By Moira Warburton and Katharine Jackson
WASHINGTON (Reuters) – Democratic and Republican negotiators said they hoped to reach an agreement to raise the federal government’s debt ceiling to $31.4 trillion and avoid a disastrous default, with talks set to resume on Saturday .
Time is counted. The Treasury Department said Friday that the government would run out of funds to pay all of its bills by June 5 without congressional action, a slightly later but firmer deadline than its previous default forecast as early as June 1.
And any tentative agreement between Democratic President Joe Biden and Congressional Republican Kevin McCarthy will be the start of what could easily be a week-long process to push the legislation through the narrowly and bitterly divided Congress.
Hardline Republicans in the House of Representatives have threatened to block any bill that fails to meet their expectations, including deep spending cuts.
Progressive Democrats have also threatened to refuse to support some of the compromises raised, particularly regarding the imposition of new work requirements on federal poverty programs.
“It’s very close and I’m optimistic,” Biden told reporters on Friday.
Republican negotiator Patrick McHenry said he agreed with Biden, though he said more negotiations were needed.
“I’m hopeful,” he told reporters Friday night. “I have rarely used that term in the last 12 days.”
Republicans control the House by a 222-213 margin, while Democrats hold a 51-49 majority in the Senate, leaving a narrow path to pass any deal between the Democratic president and the Republican president into law.
Republicans have sought to cut government spending sharply over the next 10 years to slow the growth of the US debt, which now equals the economy’s annual output.
But the tentative agreement would likely fall far short of their goal.
The two sides tentatively reached an agreement that would increase the debt ceiling enough to cover the country’s borrowing needs until the presidential election in November 2024.
It would increase spending on military and veterans’ care and cap spending on many national discretionary programs, according to people familiar with the talks.
Republicans have rejected Biden’s proposed tax increases, and neither side has shown a willingness to undertake the fast-growing health care and retirement programs that will steeply increase debt in years to come.
Biden’s signature infrastructure and green energy laws would remain intact, while the Internal Revenue Service would see its recent budget increase slightly reduced.
But safety net programs remain a sticking point. Republicans want to toughen work requirements for the Medicaid health plan for the poor and the SNAP food assistance program. Democrats say it would create more barriers for people who are already struggling to make ends meet.
Both programs have grown significantly during the COVID-19 pandemic, but have been scaled back in recent months.
A failure by Congress to raise its debt ceiling by June 5 could trigger a default that would rattle financial markets and plunge the United States into a deep recession.
Several rating agencies said they put the United States under review for a possible downgrade, which would raise borrowing costs and undermine its position as the backbone of the global financial system.
A similar standoff in 2011 led Standard & Poor’s to downgrade its rating on US debt, hammering markets and driving up government borrowing costs.
(Reporting by Moira Warburton and Katharine Jackson; Writing by Andy Sullivan; Editing by Scott Malone and Frances Kerry)