May 23 (Reuters) – President Joe Biden and congressional Republicans wrapped up another round of debt ceiling talks on Tuesday as a deadline to raise the government’s $31.4 trillion debt ceiling or risk repayment loomed.
The two parties are deeply divided over how to control the federal deficit, with Democrats arguing that wealthier 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 senior White House adviser Steve Ricchetti met with Republican representatives for about two hours on Tuesday. They left without making any substantive 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 would hammer the US economy and raise borrowing costs.
Rep. Garrett Graves, the Republican negotiator, said before Tuesday’s meeting that he saw little progress.
“I think things didn’t go well,” Graves told reporters. “They refuse to really change course, cut costs, and that’s a red line
Biden and McCarthy talked about the need for bipartisan compromise during Monday evening’s meeting on the debt ceiling, even as they espouse policies that expose bipartisan divides.
“We reiterated that default is off the table and is the only way forward in good faith toward a bipartisan deal,” Biden said in a statement after Monday’s meeting, which he called “productive.”
The lack of clear progress continues to weigh on Wall Street.
Biden and Democrats want to freeze spending in fiscal year 2024 at the level adopted in 2023, arguing that would mean spending cuts because agency budgets do not keep pace with inflation. The idea was rejected by Republicans who wanted 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 accept a tax increase.
McCarthy told reporters on Monday that he expects to speak with Biden at least daily by phone.
If Biden and McCarthy reach a deal, they will have to sell it to their caucuses in Congress. Passing a deal through the House and Senate could easily take a week, requiring Biden to approve the bill before signing it into law.
Some hard-line members of the Republican Freedom Caucus on Tuesday said they were skeptical of how firm the June 1 deadline was. The Treasury said the US could face a cash shortage on or after June 1.
“Secretary Yellen should not only testify, but also in writing, justify the dates she gave. Why is June 1 dead?” Rep. Chip Roy said in an interview.
Top Democrat Hakeem Jeffries dismissed that suspicion as baseless.
“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, America will default on its obligations, plunging the nation into recession and plunging global financial markets into chaos.
Any deal to raise the cap would have to pass both houses of Congress and would therefore depend on bipartisan support. McCarthy’s Republicans control the House 222-213, while Biden’s Democrats hold the Senate 51-49.
Despite the obstacles, the two sides have found some common ground in several areas, including permitting reform, to help energy projects move forward.
On Monday, McCarthy said not all issues related to adding some permit reforms to the debt deal could be resolved and that talks on further reforms could continue later, ruling out a trade-off for renewable energy.
The two sides are also debating returning unused Covid relief funds and imposing tougher work requirements on two popular public welfare programs that help lift Americans out of poverty.
But the leaders cautioned that nothing had yet been agreed upon.
“It’s very important to recognize that urgency should be the order of the day. That’s not the vibe I’m getting right now,” said Rep. Patrick McHenry, Republican chairman of the House Finance Committee.
Report by Jared Renshaw; Editing by Heather Timmons and Lincoln Feist.
Our Standards: Thomson Reuters Trust Principles.