(Bloomberg) — Speaker Kevin McCarthy said issues remain in negotiations with the Biden administration on raising the federal debt limit as the clock ticks down to the point when the Treasury runs out of cash.
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“I thought we made some progress” in talks Wednesday, McCarthy told reporters Thursday morning. “There are still outstanding issues. I’ve directed our team to work 24/7 to solve this problem.”
The California Republican added, “I don’t think everybody is going to be happy at the end of the day. That’s not how this system works.” He declined to specify when or where the next round of negotiations will be. Speaking on Fox News, he said, “I don’t know if we have a deal today.”
Financial markets are showing increasing signs of stress as talks wear on. Treasury Secretary Janet Yellen has said her department could run out of cash as soon as June 1, and the following day sees a payment due to millions of Social Security beneficiaries, putting pressure on politicians to resolve the impasse.
A key money-market rate jumped, as lenders of cash appeared more skittish about making overnight loans backed by Treasury securities. Positive earnings news left US stock futures higher.
Further unease was seen in a Fitch Ratings move on Wednesday to place the AAA credit rating for the US on watch for a potential downgrade. The US lost its AAA grade at S&P Global Ratings during a similar partisan standoff on the debt ceiling in 2011.
The White House and Treasury said that Fitch move demonstrated the urgency of reaching a speedy resolution to the debt ceiling standoff. But McCarthy said that he wasn’t worried about the Fitch move, and that Thursday that no word from the ratings agency was needed to remind negotiators of the importance of moving on the matter.
McCarthy didn’t specify what the sticking points are in the talks, but negotiators have been clashing over the scale and length of limits on spending to be included in a bill raising or suspending the debt ceiling. Economists have warned that even with a deal that avoids a devastating payments default, caps on government outlays could help to tip the US into a recession.
Read More: Modeling US Debt-Ceiling Risk as Talks X-Date Nears
With June 1 just a week away, any deal will need speedy action in both chambers of Congress in order to reach President Joe Biden’s desk in time. In the Senate, it could take agreement of all senators to speed past parliamentary hurdles that can add days to the debate over legislation.
Read More: Any Debt Deal Still Faces Time-Consuming Hurdles in Congress
One conservative GOP senator, Mike Lee of Utah, on Thursday morning threatened to prevent that from happening if a final deal isn’t to his liking. He tweeted that he will “use every procedural tool at my disposal to impede a debt-ceiling deal that doesn’t contain substantial spending and budgetary reforms.”
But he didn’t say whether he might slow down a temporary debt-ceiling extension if talks push past the deadline.
–With assistance from Ryan Teague Beckwith.
(Updates with additional comments and context starting in third paragraph.)
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