By Jarrett Renshaw
WASHINGTON (Reuters) -White House and congressional Republican negotiators will meet again on Tuesday to resolve a months-long impasse over raising the government’s $31.4 trillion debt ceiling, with the nation facing the risk of default in as soon as nine days.
President Joe Biden’s Democrats and the Republicans who control the House of Representatives, led by Speaker Kevin McCarthy, remained deeply divided about how to rein in the federal deficit. Democrats argue wealthy Americans and businesses should pay more taxes while Republicans want spending cuts.
Biden and McCarthy emerged on Monday evening from their third meeting this year on the debt ceiling talking about the need to find bipartisan compromise, even as they cling to policies that expose the divides between the two parties.
White House aides headed back to Capitol Hill after the meeting for further talks throughout the night.
House Appropriations Committee Chairwoman Kay Granger, a Republican, also suspended work on pending funding bills this week “to give the Speaker maximum flexibility as talks continue,” she said in a statement.
The lack of clear progress continued to weigh on Wall Street with U.S. stock indexes set to open lower Tuesday morning and global markets on edge.
Biden and Democrats want to freeze spending in the 2024 fiscal year at the levels adopted in 2023, arguing that would represent a spending cut because agency budgets won’t match inflation. The idea was rejected by Republicans, who are insisting on cuts to 2022 levels, Democratic leaders said on Monday.
Republicans are insisting federal spending must be significantly reduced so that overall spending goes down in the upcoming fiscal year even as military spending increases.
Biden wants to cut the deficit by raising taxes on the wealthy and closing tax loopholes for the oil and pharmaceutical industries. McCarthy declared that boosting revenue is a non-starter.
“I don’t think it’s a revenue problem. It’s a spending problem,” McCarthy said.
McCarthy said both he and Biden directed their negotiators, to “work through the night” on Monday as they race toward a deal before June 1, when the Treasury Department warns the federal government could run out of money.
It was not immediately clear when talks would continue on Tuesday, with McCarthy telling reporters on Monday that he expected to talk with Biden daily at least by telephone.
COMMON GROUND
Unless Congress raises the debt ceiling and allows the federal government to borrow money to pay its bills, the United States could default on its obligations for the first time in history, potentially tipping the nation into recession and plunging global financial markets into chaos.
Any deal to raise the limit must pass both chambers of Congress, and therefore hinges on bipartisan support. McCarthy’s Republicans control the House 222-213, while Biden’s Democrats hold the Senate 51-49.
Despite the gridlock, the two sides have found some common ground on several areas, including permit reform that will help energy projects move forward.
McCarthy on Monday said including some permitting reforms in the debt deal would not solve all of the related issues and that talks on further reforms could continue later, declining to address transmission for renewable energy.
The two sides are also discussing clawing back unused COVID relief funds and imposing stricter work requirements on two popular public benefit programs aimed at helping Americans out of poverty.
But leaders cautioned that nothing has yet to be agreed upon.
“No one’s going to agree to anything until we have a finalized deal,” said Republican Representative Patrick McHenry, who chairs the House Finance Committee.
(Additional reporting by David Morgan, Nandita Bose and Susan Heavey; Editing by Heather Timmons, Lincoln Feast and Chizu Nomiyama)