No sign of progress from White House or Republicans in ‘tough’ debt ceiling talks

Representatives of U.S. President Joe Biden and congressional Republicans ended another round of debt ceiling talks on Tuesday with no sign of progress as the deadline to raise the government’s borrowing limit by 31, $4 trillion or the risk of default was approaching.

The two parties remain deeply divided on how to get the federal deficit under control, with Democrats saying wealthy Americans and businesses should pay more taxes while Republicans want spending cuts.

White House negotiators Shalanda Young, director of the Office of Management and Budget, and White House senior adviser Steve Ricchetti met with their Republican counterparts for about two hours. They left without making substantial comments to the media.

Treasury Secretary Janet Yellen has warned that the federal government may not have enough money to pay all its bills by June 1, triggering a default that will hammer the US economy and drive up borrowing costs.

The two sides still disagree on spending, and it was unclear when talks would resume, said Republican Representative Patrick McHenry, who chairs the House Finance Committee.

White House spokeswoman Karine Jean-Pierre called the talks “incredibly difficult.”

“Both sides have to understand that they won’t get everything they want,” Jean-Pierre told a briefing. “And what we’re trying to achieve is a reasonable, bipartisan budget that Democrats and Republicans in the House and Senate can vote on and agree on.”

Global markets in turmoil

The lack of clear progress continued to weigh on Wall Street with US stocks falling sharply on Tuesday and global markets on edge.

Democrats want to freeze spending for the 2024 fiscal year that begins in October at levels enacted in 2023, arguing that this would represent a cut in spending because agency budgets will not match inflation. The idea has been rejected by Republicans, who want spending cuts.

Biden wants to reduce the deficit by raising taxes on the wealthy and closing tax loopholes for the oil and pharmaceutical industries. McCarthy said he would not approve of the tax increases.

McCarthy told reporters on Monday he expected to speak with Biden daily at least by phone.

If and when Biden and McCarthy reach a deal, they will still have to sell it to their congressional caucuses. It could easily take a week to push a deal through the House and Senate, both of which would need to approve the bill before Biden can sign it.

“Why is June 1 dead?”

Both hardline Republicans and progressive Democrats expressed anger at the prospect of a compromise.

Democratic Rep. Pramila Jayapal, who chairs the 101-member Congressional Progressive Caucus, said “the vast majority” of the group’s members would oppose any deal that includes spending cuts or new work requirements for federal programs. benefits for low-income Americans, which are major Republican demands.

Some hardliners in the Republican House Freedom Caucus said Tuesday they were skeptical of the tough June 1 deadline. The Treasury has said the United States could run out of cash as early as June 1, or possibly within days.

“Secretary Yellen must not only testify, but in writing, she must justify the dates she gave. Why is June 1 dead?” said Republican Representative Ralph Norman.

Democratic Rep. Hakeem Jeffries — the top Democrat in the House — dismissed that skepticism as unfounded.

“The June 1 date is real. Secretary Yellen continues to make that clear,” Jeffries told reporters.

Unless Congress raises the debt ceiling and allows the federal government to borrow money to pay its bills, the United States could default, potentially tipping the country into recession. and throw global financial markets into chaos.

Any deal to raise the limit must go through both houses of Congress and is therefore dependent on bipartisan support. McCarthy’s Republicans control the House 222-213, while Biden’s Democrats hold the Senate 51-49.

Despite the stalemate, the two sides have found common ground in several areas, including permit reform that will help power projects move forward.

On Monday, McCarthy said the inclusion of some reforms allowing the debt deal would not solve all related issues and that talks on further reforms could continue later, declining to address renewable energy transmission.

The two sides are also discussing recovering unused COVID-19 relief funds and imposing tougher work requirements on two popular public benefit programs aimed at helping Americans lift themselves out of poverty.