White House officials and Republican lawmakers are nearing a compromise that would raise the US’s debt limit for two years and apply strict caps on discretionary spending not related to the military or veterans for the same period. The plan means Republicans can say they’re reducing federal spending while spending on the military and veterans programs would continue to grow. Democrats can say they have spared most domestic programs from significant cuts. Both sides are in discussions and are yet to iron out details to make or break the deal. There are concerns that hard-line fiscal conservatives in the House will disapprove of any deal.
The high stakes talks follow months of bitter partisanship in Washington with Democrats accusing Republicans of doing grave harm to the US economy with their demands for spending reductions in exchange for voting to raise the debt ceiling. The United States hit the legal limit, currently $31.4tn, in January and has been relying on accounting measures to avoid defaulting since then. The Treasury Department has projected it will exhaust its ability to pay bills on time as early as June 1.
In exchange for lifting the debt limit, the compromise would meet Republicans’ demand to cut some federal spending, although with the help of accounting manoeuvres that would give both sides political cover for an agreement likely to be unpopular with large swathes of their base voters. It would impose caps on discretionary spending for two years, though those caps would apply differently to spending on the military than to nondefence discretionary spending.
Nothing is decided until there is a complete deal, says Representative Patrick T. McHenry of North Carolina, one of the lead GOP negotiators. There are still details that need to be ironed out. High-profile voices, like former President Donald Trump, who believe Republicans should push for a default if they can’t get what they want from negotiations, are adding to the pressure.