The White House and Republicans in Congress struggled to make meaningful progress towards a deal to raise the US borrowing limit on Tuesday, leaving the economy and financial markets in a dangerous limbo little more than a week before a potential debt default.
President Joe Biden and Kevin McCarthy, the Republican House Speaker, met on Monday evening at the White House for direct talks they each called “productive”, raising hopes that they were moving closer to an agreement.
But staff-level negotiations that occurred late on Monday and on Tuesday yielded no signs of a breakthrough — just pledges to continue conversations.
“While areas of disagreement remain, the president, the Speaker and their teams will continue to discuss the path forward”, Karine Jean-Pierre, the White House press secretary, told reporters in a briefing on Tuesday.
Earlier on Tuesday, McCarthy held a closed-door meeting with Republican lawmakers in the lower chamber of Congress in which he said he was “nowhere close” to an agreement with Biden.
“There are certain things that divide us . . . You cannot spend more money next year than you spent this year, clear as day. We have got to help people get into work with work requirements,” McCarthy later told reporters.
The lack of any tangible movement towards a deal will be increasingly alarming given that the US Treasury has warned that it could run out of cash to pay all of its bills as soon as June 1. Such an event could potentially trigger massive disruptions to the financial system, and hit households and businesses across the US.
Any deal would have to be struck several days before that deadline in order to give both chambers of Congress time to pass the legislation and send it to Biden for his signature.
The biggest sticking point relates to the divide over where discretionary spending levels should be set in the coming years. Although the White House has proposed a freeze in spending levels for the coming fiscal year, Republicans want spending to be cut aggressively before it starts to edge up again over a longer period of time.
“They’re just now coming up with the idea of a freeze?” McCarthy said.
The two sides have also been sparring over adding new work requirements to social safety net programmes. As the talks have dragged on, Democrats have grown increasingly impatient, suggesting Biden should find a way of unilaterally avoiding a default on constitutional grounds, even though such a solution would be legally risky.
“As I’ve said from the start, McCarthy’s too weak a Speaker & his MAGA caucus too controlled by Trump for him to deliver any reasonable deal,” Chris Van Hollen, the Democratic senator from Maryland, wrote on Twitter on Tuesday, referring to the former president’s Make America Great Again slogan.
But McCarthy did insist that an agreement was still possible. “I believe we can still get there, and get there before June 1.”
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