Biden remains confident on debt ceiling, Treasury warns of June 5 default

WASHINGTON, May 26 (Reuters) – Democratic President Joe Biden and Republican negotiators said on Friday they were working on a deal to raise the U.S. government’s $31.4 trillion debt ceiling by June 5.

The two sides have been negotiating for weeks on a deal to raise the federal government’s self-imposed debt ceiling, with Republicans also pushing for sharper spending cuts. Without a deal, the US faces a catastrophic default.

“Things are looking good,” Biden told reporters. “I’m hopeful.”

Republican Representative Patrick McHenry said he agreed with Biden’s comments, while cautioning that negotiations are far from over.

“I’m optimistic,” said McHenry, one of House Speaker Kevin McCarthy’s White House negotiators. “But we have to make sure there’s a line on the line, we have a deal – there are significant challenges ahead.”

The two spoke separately shortly after US Treasury Secretary Janet Yellen said on June 5 that the government would run out of money to pay bills. Yellen had previously said that June 1, the date that would mean a new forecast is allowed, could come as soon as possible. More time but tougher deadlines.

Negotiators are discussing a deal that would raise the cap for two years, but are at odds over toughening work requirements for some anti-poverty programs.

McCarthy left the Capitol on Friday following a conference call in which one of his top lieutenants told fellow Republicans that no deal had been reached, CNN reported.

Any deal must be approved by the Republican-controlled House and the Democratic-led Senate before Biden can sign it into law — which could take more than a week.

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According to the US official, negotiators have tentatively reached an agreement.

Job requirements are in dispute

Safety net plans were a sticking point. Garrett Graves, a leading Republican negotiator, said his party would not give up on its demand for more participants to hold a job.

“Hell no. Not a chance,” Graves told reporters.

Biden and his fellow Democrats opposed a Republican push for childless adults under the age of 56 to show they are working or looking for work in order to qualify for Medicaid and the SNAP food-assistance program.

The Republican proposal would require more participants in those programs to show they are working or looking for work. It would save $120 billion over 10 years, but kick more than a million Americans out of those plans, according to the nonpartisan Congressional Budget Office.

Democrats have said the proposal would only create more red tape that would keep out people who would otherwise qualify.

Medicaid and SNAP have been cut in recent months after expanding dramatically during the COVID-19 pandemic. In particular, Biden has opposed work requirements for Medicaid, which as of January covered 85 million Americans.

The deal under consideration would increase funding for the military and veterans’ care while keeping non-defense discretionary spending at current annual levels, according to the official, who spoke on condition of anonymity.

The deal could restore funding to the Internal Revenue Service, which received an additional $80 billion last year. Republicans tried to roll back that funding.

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The official said the White House was acting to defend efforts to target wealthy taxpayers.

The Treasury Department had warned that it would not be able to meet all its obligations before June 1.

Several credit-rating agencies have said the U.S. is under review for a potential downgrade, which would raise borrowing costs and undermine its status as the backbone of the global financial system.

A similar stance in 2011 led Standard & Poor’s to downgrade its rating on US debt.

Even if they reach a deal, leaders of both parties will have to work hard to muster enough votes for ratification in Congress. Right-wing Republicans have insisted that any deal include steep spending cuts, while Democrats have opposed new work requirements for benefit programs.

Most lawmakers have left Washington for the Memorial Day holiday, but congressional leaders have told them to be ready to vote if a deal is reached.

House leaders have said lawmakers will have three days to think about the deal before voting. Any legislative member in the Senate has the power to take action over several days. At least one, Republican Mike Lee, has threatened to do so.

Reporting by Jarrett Renshaw, Richard Cowan, Trevor Hunnicutt, Andy Sullivan, Gram Slattery, David Lawder and Nandita Bose; Written by Andy Sullivan; Editing by Scott Malone, Will Dunham, Alistair Bell, Rosalba O’Brien, David Gregorio and Kim Coghill

Our Standards: Thomson Reuters Trust Principles.

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