood in the party. Democrats were not happy with the deal, but they could not force default by dumping it. (The final count: 165 Democratic legislators voted “yes”).
After two years of negotiating differences between conservative Democrats and progressive Democrats, such as Sen. Joe Manchin from West Virginia, a new strategy was needed to garner votes for the debt agreement. This approach focused on the center-left bloc.
Biden’s first call after the announcement was made was to Ann McLane Kuster (D-N.H.), the chairperson of the New Democratic Coalition, which has 98 members. Kuster told Biden that when they discussed the deal with fellow Democrats, she did not focus on the benefits the White House received from the negotiations. Instead, Kuster focused on how “we got everything we could out the agreement” Republicans were pushing to implement.
Kuster’s group and she released a statement on Memorial Day, just two days before the vote.
White House officials on Capitol Hill made a final pitch Wednesday morning to Democrats for their support at the caucus meetings. Sources in the room say that before Young, Biden’s negotiator made her presentation, the caucus gave a standing applause, which “brought” her to tears.
The group heard from Nancy Pelosi (D-Calif.), former speaker of the California Democratic caucus. She still has a great deal of influence within the caucus, but is reluctant to use it publicly for fear that she will undermine the new leadership.
Source: Pelosi made an “impassioned appeal” to her caucus for them to support the agreement. Her words resonated more than usual because she has been relatively quiet since she gave up a leadership position.
There were still clear differences. Rep. Gwen Moore (D-Wis.) criticized changes made to anti-poverty programmes like SNAP, Temporary Aid for Needy Families, and the Supplemental Nutrition Assistance Program. She claimed that Black women were always disrespected, and that the bill “put your foot on our throat”.
Pelosi told another source that she “explained to them that this wasn’t a bill that we would draft ourselves, but it was the best that we could do.”
As painful as the standoff may have been, the House approved the 99-page Fiscal Responsibility Act in a 314-117 vote on Wednesday night.
At least, not yet.
There is no other nation with a similar limit except Denmark Congress could eliminate it if they wanted to. It has been preserved by lawmakers: Republicans use it to gain leverage when they do not control the White House and Democrats have never found support to abolish it.
Jim Kessler is a cofounder of Third Way, a center-left think-tank. He said: “There will be a Republican President in the future that’s going need to raise debt ceiling.” “I don’t think Democrats will say, ‘We’ll just allow you to do this.'” They’ll also make concessions. Democrats will play that card once it is their turn.
He added that “if it gets bad enough, we’ll do what is smart and repeal this stupid law.”
