WASHINGTON, May 25 (Reuters) – U.S. President Joe Biden and top congressional Republican Kevin McCarthy appeared to be nearing a deal on Thursday to cut spending and raise the government’s $31.4 trillion debt ceiling. .
According to a person familiar with the negotiations, the agreement will specify the total amount the government can spend on discretionary programs such as housing and education, but cannot be broken down into individual categories. According to another source, the two sides have a difference of $70 billion, which could be more than $1 trillion.
The White House said the two sides almost met on Thursday. Biden said they still don’t agree on where the cuts should fall.
“I don’t believe the entire burden should shift to middle-class and working-class Americans,” he told reporters.
It’s unclear how much time Congress has to act. The Treasury Department has warned that it will not be able to cover all of its obligations by June 1, but on Thursday it said it would sell $119 billion worth of outstanding debt, leading some market watchers to suggest it would not. An ironclad deadline.
“They have suggested in the past not to announce a bid because they don’t believe they don’t have the means to resolve,” said Gennady Goldberg, senior rates strategist at TD Securities in New York. “So I think that’s a positive sign.”
Any deal must pass both 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 compromise.
“I don’t think everybody’s going to be happy at the end of the day. That system doesn’t work,” House Speaker McCarthy said.
His office did not respond to a request for comment on a possible deal with the Democratic president.
The House adjourned for a week-long recess Thursday afternoon, and the Senate was not in session. Lawmakers have been told to be ready to vote again if a deal is reached.
The deal would set only broad spending outlines, leaving lawmakers to fill in the blanks in the coming weeks and months.
It will address the total amount of military spending, which has been a major sticking point in the negotiations, one of the sources said.
According to Democratic Rep. Mark Dagano, Biden opposed Republican proposals to toughen work requirements for anti-poverty programs and loosen rules on oil and gas drilling.
Representative Kevin Hearn, who leads the powerful Republican caucus, told Reuters on Friday afternoon that a deal was likely.
Democrats on Thursday focused on what they said would be devastating cuts to federal aid for veterans — from health and food assistance to housing assistance — if Republicans enter the negotiations.
“Time’s up for all these games here,” U.S. Air Force veteran Democratic Rep. Dan Davis said at a press conference.
A US default would lift global financial markets and push the US into recession.
Credit rating agency DPRS Morningstar, which on Thursday reviewed the US for a potential downgrade, echoed similar warnings. Fitch, Moody’s and Scope Ratings. Another firm, S&P Global, downgraded US debt following a similar debt ceiling stance in 2011.
The months-long standoff spooked Wall Street, weighed on U.S. stocks and pushed up the nation’s borrowing costs.
Deputy Treasury Secretary Wally Adeyemo said concerns over the debt ceiling have pushed up government interest costs by $80 million so far.
Lawmakers often have to raise the self-imposed debt ceiling to cover spending and tax cuts they’ve already approved.
House lawmakers will have three days to read before they have to vote on any debt ceiling bill.
McCarthy said any deal would have to reduce discretionary spending next year and curb spending growth in the coming years, slowing the growth of the U.S. debt, which now equals the economy’s annual output.
He also said he spoke briefly about negotiations with former President Donald Trump, who has publicly urged Republicans to allow default if they miss their goals.
Biden has proposed freezing spending at current levels next year and proposing several tax increases to help control the debt.
Lawmakers on both the right and left sides of the party are frustrated. Republican Rep. Chip Roy, a member of the hard-right Freedom Caucus, has insisted that any deal must include the sharp spending cuts they passed last month.
Meanwhile, some Democrats say Biden has not been vocal enough about the flaws in the Republicans’ proposed spending cuts, unlike McCarthy, who has been briefing reporters several times a day.
“I would urge the president to exercise the power of the president’s bully pulpit,” said Democratic Rep. Steven Horsford.
(This story has been reprinted to correct Karbal in paragraph 12)
Reporting by Nandita Bose, Jared Renshaw, David Morgan, Richard Cowan, Moira Warburton, Trevor Hunnicutt, Douglas Gillison, Gram Slattery, Dan Burns and Karen Bratdell; Written by Andy Sullivan; Editing by Scott Malone, Alistair Bell, Rosalba O’Brien and Nick Zieminski