US debt ceiling talks stalled by ‘serious differences’

  • By Sam Cabral
  • BBC News, Washington

image source, Good pictures

White House and Republican negotiators resumed U.S. debt ceiling talks after a brief pause on Friday that rattled financial markets.

House Speaker Kevin McCarthy said talks had resumed at the Capitol, but the White House warned of “significant differences.”

Republicans called off the talks hours earlier, accusing the White House of making “unreasonable” demands.

Without a deal, the US cannot repay its $31.4tn (£25.2tn) debt.

This means that the government cannot borrow or pay all its bills.

The Treasury Department has warned that a default could start as early as June 1.

Speaker McCarthy told Fox Business on Friday evening: “We’ll be back in the chamber tonight.

“But it’s very frustrating when they come into the room and think they’re going to spend more money next year than they did this year. That’s not right, and that’s not going to happen.”

He said he had not spoken to President Joe Biden, who is attending the G7 summit in Japan, and would cut short his overseas trip and return to Washington on Sunday.

Garrett Graves, the lead Republican negotiator, told reporters he had “an honest debate about realistic numbers, a realistic path forward and something that will really change the trajectory of this country’s spending and debt problem.”

The White House has suggested the two sides are still some way from a deal.

Speaking at a press conference in Hiroshima, press secretary Karine Jean-Pierre said: “We have serious differences. And this will continue to be a difficult conversation. That is not lost on us.”

He questioned whether congressional Republicans were serious about reducing the deficit and reaching a “fair” deal.

image source, Good pictures

Failure to raise the debt ceiling from its current limit could see the United States freeze its Social Security payments and the salaries of its federal and military employees. A default threatens to wreak havoc on the global economy, affecting prices and mortgage rates in other countries.

The suspension of talks earlier on Friday was widely seen as a bargaining ploy on Capitol Hill, but U.S. financial markets stumbled on growth, ending the afternoon in negative territory. The Dow fell 0.3%, the S&P 500 fell 0.1% and the Nasdaq fell 0.2%.

In exchange for support for raising the debt ceiling, Republicans are demanding budget cuts of up to $4.5tn, including scaling back many of Mr Biden’s legislative priorities.

The White House has called the Republican proposal “a blueprint that will destroy hard-working American families,” though it has hinted in recent days that it might offer some budget concessions.

Both President Biden and Speaker McCarthy are under pressure from the left and right of their respective parties to hold the line. With a one-seat Democratic majority in the Senate and Republicans in narrow control of the House, a deal has so far proven elusive.

And with the clock ticking, the two parties are far apart.

North Carolina Republican Patrick McHenry, who has been involved in the negotiations, told the Wall Street Journal on Friday that the negotiations were at a “very bad moment.”

Mr. Biden has argued that raising the debt ceiling and reducing the budget deficit should be two separate issues, but six in 10 Americans disagree. A new Associated Press-NORC poll.

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