WASHINGTON, May 25 (Reuters) – U.S. President Joe Biden and top Republican in Congress Kevin McCarthy appeared close on Thursday to a deal to cut spending and raise the government’s debt ceiling to 31, $4 trillion, with little time on your hands to avoid default risk. .
The agreement would specify the total amount the government could spend on discretionary programs like housing and education, according to a person familiar with the conversations, but they are not broken down into individual categories. The two sides are just $70 billion apart in a total figure that would well exceed $1 trillion, according to another source.
Biden said the two sides still disagreed on where the cuts should fall.
“I don’t think the entire burden should fall on working-class and middle-class Americans,” he told reporters.
The Treasury Department warned that the federal government could run out of money to cover all its obligations as early as June 1, a week from now, but on Thursday announced plans to sell $119 billion in debt that will be paid off on June 1. June, suggesting to some market watchers that date was not an unequivocal deadline.
Any deal will have to be approved by the Republican-controlled House of Representatives and the Democratic-controlled Senate. That could be tricky, as some right-wing Republicans and many liberal Democrats said they were upset by the prospect of a compromise.
“I don’t think everyone is happy at the end of the day. That’s how the system works now,” said McCarthy, who serves as Speaker of the House.
His office did not respond to a request for comment on the possible deal with the Democratic president.
The agreement would only set out general spending outlines, leaving lawmakers to fill in the blanks in the coming weeks and months.
It would specify the total amount of military spending, which would be a key point in the talks, one of the sources said.
Biden has resisted Republican proposals to toughen work requirements for anti-poverty programs and relax oil and gas drilling rules, according to Democratic Rep. Mark Takano.
Rep. Kevin Hern, who heads the powerful Republican Study Committee, told Reuters a deal had been reached. likely for Friday afternoon.
Even as Republicans tout progress, McCarthy is preparing to allow lawmakers to leave Washington on Thursday for a weeklong holiday break, on the condition that they be ready to return to vote. The Senate is currently out but with similar orders to be ready to return.
A US default could upset global financial markets and push the United States into recession.
POSSIBLE DEGRADATION
The credit rating agency DBRS Morningstar put the United States under review for a possible discount on Thursday, echoing similar warnings from fitch, Moody’s and Scope Ratings. Another agency, S&P Global, downgraded US debt after a similar debt-ceiling standoff in 2011.
The months-long standoff has spooked Wall Street, weighing on US stocks and raising the nation’s cost of borrowing. The yield on US Treasury bills due in early June rose in early Thursday trading, a sign of investor unease.
US Treasury Under Secretary Wally Adeyemo said concerns about the debt ceiling had raised the government’s interest costs by $80 million so far.
Lawmakers regularly need to raise the self-imposed debt limit to cover the cost of spending and the tax cuts they’ve already passed.
House lawmakers will have three days to read any debt ceiling bill before having to vote on it. In the Senate, Republican Mike Lee said he would block a quick vote if he didn’t like the deal, which could delay action for days.
McCarthy has insisted that any deal must cut discretionary spend next year and limit spending growth for years to come, to slow the growth of US debt, now equal to the economy’s annual output.
He also said that he had spoken briefly about negotiations with former President Donald Trump, who publicly urged Republicans to allow a default if they don’t meet their goals.
Biden has offered to freeze spending at current levels next year and has proposed several tax increases to help curb debt.
Lawmakers on the parties’ left and right flanks are increasingly frustrated by signs of compromise. Republican Rep. Chip Roy, a member of the far-right Freedom Caucus, has insisted that any deal must include the sharp spending cuts they approved last month.
Meanwhile, some Democrats say Biden hasn’t spoken enough about the downsides of Republican-proposed spending cuts, in contrast to McCarthy, who has been briefing reporters multiple times a day.
“I would urge the president to use the power of the bullying pulpit of the presidency,” said Rep. Steven Horsford, a Democrat.
Reporting by Nandita Bose, Jarrett Renshaw, David Morgan, Richard Cowan, Moira Warburton, Trevor Hunnicutt, Douglas Gillison, and Gram Slattery; written by Andy Sullivan; Edited by Scott Malone, Alistair Bell, and Rosalba O’Brien
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