President Joe Biden and Republican House Speaker Kevin McCarthy have moved closer to a two-year deal to limit government spending and avoid a US debt default, raising hopes for an end to the budget stalemate in the largest economy in the world.
People familiar with the potential deal said negotiators were looking to finalize the deal in the coming days, ahead of the looming June 1 deadline, by which time the US could run out of cash to pay all of its financial obligations. .
During the day Thursday, the White House and Republicans on Capitol Hill suggested the talks were in a better place, though nothing was concluded. If a deal is struck, it will still face potentially hair-raising votes in a tightly divided Congress to send it to Biden for his signature, a situation that could prolong uncertainty over the U.S. fiscal future into next week.
“President McCarthy and I have had several productive conversations and our staff continue to meet as we actually speak — and they are making progress,” Biden said Thursday afternoon, setting an upbeat tone for the talks. “I believe we will reach an agreement that will allow us to move forward and protect American workers in this country.”
His comments came a day after Fitch, the credit rating agency, warned that it could downgrade US triple-A rating due to ‘strain’ over debt ceiling amid growing fears that financial strains could escalate in coming days in the absence of a a compromise.
Both Biden and McCarthy have faced calls from rank-and-file members of their parties not to back down on concessions in the final stretch of negotiations.
McCarthy even spoke by phone Thursday with former President Donald Trump, who called on Republicans to accept a default if Biden did not agree to deep spending cuts. He then met with top Republican lawmakers in his office. “We’ve talked at the White House all day, we’ve been back and forth, and it’s not easy,” McCarthy told reporters. “It takes time to get there, and we’re working hard to get there.”
According to people familiar with the talks, the pact would set the trajectory of US fiscal policy until 2025, after next year’s general election, when a new Congress and administration are in place. Biden is running for a second term on the Democratic side, while Trump and Ron DeSantis, the governor of Florida, are the main contenders for the Republican nomination.
Along with raising the debt ceiling and limiting spending until then, measures are also on the table in the latter part of the talks to speed up the clearance of major infrastructure projects and add new work requirements to programs. social safety nets.
The parties also debated whether to cut funding to the Internal Revenue Service, the US tax collection agency, which was approved last year so that it can better combat tax evasion and tax evasion among wealthy households, people familiar with the matter said.
House members are heading home for the Memorial Day long weekend, but have been told they may have to return to Washington at short notice. “The sand is almost out of the hourglass for a potential debt ceiling deal,” Chris Krueger, an analyst at TD Cowen’s Washington Research Group, wrote in a note Thursday.
Business groups in Washington have urged both sides to reach a compromise as soon as possible to avoid a potentially devastating economic and financial blow.
“It’s starting to get really hairy if there’s no deal in the next 24 hours,” said Neil Bradley, director of policy at the US Chamber of Commerce. “We’re in that window where you need things to go well.”
Speaking at an event hosted by the Investment Company Institute earlier today, Wally Adeyemo, the deputy treasury secretary, lamented that the stalemate had gone to the wire.
“I think everyone’s goal is to make sure we raise the debt ceiling. But the most important thing, as you all know in this room [and] what the American people know is that we shouldn’t be here,” he said. “It’s a manufactured crisis.”