US debt ceiling talks reportedly near agreement as deadline looms | US politics

Talks were reportedly close to conclusion on Friday afternoon on an outline deal to increase the US debt ceiling and avoid a disastrous and unprecedented default, with Wall Street and European shares rising as the White House and congressional Republicans worked on the final touches of a package to present to Congress.

US lawmakers are on call over the Memorial Day holiday weekend after leaving Washington without a deal and with deadline day to avoid the prospect of default, 1 June, just six days away.

House speaker Kevin McCarthy, a Republican, arrived at the US Capitol on Friday morning saying he “will work until we get it done”.

Democrats representing Joe Biden indicated the US president was willing to consider spending cuts, including to planned extra funding for the Internal Revenue Service, a target of rightwing attacks, the Washington Post reported.

Citing an anonymous US official, Reuters said the impending deal would raise the ceiling for two years “while capping spending on everything but military and veterans”.

On Thursday night McCarthy told reporters: “We’ve been talking to the White House all day, we’ve been going back and forth, and it’s not easy. It takes a while to make it happen, and we are working hard to make it happen.”

North Carolina congressman Patrick McHenry, a Republican negotiator, said: “I think there’s a sense of understanding from both teams that we have serious issues still to work out and come to terms with, and that’s going to take some time. That’s all there is to it.”

Any deal would have to pass the House and Senate, which typically takes days to complete.

The debt ceiling stands at $31.4tn. The treasury secretary, Janet Yellen, has said the US will cease to be able to pay its bills on or around 1 June, if the limit is not raised.

Doing so is usually a formal process, if subject to political grandstanding. Republicans raised the ceiling without preconditions three times under Donald Trump, while adding to the debt with tax cuts and spending rises.

But McCarthy has only a five-seat majority and is beholden to the far right of his party, which is demanding stringent cuts.

On Thursday the White House press secretary, Karine Jean-Pierre, told reporters: “We’re fighting against Republicans’ extreme, devastating proposal that would slash … law enforcement, education, food assistance, all of these things are critical to American families who are just trying to make ends meet.

“So what the people should know, what the American people should know, is that we are not taking any hostages here. Default is not an option.”

Most analysts say a US default would cast the global economy into market chaos and probable recession.

This week, the US treasury cash balance dropped to $49.5bn, prompting Bloomberg TV to report: “There are 24 individuals on the Bloomberg Billionaires list who have more money than the treasury does right now.”

Reuters spoke to David Beers, a former head of sovereign ratings for Standard & Poor’s, which in 2011 reacted to a similar Republican-fueled debt standoff by downgrading its US credit rating, a move that stoked market instability.

“We thought that the political polarisation in the country was likely to endure, and secondly, we were also concerned about the rising trajectory of debt,” Beers said. “On both of our counts, our expectations, if anything … have been exceeded. I have no doubt in my mind that was the right call.”

Now, some on the Republican right, including Trump, the former president and current presidential frontrunner, say the party should let the US default if Biden refuses to cave to all their demands.

Some House Democrats are upset at being kept out of negotiations, and at how Biden has trusted advisers to conduct talks rather than consistently getting involved himself. Democrats have also bemoaned how Republicans seem to be winning the messaging war, public polling showing support for spending cuts – and a ceiling raise.

Rosa DeLauro, from Connecticut, told Politico: “The scale of the cuts [demanded by Republicans] is staggering, which really the public knows very little about. The president should be out there.”

Biden was due to meet winning basketball teams at the White House on Friday, then travel to the presidential retreat at Camp David in Maryland.

Steven Horsford of Nevada, chair of the Congressional Black Caucus, said: “They need to use the power of the presidency … I need the American people to know that Democrats are here fighting, working, prepared to reach an agreement to avoid a default and only the White House, the president, can explain that in this moment.”

However Biden has not been silent. On Thursday, in remarks at the White House, he said Republicans wanted “huge cuts” that would hurt ordinary Americans.

Saying congressional leaders “all agreed there will be no default”, the president said: “It’s time for Congress to act, now.

“The negotiations we’re having with Speaker McCarthy … are about competing visions for America. Under my administration, we’ve already cut the deficit by $1.7tn in our first three years. But Speaker McCarthy and I have a very different view of who should bear the burden of additional efforts to get our fiscal house in order.

“I don’t believe the whole burden should fall on the backs of middle-class and working-class Americans. My House Republican friends disagree.

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