Republicans in the White House and the House on Friday scrambled to finalize a government spending agreement that would avert an unprecedented default on US debt and remove a huge cloud of uncertainty hanging over the country’s economy.
Negotiators for US President Joe Biden and Republican House Speaker Kevin McCarthy met virtually Friday and spoke by phone to iron out the remaining sticking points in the potential agreement.
People close to both sides said they are close to a deal that would increase the US borrowing limit for two years, even after the 2024 general election, while also setting caps that would limit spending growth over the same time period.
But there was still no certainty that a compromise could be reached. “Every time there’s more progress, the issues that remain become more difficult and more challenging,” Patrick McHenry, chairman of the House Financial Services Committee and one of the House’s top Republican negotiators, told reporters. “At some point this thing could come together — or go the other way.”
He added that it could still take “one, two or three days” to reach an agreement.
McCarthy struck a more optimistic tone as he arrived at the Capitol earlier in the morning.
“I’m going to work as hard as I can to try to get that done and make more progress today and finish the journey. I’m quite hopeful,” said the spokesperson. “It’s really about one thing: This was about spending. The Democrats have never wanted to stop the amount of spending.”
In an interview with CNN earlier, Wally Ademo, the US deputy secretary of the Treasury, suggested that a deal is at hand: “What I can say is we’re making progress and our goal is to make sure we get a deal because default is unacceptable.”
He added, “The President said it, and the Speaker said it. And we have to get something done before early June when the Secretary said it’s very likely we won’t have the resources anymore to pay our bills.”
The urgency to reach an agreement increased after Treasury Secretary Janet Yellen warned of the possibility of a default on June 1st. Once an agreement is reached, it can take several days for any legislation to be approved by the Republican-controlled House of Representatives. Representatives and the Democratic-controlled Senate, before Biden enacted it into law.
The vote in the closely divided House of Representatives will be especially difficult because both Republican and rank-and-file lawmakers have already expressed unhappiness with the emerging deal.
In addition to setting a spending cap for the next two years, the potential settlement also likely includes new business requirements for some social safety net programs, legislation to speed up allowing large investments and an increase in smaller funding for the Internal Revenue Service to vet the wealthy. taxpayers.
The agreement, if successfully enacted, would remove a major source of risk for the US economy and financial markets, which are already grappling with turmoil in the banking sector and the impact of high interest rates to tame inflation.
Negotiations to resolve the financial crisis have only come into high gear in recent weeks, forcing Biden to cut short a trip to Asia in order to follow talks directly in Washington. Although a deal is close, it remains uncertain that it can be finalized by the end of Friday, which means talks could extend into the Memorial Day long weekend in the US.
In the wake of reports of progress in debt ceiling talks, US stocks rose, with the S&P 500 rising 1 percent in mid-morning trade. Treasury yields, which rose early in the morning after stronger-than-expected economic data, continued to rise as investors remained hopeful that the US government might avoid a default.
Additional reporting by Peter Wells in New York