By Jarrett Renshaw, Richard Cowan and Trevor Hunnicutt
WASHINGTON (Reuters) – Democratic and Republican negotiators scrambled on Friday to reach an agreement to raise the debt ceiling to $31.4 trillion, as key Republicans cited disagreements over requirements to require some benefit programs.
Time is running out for Democratic President Joe Biden and Republican House Leader Kevin McCarthy to reach an agreement to impose a self-imposed borrowing limit and avoid a potentially disastrous federal government default.
Negotiators appeared close to an agreement on a two-year cap and spending limit, along with an agreement on funding for the Internal Revenue Service and the military, limiting several government programs, according to an official report.
But a government source in talks with the family said it could easily be pulled over the weekend.
The two sides remained at odds over Republican pressure on new labor requirements for several anti-poverty programs.
“We’re done,” top Republican spokesman Garrett Graves told reporters. “I said two days ago we have made progress on some key issues, but I want to be clear, there are still big issues where we haven’t closed the gap, chief among them the work requirements.”
If Congress does not raise the debt ceiling next week, it could trigger a default that would rock financial markets and plunge the United States into a deep recession.
“We know it’s time to break,” McCarthy told reporters on Capitol Hill on Friday. “We’re not just trying to make a deal, we’re trying to get something decent for the American people that’s going to change the course.”
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Wall Street’s main index rose as investors awaited progress in the business. The Dow Jones Industrial Average snapped a five-day losing streak, while the Nasdaq hit its highest since August earlier in the session.
Even if they live up to the agreement, the leaders of both parties will have to work hard to get enough votes in Congress. Right-wing Republicans have argued that any deal could be cut short, while Democrats resist new work requirements to advance the program.
The deal is considered to increase funding for the military and veterans, while respecting non-defense discretionary spending in current years, said the official, who asked to remain anonymous because he was not authorized to speak about internal discussions.
A two-year extension would mean Congress wouldn’t have to address the cap again until after the 2024 presidential election.
Each party will have to be convincing enough to get the majority of votes in favor of their party in a closely divided Congress.
“The only way forward is with bipartisan agreement. And I believe we will reach an agreement that will allow us to move forward and that will protect working Americans in this country,” Biden said Thursday.
The Treasury Department has warned that it may not be able to meet all of its obligations as soon as June 1, but it has also made plans to sell $199 billion of debt that day, prompting some market observers to say that. not an immovable boundary.
The situation has upset investors and caused an $80 million increase in government borrowing costs, according to Treasury Under Secretary Wally Adeyemo.
Several credit rating agencies have announced that the US rating has been placed under review for a possible level that would increase borrowing costs and undermine the country’s status as the backbone of the global financial system.
Most Washington lawmakers left the Memorial Day holiday, but their leaders warned that the deal should be prepared for a vote again.
House leaders said lawmakers will have three days to deliberate on the deal before voting, and anyone from the Senate has days to act. At least one of them, Republican Mike Lee, has threatened to do so.
(Additional reporting by Gram Slattery, David Lawder and Nandita Bose;