Obviously, there is one huge issue in DC – the debt ceiling. Last week the President invited the bipartisan Congressional leadership to the White House for the first face to face meeting between Biden and McCarthy since February.

While the meeting didn’t seem to move the needle, the leaders all agreed that their staff would meet to see if they could find common ground. The principals are now scheduled to reconvene on Tuesday.

From my days as a senior Congressional staff aide I can still remember being summoned to the Senate floor to be told that our bosses were leaving for the weekend, but the staff were to see what compromise we could work out on a given issue. This is actually fairly common practice in DC. The top staff know what their bosses can accept or want in a deal, and most big deals begin with talks at the staff level, hence, in my view, this is a positive. During my tenure working on legislative deals the staff would work out “staff issues” and then have a list of “Member” issues that the principals would need to deal with. Staff has been meeting last week and over the weekend, and there are reports that they are finding some areas where compromise may be possible.

After the initial meeting it was announced that the leaders would meet again last Friday, but that meeting was delayed until this week, and I and others view this as a good sign, as the staff should be able to develop a list of issues where compromise is possible, and Member issues that need the principals to discuss.

Adding to the need for action was a report late last week from the non-partisan Congressional Budget Office (CBO) that their work concurred with Treasury that the X-date might be early in June. The CBO did add a caveat that if Treasury could make ends meet until June 15 that the inflow of quarterly payments could buy a few more weeks, but the CBO seemed skeptical if that would happen.

After the White House meeting Senate Republican Leader Mitch McConnell stated that the US will not default, but at the same time he made clear that a compromise needed to be reached between the President and Speaker McCarthy. Senate Republicans have held fast in support of their House colleagues. This unity put pressure on the White House to move off their position of insisting that Congress pass a clean debt ceiling increase before serious budget talks can begin. Additionally, more Democrats are speaking up on the need for the White House to work with House Republicans to find a deal.

In my view, the biggest challenge Congress and the Administration face in finding a compromise is the weak position Speaker McCarthy finds himself in after the painful process he went through in order to win the Speakership. His challenge now is that basically Republicans don’t like voting to raise the debt ceiling.

A point I often make is how little issues change in DC. Years ago when I worked as Chief of Staff for a Republican House Member, he just wouldn’t vote for any debt increase. Back then Democrats had a large majority and his vote wasn’t needed, but Democrats always wanted the vote to be bipartisan and my boss had worked with Democrats on other issues. However, he was concerned that a vote to increase the debt ceiling would be used against him in a Republican primary, so he just voted NO. I believe that concern remains an issue today.

During the Trump Administration in 2017 there was a vote to increase the debt ceiling that passed the House overwhelmingly on a vote of 316 YES to 90 NO. All 90 no votes were Republican. In 2019 there was a vote on an increase supported by President Trump that passed 284 YES to 149 NO. 132 of the NO votes came from Republicans. The eventual debt ceiling agreement is likely to pass with mainly Democratic votes, but McCarthy needs to find a compromise that at least 20 to 50 Republicans can support.

There continues to be talk of the President invoking the 14^th amendment to the constitution that states: “The validity of the public debt of the United States, authorized by law…shall not be questioned.” The debt ceiling only pays for programs authorized by law. However, as attention focuses on the 14^th amendment, many have pointed out that its use is likely to be litigated in court causing an extended period of financial uncertainty.

As talks proceed, what might be in a deal? One easy give for Democrats is returning unspent Covid relief program money to the Treasury. Republicans believe this may be as much as $60B. Another idea that has bipartisan support is simplifying the permitting process for energy projects. The House passed debt ceiling bill had tougher work requirements for recipients of federal aid programs and Biden said on Sunday that in the past he has supported work requirements. Spending is at the core of the House bill and there are some discussions about a multi-year spending cap that of course would be ignored if the economy moves to a recession.