US debt ceiling negotiations push towards critical default deadline
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[May 27, 2023]
By Moira Warburton and Katharine Jackson
WASHINGTON (Reuters) - Democratic and Republican negotiators said they
were hopeful of reaching a deal to raise the federal government's $31.4
trillion debt ceiling and avert a disastrous default, with talks
expected to resume on Saturday.
Time is tight. The Treasury Department on Friday said the government
would run short of funds to pay all its bills on June 5 without
congressional action, a slightly later but firmer deadline than its
prior forecast of default as early as June 1.
And any deal in principle between Democratic President Joe Biden and top
congressional Republican Kevin McCarthy will be the start of what could
easily be a week-long process of shepherding legislation through the
narrowly and bitterly divided Congress.
Hardline Republicans in the House of Representatives have threatened to
block any bill that does not meet their expectations, including sharp
spending cuts.
Progressive Democrats have also threatened to withhold support for some
of the compromises raised, particularly around imposing new work
requirements on federal anti-poverty programs.
"It's very close and I'm optimistic," Biden told reporters on Friday.
Republican negotiator Patrick McHenry said he concurred with Biden,
although he said more negotiations were needed.
"I'm hopeful," he told reporters late Friday. "I've rarely used that
term in the last 12 days."
Republicans control the House by a 222-213 margin, while Democrats hold
a 51-49 Senate majority, leaving a narrow path to pass any agreement by
the Democratic president and Republican speaker into law.
Republicans have sought to sharply curb government spending over the
coming 10 years in order to slow the growth of the U.S. debt, which is
now equal to the annual output of the economy.
But the tentative agreement would likely fall well short of their goal.
The two sides have tentatively reached an agreement that would raise the
debt ceiling by enough to cover the country's borrowing needs through
the November 2024 presidential election.
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The sun sets behind the U.S. Capitol
building in Washington, U.S., October 6, 2021. REUTERS/Leah
Millis/File Photo
It would boost spending on the military and veterans' care, and cap
it for many discretionary domestic programs, according to sources
familiar with the talks.
STICKING POINTS
Republicans have rejected Biden's proposed tax increases, and
neither side has shown a willingness to take on the fast-growing
health and retirement programs that will drive up debt sharply in
the coming years.
Biden's signature infrastructure and green-energy laws would remain
intact, while the Internal Revenue Service would see its recent
budget increase scaled back slightly.
But safety-net programs remain a sticking point. Republicans want to
stiffen work requirements for the Medicaid health plan for the poor
and the SNAP food assistance program. Democrats say that would
create more barriers for people who are already struggling to make
ends meet.
Both programs expanded dramatically during the COVID-19 pandemic but
have been scaled back in recent months.
A failure by Congress to raise its self-imposed debt ceiling before
June 5 could trigger a default that would shake financial markets
and send the United States into a deep recession.
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 its 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, hammering markets and sending the government's
borrowing costs higher.
(Reporting by Moira Warburton and Katharine Jackson; Writing by Andy
Sullivan; Editing by Scott Malone and Frances Kerry)
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