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NBC News: A break-glass option, gumbo and a bike ride: How the debt ceiling deal got done
Washington, May 31, 2023
NBC News: A break-glass option, gumbo and a bike ride: 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 House
Democratic 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.
“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. A source familiar with the talks described it as a negotiation tactic and said Republican leaders needed to make sure they shored up members on spending cuts, with 50 to 60 members holding a hard-line position on the issue, the source said. The source said they were still with McCarthy, however, and members maintained that public unity.
Graves later said the moment was worrying.
“We effectively threw them out,” he said, referring to the White House negotiators. “That was probably a low point. Meetings got pretty tense at that point, language got pretty intense.”
The pause came roughly overnight in Japan — where Biden was taking part in a meeting with the leaders of other advanced democracies. Biden’s team, briefing him at odd hours back home because of the 13-hour time difference, viewed the GOP’s position as a troubling step backward, according to White House officials.
McCarthy was in a tough spot; he needed to appease the far right. The debt ceiling deal would have to pass both the House and the Senate. A Senate conservative, Mike Lee of Utah, warned that he would use “every procedural tool” to delay a deal that lacked “substantial reform.”
Meanwhile, Democrats fretted that Biden was losing the messaging war. McCarthy was everywhere. He would hold lengthy news conferences at the White House after his meetings with Biden, then moments later do the same thing with reporters in the Capitol. As he walked the halls of the Capitol, he’d stop and chat informally with reporters. Biden wasn’t nearly as accessible. And unlike President Barack Obama during the 2011 debt ceiling fight, Biden never gave a prime-time address devoted to the crisis.
“Where the White House failed miserably is in filling the messaging void,” a Democratic lawmaker said in the days before the agreement was reached. “Kevin [McCarthy] is out there every day. There’s no response. There’s no frame. There’s nothing. Is he [Biden] absent? Is it ‘Weekend at Bernie’s’? Where is the guy?”
There was a reason for Biden’s silence, White House officials countered. His focus was on getting a deal, and he worried that too many speeches lambasting Republicans might jeopardize the talks, aides said. White House advisers characterized his approach this way: “Prioritize the win.”
Meanwhile, House Democratic leaders scrambled. On the evening of May 22, as Biden and McCarthy met at the White House, Minority Leader Hakeem Jeffries, D-N.Y., huddled with his top lieutenants in his Capitol office to discuss strategy: They would parry McCarthy with daily news conferences accusing “extreme MAGA Republicans” of risking a default that would tank the economy. Three days later, nearly 90 Democrats gathered on the floor to excoriate their GOP counterparts for having left town for the Memorial Day weekend without a deal.
Still, most Americans didn’t appear to grasp the dire stakes. Many seemed to believe a default would be akin to a government shutdown, which the U.S. has been through numerous times in recent years. Default, by contrast, would reverberate worldwide.
While people scoured the web more frequently as the talks lurched forward, their searches focused more on government shutdowns than on the consequences of default, according to data gathered by FiscalNote’s Predata.
‘Let’s be clear, I wasn’t sane’
On the Friday morning before the long Memorial Day weekend, McCarthy and Graves bicycled 10 miles together in Washington, circling the National Mall and points south. It was Graves’ second workout of the day. Earlier, he told colleagues in the House gym that negotiators were “close” but still had differences over permitting reform and spending caps.
Around midnight, Graves emerged from the speaker’s suite in the Capitol with a cup of coffee and gummy worms in hand, fortifying himself for the long night ahead. (Asked Wednesday what he did to keep his sanity over weeks of tense talks, he joked: “Let’s be clear, I wasn’t sane.” He also confessed that the bike had been stolen, or borrowed, from the police. “I did return it, so I feel like it’s more of a borrow,” he said.)
The next day, Saturday, McCarthy and his fellow negotiators left the Capitol together to get lunch from Chipotle, bringing back chips and queso for the reporters camped outside the speaker’s office.
Biden was at the presidential retreat at Camp David, Maryland, where he consulted with aides and signed off on various offers and counterproposals, a White House official said.
The two sides announced the breakthrough Saturday night — a deal that neither set of negotiators loved but both could accept. Biden prevailed on one important point: The debt ceiling would be suspended a full two years, meaning he wouldn’t need to negotiate all over again as he ran for re-election in 2024.
The backlash was immediate. Liberals deemed the cuts and the work requirements to get federal aid from the Supplemental Nutrition Assistance Program, or SNAP, too severe; conservatives, too modest.
When McCarthy appeared on Fox News on Sunday to say a majority of his conference supported the deal, a House Republican texted a reporter to rebut him in real time. The lawmaker wrote: “That’s a lie. Text [of the bill] hasn’t even come out yet and I already know of more than that.”
McCarthy’s goal was to show confidence and limit Republican defections. They knew the bill would require Democratic votes — the aim was to minimize the need for them.
McCarthy and his allies sought to arm members with a talking point by leaking a Congressional Budget Office finding — conveyed privately to GOP leadership, according to two sources — that the legislation would lead to $2.1 trillion in cuts if the six-year targets were met.
That was a sleight of hand: Only two years of caps would be binding; the rest were aspirational. GOP Conference Chair Elise Stefanik of New York hosted a call Monday afternoon in which she repeatedly emphasized the broad ideological mix of lawmakers who were on it to support the bill. In the end, it won 149 Republican votes.
Democrats largely played coy, refusing to say how many votes they’d help provide. Progressives vented their concerns in a private call Monday about “fossil fuel permitting, work requirements and spending cuts,” a source on the call said.
Rep. Ro Khanna, D-Calif., opposed the bill but proclaimed before the vote that “many House progressives have said if they need our vote, we’ll be there.” It was emblematic of the party mood. Democrats weren’t happy, but there was no way they would tank Biden’s deal and force a default. (The final tally: 165 Democratic lawmakers voted “yes.”)
After two years in which the White House largely had to negotiate differences between progressives and conservative Democrats like Sen. Joe Manchin of West Virginia, corralling votes for the debt deal required a new approach, focused on a key center-left block.
One of the first calls Biden made after the deal was announced was to Rep. Ann McLane Kuster, D-N.H., the chair of the 98-member New Democratic Coalition. As they two discussed selling the deal to fellow Democrats, Kuster said she focused not on what the White House got from the negotiations but rather how “we got everything out of the agreement” that Republicans had been pushing to enact.
On Memorial Day, two days before the big vote, Kuster and her group issued a statement championing the bill.
Wednesday morning, White House officials made one final pitch to Democrats for support at a caucus meeting on Capitol Hill. Before Young, the Biden negotiator, made a presentation, she got a standing ovation from the caucus that “brought her to tears,” a source in the room said.
The group also heard from former Speaker Nancy Pelosi, D-Calif., who still enjoys great influence in the caucus but has been reluctant to wield it publicly, for fear of undermining the new leadership.
Pelosi “gave an impassioned plea” to the caucus to support the deal, the source said — words that resonated all the more because of the relatively low profile she has kept since she relinquished a leadership role.
Still, there were clear differences in the room. Rep. Gwen Moore, D-Wis., criticized the changes to anti-poverty programs like SNAP and Temporary Assistance for Needy Families. She said that Black women are always being disrespected and that “you have your foot on our neck” with the bill.
Pelosi “explained that it wasn’t the bill we would draft on our own, but that it was the best we could do,” another source said.
Painful as the standoff was, the House passed the 99-page Fiscal Responsibility Act on Wednesday night in a whopping 314-117 vote.
There would be no economic meltdown — at least not yet.
No other democratic nation except Denmark has a similar debt ceiling. Congress could do away with it if it chose. But lawmakers have preserved it: Republicans like to wield it as leverage when they don’t control the White House, and Democrats never found the support to abolish it while in charge.
"There will be a Republican president in the future who’s going to need to raise the debt ceiling,” said Jim Kessler, a co-founder of the center-left think tank Third Way. “I don’t think Democrats are going to say, ‘We’re just going to allow you to do it.’ They’ll draw concessions, too. Democrats will start playing that card when it’s their turn."
“If it gets bad enough,” he added, “we’ll do the smart thing and repeal this silly law.”