The White House and congressional Republicans on Friday aim to put the final touches on a deal to raise the U.S. government’s $31.4 trillion debt ceiling for two years while capping spending on many government programs, according to a U.S. official.
Negotiators for Democratic President Joe Biden and House of Representatives Speaker Kevin McCarthy appeared to be nearing a deal as the two sides reached an agreement on key issues, such as spending caps and funding for the Internal Revenue Service and the military.
“I thought we made progress last night,” McCarthy told reporters at the Capitol on Friday.
However, they still appear to be at odds over several issues, including whether work requirements should be stiffened for some antipoverty programs.
A failure by Congress to raise its self-imposed debt ceiling in the coming week could trigger a default that would shake financial markets and send the United States into a deep recession.
The deal under consideration would increase funding for military and veterans care while essentially holding non-defense discretionary spending at current year levels, said the official, who requested anonymity because they are not authorized to speak about internal discussions.
A two-year extension would mean Congress would not need to address the limit again until after the 2024 presidential election.
The deal might also scale back funding for the IRS, the official said. Republicans have sought to roll back a big budget increase for the tax-collecting agency that Democrats approved last year to boost enforcement, which would help raise revenue and chip away at the deficit.
The deal would boost military and veterans spending to levels proposed by Biden earlier this year, a second U.S. official said.
Fast-growing health and retirement programs would not be affected, even though they are projected to push U.S. debt levels higher in coming years.
The deal would leave many other details to be sorted out in the weeks and months ahead.
Each side will have to persuade enough members of their party in the narrowly divided Congress to vote for any eventual deal.
“The only way to move forward is with a bipartisan agreement. And I believe we will come to an agreement that allows us to move forward and that protects the hardworking Americans of this country,” Biden said on Thursday.
The Treasury Department has warned that it could be unable to cover all its obligations as soon as June 1, but also has made plans to sell $119 billion worth of debt that will come due on that date, suggesting to some market watchers that it was not an iron-clad deadline.
The standoff has unnerved investors, pushing the government’s borrowing costs up by $80 million so far, according to Deputy Treasury Secretary Wally Adeyemo.
Several credit-rating agencies have said they have put the United States on review for a possible downgrade, which would push up borrowing costs and undercut the United States’ standing as the backbone of the global financial system.
A similar 2011 standoff led Standard & Poor’s to downgrade its rating on U.S. debt.
Most lawmakers have left Washington for the Memorial Day holiday, but their leaders have warned them to be ready to return for votes when a deal is struck.
House leaders have said lawmakers will get three days to ponder the deal before a vote, and any single lawmaker in the Senate has the power to tie up action for days. At least one, Republican Mike Lee, has threatened to do so.
Leaders from both parties will likely have to work hard to round up enough votes for passage. Right-wing Republicans have insisted that any deal must include steep spending cuts, while Democrats have resisted the new work requirements for benefits programs.