Republicans are pushing for sharp spending cuts in exchange for the increase in the government’s self-imposed borrowing limit, a move needed regularly to cover costs of spending and tax cuts previously approved by lawmakers.
Earlier on Friday, a White House official said: “There are real differences between the parties on budget issues and talks will be difficult. The president’s team is working hard towards a reasonable bipartisan solution that can pass the House and the Senate.”
US stocks closed the week on a soft note after news of the stalled negotiations.
Republicans control the House of Representatives by a 222-213 margin, while Biden’s Democrats have a 51-49 Senate majority, making it difficult to thread the needle with a deal that will find enough votes to pass both chambers.
Democrats have been pushing to hold spending steady at this year’s levels, while Republicans want to return to 2022 levels. A plan passed by the House last month would cut a wide swath of government spending by 8 per cent next year.
That plan does not specify what spending would be cut, but some Republicans have said they would shield military and veterans programs. Democrats say that would force average cuts of at least 22 per cent on domestic programs like education and law enforcement, a figure top Republicans have not disputed.
WHITE HOUSE “CONFIDENT” ON DEBT TALKS
Biden is in Japan at a meeting of the Group of Seven wealthy nations, and some Republicans criticised him for taking the trip at a key point in the talks.
The president remains “confident” about resolving a stalemate on raising the debt ceiling, despite “real differences” with Republicans, Press Secretary Karine Jean-Pierre said Saturday.
There “continues to be real differences” but “the president is confident that there is a path forward”, she said in Hiroshima.
Biden and McCarthy spent most of the year in an impasse with the White House insisting on a “clean” increase in the debt ceiling without conditions. Republicans said they would only vote for a deal that cut spending.
They agreed to two-way talks, with the White House represented by Shalanda Young, director of the Office of Management and Budget, and Ricchetti. McCarthy was represented by Graves and McHenry.
“If both sides negotiate in good faith and recognise they won’t get everything they want, a deal is still possible,” a White House official said.
Republicans have taken a hard line. On Thursday, the House Freedom Caucus urged the Senate to vote on a previously passed House bill that would raise the limit through March in exchange for 10 years of sharp spending cuts.
House and Senate Democrats have raised concern over the inclusion in the talks of new work requirements for some federal benefit programs for low-income Americans.
The last time the nation got this close to default was in 2011, also with a Democratic president and Senate alongside a Republican-led House.
Congress eventually averted default, but the economy endured heavy shocks, including the first-ever downgrade of the United States’ top-tier credit rating and a major stock sell-off.
Source: CNA
