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.
Biden said the two sides still disagree 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.
The Treasury Department has warned that the central government may run short of cash to meet all its obligations by June 1. That date is not an iron-fisted deadline for some market watchers.
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 in the end. That’s how the system works right now,” said McCarthy, who serves as House speaker.
His office did not respond to a request for comment on a possible deal with the Democratic president.
The deal would set only broad spending outlines, leaving lawmakers to fill in the blanks in the coming weeks and months.
It will specify the total amount of military spending, which will be a major sticking point in the negotiations, one of the sources said.
According to Democratic Rep. Mark Tagano, 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.
Even if Republicans make progress, McCarthy is preparing to allow lawmakers to leave Washington on Thursday for a week-long vacation on the condition that they be ready to return to a vote. The Senate is now out, but should be ready to return.
A US default would lift global financial markets and push the US into recession.
Credit rating agency DPRS reviewed the US for a possible downgrade on Thursday, echoing similar warnings from Morningstar, 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. Yields on U.S. Treasury bills maturing in early June rose in early trade Thursday in a sign of investor unease.
U.S. Treasury Undersecretary Wally Adeyemo said concerns about the debt ceiling have so far raised the government’s interest costs by $80 million.
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. In the Senate, Republican Mike Lee said he would block a quick vote if the deal doesn’t catch on, which could delay action by several days.
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 parties are frustrated by signs of compromise. 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 shortcomings of 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.
Reporting by Nandita Bose, Jared Renshaw, David Morgan, Richard Cowan, Moira Warburton, Trevor Hunnicutt, Douglas Gillison and Graeme Slattery; By Andy Sullivan; Editing by Scott Malone, Alistair Bell and Rosalba O’Brien
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