WASHINGTON (Reuters) – U.S. President Joe Biden and Republican Congressman Kevin McCarthy appeared closer to a deal on Thursday to spend and lift the $31.4 trillion public debt ceiling just ahead of schedule to avoid the risk of a default.
A person familiar with the talks said the agreement expressed the maximum amount the government could spend on discretionary programs, such as housing and education, although it did not break it down into individual categories.
The two sides are only $70 billion away from a total figure that well exceeds $1 trillion, according to another source.
Biden said the two sides continue to disagree on where the cuts should go. “I don’t think the entire burden should fall on working and middle-class Americans,” he told reporters.
The Treasury Department warned that the federal government could run out of money to cover all of its debt as early as June 1 within a week, but on Thursday announced plans to sell $199 billion in debt that will settle on that date; This suggests to some observers of the market that that day is not fatal.
Each item must be approved by the Republican House of Representatives and the Democratic Senate. That can be tricky, as some right-wing Republicans and many liberal Democrats are surrounded by the hope of compromise.
“I don’t think everybody is happy at the end of the day. That’s just the way the system works,” said McCarthy, who serves as Speaker of the House of Representatives. His office did not respond to a request for comment about the potential with Biden.
The agreement only set general guidelines for spending, leaving lawmakers to fill in the blanks in the coming weeks and months. The total amount of military spending is specified, which is stuck in key talks, according to the source.
According to Democratic lawmaker Mark Takano, Biden resisted Republican proposals to toughen labor requirements for anti-poverty programs and relax oil and gas drilling regulations.
Congressman Kevin Hern, who leads the powerful Republican Study Committee, told Reuters the deal was expected by Friday afternoon.
While Republicans are bragging about their win, McCarthy is preparing for Washington lawmakers to take a week-long vacation on Thursday to prepare them to return to the polls. The Senate acted, but has similar orders ready to return.
A default could push global financial markets and the United States into recession.
Credit ratings agency DBRS Morningstar put the United States on review for a possible downgrade on Thursday, echoing similar warnings from Fitch, Moody’s and Scope Rating. Another agency, S&P Global, downgraded US debt after a similar situation in 2011.
The stipulation, which lasted for months, is a rocky Wall Street, weighing stocks and raising the cost of borrowing for the country. Yields on Treasury notes rose on the first day of June, in a repeated investor signal.
Treasury Undersecretary Wally Adeyemo said he was concerned over the government’s debt ceiling of $80 million to date.
Legislators regularly need to raise the self-imposed debt limit to cover spending and cut taxes that have already been passed.
House lawmakers will have three days to read up on the debt ceiling bill before voting on it. In the Senate, Republican Mike Lee said he would block a quick vote if the deal is rejected, which could delay action for days.