US debt ceiling talks progress as deadline approaches
President Joe Biden and Republican House Speaker Kevin McCarthy are nearing a two-year deal to limit government spending and avoid a US debt default, raising hopes for an end to the fiscal impasse in the economy. biggest in the world.
People familiar with the potential deal said negotiators were looking to finalize the deal in the coming days, ahead of a looming June 1 deadline when the U.S. could run out of cash to pay all its financial obligations. .
During the day Thursday, both the White House and Republicans on Capitol Hill suggested that the talks were in a better place, though nothing was finalized. If a deal is reached, it would still face potentially hair-raising votes in a closely divided Congress to send it to Biden for his signature, a situation that could prolong uncertainty over the U.S. fiscal future even in the next week.
“Chairman McCarthy and I have had some productive conversations and our staff continues to meet as we speak actually — and they’re making progress,” Biden said Thursday afternoon, striking an upbeat tone about the talks. “I believe we will reach an agreement that allows us to move forward and protects the hardworking Americans of this country.”
His comments came a day after Fitch, the credit rating agency, warned it could downgrade the US’s triple-A rating due to “fallbacks” on the debt limit, amid growing concerns that financial stress could escalate to the following days in the absence of a compromise.
Both Biden and McCarthy have faced calls from members of their own parties not to renege on concessions in the final stretch of negotiations.
McCarthy even spoke by phone Thursday with former President Donald Trump, who has called on Republicans to accept a bankruptcy if Biden does not agree to deep spending cuts. He then met with key Republican lawmakers in his office. “We’ve been talking to the White House all day, we’ve been going back and forth, and it’s not easy,” McCarthy told reporters. “It takes a while to get it done and we’re working hard to get it done.”
According to people familiar with the talks, the pact would set the trajectory of US fiscal policy through 2025, after next year’s general election, when Congress and a new administration will be in office. Biden is running for a second term on the Democratic side, while Trump and Ron DeSantis, the governor of Florida, are the main contenders to win the Republican nomination.
In addition to raising the debt ceiling and limiting spending until then, measures to speed up permitting for major infrastructure projects and add new work requirements to social safety net programs are also on the table in the final phase of talks.
The parties have also debated whether to cut funding for the Internal Revenue Service, the U.S. tax collection agency that was enacted just last year, so it could better deal with tax avoidance and evasion among tax families. assets, people familiar with the matter said.
House members are going home for the Memorial Day weekend, but have been told they may need to return to Washington on short notice. “The sand is almost out of the hourglass on a possible 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 starts to get very woolly if there’s no deal in the next 24 hours,” said Neil Bradley, chief policy officer at the US Chamber of Commerce. “We’re in that window where you need things to go well.”
Speaking at an event organized by the Investment Company Institute earlier in the day, Wally Adeyemo, the Deputy Treasury Secretary, lamented that the match had gone down to the wire.
“I think everybody’s goal is to make sure we raise the debt limit. But the most important thing, as all of you in this room know [and] what the American people know is that we shouldn’t be here,” he said. “This is a manufactured crisis.”