Washington, May 27 (BNA) Democratic President Joe Biden and a Republican negotiator said Friday they are working on a deal to raise the $31.4 trillion US government debt ceiling after the Treasury Department warned a June 5 default loomed without action.
The two sides have been negotiating for weeks a deal to raise the federal government’s self-imposed borrowing limit, with Republicans also pushing for sharp spending cuts. Reuters reported that without an agreement, the United States could face a catastrophic default.
“It’s looking good,” Biden told reporters. “I am optimistic.”
Republican Representative Patrick McHenry said he agreed with Biden’s comments, while warning that negotiations were far from over.
“I’m hopeful,” said McHenry, one of the House members. Speaker of the House Kevin McCarthy is the main negotiator with the White House. “But we have to make sure we have our own tax threshold, we have a line on agreement — there are significant challenges ahead.”
The two spoke, separately, shortly after US Treasury Secretary Janet Yellen said the government would run short of money to pay its bills on June 5th. Yellen had previously said that date could come as soon as June 1, which means the new forecast allows. More time but a tougher deadline.
Negotiators are discussing a deal that would raise the limit by two years, but remain at odds over whether to tighten labor requirements for some anti-poverty programmes.
CNN reported that McCarthy left the Capitol on Friday after a conference call during which he told one of his top Republican aides that no deal had been reached.
Any deal must win approval in the Republican-controlled House and Democratic-led Senate before Biden signs it into law — a process that could take more than a week.
Negotiators have tentatively reached an agreement that would cap spending on several government programs next year, according to a US official.
Safety net programs remained a sticking point. Chief Republican negotiator Garrett Graves said his party would not waive its demand for more participants to fill a position.
Biden and his fellow Democrats have resisted Republican pressure to require childless adults under 56 to show they are working or looking for work in order to qualify for the Medicaid health plan and SNAP.
The Republican proposal would require more participants in those programs to show that they are working or looking for work. That would save $120 billion over 10 years, but it also forces more than 1 million Americans out of those programs, according to the nonpartisan Congressional Budget Office.
Democrats said the proposal would only lead to more red tape that would disqualify otherwise eligible people.
Medicaid and SNAP have declined in recent months after expanding greatly during the COVID-19 pandemic. Biden in particular has resisted employment requirements for Medicaid, which covered 85 million Americans as of January.
The deal under consideration would increase military and veterans’ care funding while primarily keeping non-defense discretionary spending at current year levels, according to the official, who spoke on condition of anonymity.
The deal may also reduce funding for the Internal Revenue Service, which took in an additional $80 billion last year, in part to boost enforcement and bring in more tax revenue. Republicans sought to eliminate this funding.
The official said the White House is working on a way to sustain its efforts to target wealthy taxpayers.
The US Treasury had earlier warned that it may not be able to cover all of its liabilities as soon as June 1.
Several credit rating agencies said they were placing the United States under review for a possible downgrade of its rating, which would raise borrowing costs and undermine its position as the backbone of the global financial system.
A similar standoff in 2011 led Standard & Poor’s to downgrade its US debt rating.
Even if they do reach an agreement, leaders from both parties will have to work hard to gather enough votes to get it approved in Congress. Whig Republicans have insisted that any deal must include deep spending cuts, while Democrats have resisted new labor requirements for benefits programs.
Most lawmakers left Washington for the Memorial Day recess, but congressional leaders told them to be ready to return to vote on a deal.
House leaders said lawmakers would have three days to think about the deal before voting. Any single lawmaker in the Senate has the power to restrict the proceedings for days. At least one, Republican Mike Lee, has threatened to do so.
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