Debt ceiling: Two key issues in focus as McCarthy says sides 'far apart'

Debt-ceiling negotiators appear to be making progress on two wonky topics that could be crucial to a final deal even as the House Speaker said the two sides are still far apart.

The glimmers of possible compromise in the weeks ahead are whether the government should require more work from low-income Americans who benefit from social programs and whether to eliminate the red tape required to start new energy development projects.

A note of caution came Monday from Speaker McCarthy who told reporters at the Capitol that “I still think we are far apart” on the overall talks and the other side was "not talking anything serious."

The downbeat comments were in contrast to President Biden this weekend telling reporters “I really think there’s a desire on their part, as well as ours, to reach an agreement, and I think we'll be able to do it.”

On Monday, during a stop in Philadelphia, Biden confirmed that the leaders would be meeting Tuesday.

Stocks were mixed Monday as investors hoped for progress on a deal.

New space for a deal on work requirements

Perhaps the most significant advance over the weekend was a signal from Biden that he is open to finding space on the controversial issue of accessing social programs.

The GOP is pushing to impose new work minimums on Americans who participate in federal programs like Temporary Assistance for Needy Families (TANF), Medicaid, and SNAP (formerly known as food stamps).

The benefits would continue, according to the GOP proposal, but only if the recipients work longer hours.

Speaker McCarthy has called them common sense measures to “rebuild the workforce.” Biden, during his conversation with reporters Sunday, noted that “I voted for tougher aid programs that’s in the law now but for Medicaid it's a different story.”

White House spokesman Michael Kikukawa further explained the White House position, saying in a statement Monday that “the President has been clear that he will not accept proposals that take away peoples’ health coverage [or] policies that push Americans into poverty.”

The requirements have been a high priority for a bloc of conservative Republicans in the House who pushed to get the measures included in the House GOP debt-ceiling proposal and then added last-minute changes to make them go into effect into effect even earlier, in 2024.

What remains unclear is whether the changes will go far enough to satisfy Republicans, with McCarthy emphasizing to Bloomberg Monday that he would stand by tougher worker requirements for government benefits.

Talks on energy-permitting reform

Another issue that appears to be making some progress are efforts to make it easier for energy projects to get off the ground.

Energy-permitting reform remains part of the conversation, a source familiar with negotiations confirmed Monday, with "the White House hopeful for a bipartisan agreement."

Punchbowl News also reported Monday that aides even recently met separately on that issue to further haggle over details.

Politicians across the spectrum have long bemoaned the years it can take to get energy projects of all types off the ground. The Biden team also laid out priorities for permitting legislation this week, with senior advisor John Podesta saying “President Biden has elevated this issue to the highest levels of government.”

In addition, McCarthy and other Republicans have called energy their top concern and passed a suite of measures in a bill called HR1 that they also included in their debt ceiling proposal.

Optimism that a deal could be possible on energy comes as energy-industry advocates say that both the clean energy and the fossil fuel sectors are being hamstrung by red tape, increasing the pressure on both sides of the aisle to act.

“No matter what you want to build, it simply takes too long,” Sen. Joe Manchin (D-WV), a key voice in the issue, said at a Senate hearing last week.

Other areas of negotiation

The continued progress around energy and work requirements comes as aides also continue to tackle differences. The talks continue on the central spending issues in the bill, notably a possible cap on federal spending and what money can be taken back from COVID-19 relief bills.

There appears to be space for compromise on the spending caps, with multiple reports Monday saying the issue there continues to be Republicans seeking budget caps for the entirety of the coming decade with Democrats pushing instead for two years of austerity measures.

On the issue of COVID money, experts estimate that there is somewhere in the neighborhood of $50-$70 billion that was appropriated by Congress in the flurry of COVID relief bills during the pandemic which was not actually spent. "Clawing back" those funds is a priority for Republicans and an issue that Biden has signaled a willingness to deal on.

All told, a range of Biden administration officials offered encouraging words over the weekend with Treasury Secretary Janet Yellen telling the Wall Street Journal she’s “hopeful” and National Economic Council director Lael Brainard adding to CBS that talks have been “serious.”

As Biden himself put it Sunday: “I remain optimistic because I'm a congenital optimist.”

Ben Werschkul is Washington correspondent for Yahoo Finance.

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