Updates on debt ceiling negotiations between Joe Biden and Kevin McCarthy

WASHINGTON — House Speaker Kevin McCarthy said negotiations with the White House on raising the U.S. debt ceiling on Wednesday are still on hold due to disagreement over the issue of basic spending, indicating that the two parties were still a long way off with just eight days before the government could face an unprecedented default.

Shares fell to session lows after McCarthy’s comments, as investors watched the talks closely for any signs of progress.

On Capitol Hill, negotiators for House Republicans and the White House were due to resume talks in the conference room right next to McCarthy’s office, where they’ve been holed up for hours every day this week.

The talks have hit a “speed bump,” a Democratic official familiar with the situation told NBC News on Wednesday.

But outside the ring road, worries have grown over whether negotiators will be able to reach a deal to cut government spending enough to win the GOP votes needed to pass a bill that raises the ceiling on the debt before June 1.

Treasury Secretary Janet Yellen said on Wednesday she was already seeing “some tension in financial markets,” driven by fears that the United States could fall into a first-ever default.

Debt ceiling stress was having a particular impact on Treasury markets, Yellen said at a Wall Street Journal event. These signs of stress “should be a reminder of the importance of reaching an agreement in a timely manner”.

But after a week of daily sessions led by a group of seasoned negotiators, people on both sides say the gap between what House Republicans want and what the White House is willing to give seems wider than ever.

For example, one of the top Republican delegates, Rep. Patrick McHenry of North Carolina, on Tuesday night exposed what until then had only been implied, when a reporter asked him what concession the Democrats were getting. in the talks, to win their votes in the House.

“The debt ceiling,” he said.

“That’s what they’re getting,” added Rep. Garret Graves of Louisiana, another GOP negotiator.

This view of last week as one where Democrats are forced to agree to Republican demands, while Republicans in return only offer the chance to avoid a catastrophic default, would anger Democrats and reduce the odds. of an agreement. The GOP has pushed for spending cuts as part of any deal to raise the debt ceiling, which alone does not authorize new spending.

A default would wreak havoc on the US economy and force millions of people to at least temporarily lose the government benefits that many rely on to survive.

With talks at an apparent breaking point for the second time in a week, and a deal likely within the next 24 hours – in time for the House to turn a deal into a bill and vote in favor before the weekend – seems very slim McCarthy seemed open to letting House members leave DC for Memorial Day weekend without a deal.

“I haven’t made that decision yet,” he told reporters on Tuesday, but added: “I should have, depending on where we are at the time, brought them back to home and come back.”

With Republicans only seeming to harden their stance over time, Democrats on Wednesday accused McCarthy of bowing to pressure from the far-right in his caucus. They said he gave in to members who had made a long list of demands but were unlikely to vote for a debt ceiling hike no matter what it contained.

One such laundry list was released Wednesday by Rep. Chip Roy, R-Texas, a member of the ultraconservative House Freedom Caucus. Presented as a memo, the list contained seven provisions that appeared in a debt limitation bill that the House GOP narrowly passed in April, despite “no” votes from all Democrats and four Republicans. .

“The following reforms were part of the Limit, Save, Grow Act – each is essential and none should be abandoned just in pursuit of a ‘deal,'” Roy’s memo reads.

Pressure like this from extremists within his own party has made McCarthy’s path to passing a bill that much more treacherous because it will need Democratic votes.

Biden has offered compromises, the Democratic official told NBC News, including freezing spending, writing off unspent COVID funds and putting in place a two-year cap on spending.

But McCarthy rejected those concessions.

“Let me be very clear, we’re not putting anything on the floor that doesn’t spend less than what we’ve spent this year,” he said Tuesday.

This is a developing story, please check for updates.