WASHINGTON, May 22 (Reuters) – Negotiations to raise the U.S. federal government’s $31.4 trillion debt ceiling are “on track,” top Republican Congressman Kevin McCarthy said on Monday afternoon, hours before a meeting with Democratic President Joe Biden.
The president and House Speaker McCarthy have 10 days to reach an agreement to raise the government’s self-imposed debt limit or trigger unprecedented debt.
Treasury Secretary Janet Yellen on Monday offered a sobering reminder of how little time remains, saying the previous estimated default date was June 1 and that it was “highly likely” the Treasury would not be able to pay off all government obligations by early June. The debt ceiling has not been raised.
The White House said Biden and McCarthy will meet at 5:30 p.m. EDT (2130 GMT), after their negotiating delegations met for more than two hours on Monday.
“I’m confident that what we’re negotiating now, the majority of Republicans will see as the right place to get us on the right track,” McCarthy told reporters.
Any deal to raise the cap would have to be passed by both houses of Congress. McCarthy’s Republicans control the House 222-213, while Biden’s Democrats hold the Senate 51-49, making bipartisan agreement difficult to reach.
Failure to raise the debt ceiling could roil financial markets and trigger defaults that would raise interest rates on everything from car payments to credit cards. The current uncertainty is already weighing on investors and stocks.
US markets rose on Monday as investors awaited updates on the talks.
If Biden and McCarthy come to an agreement, it will take several days to push the legislation through Congress. McCarthy said a deal must be reached this week to pass Congress and that Biden would need to sign the legislation to avoid default.
“We can get a deal tonight. We can get a deal tomorrow, but you have to do something this week to get it passed and moved to the Senate,” McCarthy told reporters.
A White House official said Monday that Republican negotiators have proposed additional cuts to programs that provide food assistance to low-income Americans, and stressed that no deal could pass Congress without bipartisan support.
Cuts and clawbacks
Republicans favored discretionary spending cuts, new work requirements for some programs for low-income Americans and a clawback of COVID-19 aid approved by Congress but not yet spent in exchange for an increase needed to cover lawmakers’ costs. Previously approved spending and tax deductions.
Democrats want to keep spending steady at this year’s levels, while Republicans want to return to 2022 levels. A plan passed by the House last month would cut government spending by 8% next year.
Biden, who has made the economy a centerpiece of his domestic agenda and is running for re-election, has said he would consider spending cuts along with tax changes, but called the Republicans’ latest offer “unacceptable.”
The president tweeted that he will not support “Big Oil” subsidies and “rich tax cheats” while jeopardizing health and food assistance for millions of Americans.
Both sides must weigh any concessions against pressure from hard-line factions within their own parties.
Some members of the far-right House Freedom Caucus insisted on halting the talks, demanding that the Senate take up their House-passed legislation, which was rejected by Democrats. After losing the 2020 election to Biden, former Republican President Donald Trump has urged members of his party to minimize any economic consequences and force default if all of their goals are not met.
Liberal Democrats have pushed back against any cuts that would harm families and low-income Americans, with some urging Biden to act on his own by invoking the Constitution’s 14th Amendment — something the president said Sunday would face sanctions.
The amendment states that “the validity of the public debt of the United States … shall not be questioned,” but this provision has often been overlooked by courts.
After months of refusing to negotiate on the debt ceiling and insisting that Republicans must pass a “clean” unconditional increase before agreeing to any spending talks, Biden is looking for a solution.
In Japan on Sunday, he acknowledged the political implications, saying some far-right House Republicans “know the damage it will do to the economy.” – Selection.
Congress has raised the debt ceiling three times under Trump, without demands from Republicans for sharper spending cuts.
Reporting by David Morgan, Richard Cowan and Andrea Shalal; Written by Susan Hevey; Editing by Lisa Shumaker and Stephen Coates
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