US debt talks at impasse as default clock ticks down

Republicans want spending cuts but Democrats have refused to commit

US Speaker of the House Kevin McCarthy arrives at the Capitol Building on Tuesday. EPA
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Negotiations to avert a US debt default look set to go to the wire, with talks resuming on Tuesday after President Joe Biden and the Republican Speaker of the House failed to reach agreement before a June 1 deadline.

Kevin McCarthy left the US Capitol on Tuesday afternoon saying the two sides had yet to reach a deal to avert the first US default, and a top lieutenant said there were no more meetings planned as yet.

“I believe we can still get there – and get there before June 1,” Mr McCarthy said.

Republican Representative Garret Graves, one of Mr McCarthy’s chief negotiators, suggested just hours after a two-hour meeting in the Capitol that the two sides were at an impasse.

“Bottom line is that we’re going to have to see some movement or some fundamental change in what they’re doing,” Mr Graves said of the White House negotiating team.

“Right now, we don’t have additional meetings set up.”

Mr Biden and Mr McCarthy said talks on Monday were productive but there was still disagreement on key issues.

Even if the two sides manage to resolve their differences, the timing will be tight for the required legislation to pass through Congress before June 1.

Mr Biden and Mr McCarthy's teams have been locked in late-night talks since Sunday to try to shape a deal to raise or suspend the borrowing cap, known as the debt ceiling, and cover existing US spending commitments.

Republicans in Congress have so far insisted on a commitment from Democrats to cut spending next year and start reducing the country's $31 trillion-plus debt burden.

US Treasury Secretary Janet Yellen has said the country could run out of money to pay for existing commitments as early as next week, while the non-partisan Congressional Budget Office predicts the so-called X-date will come two weeks later.

What is the US debt ceiling?

What is the US debt ceiling?

After three rounds of talks between Mr Biden and Mr McCarthy, the contours of a potential deal include a debt-limit increase with curbed federal spending, reforms to simplify the approval process for energy projects and clawing back up to $70 billion in unspent pandemic relief.

But cutting spending next year to 2022 levels remains a "red line" on which Republicans are insisting, but to which the Democrats have refused to commit.

Mr McCarthy told Republicans early on Tuesday the debt-limit talks still have some distance to go and pleaded with members of his party to stay united on demands for spending cuts.

The Biden administration has proposed freezing current spending limits but wants the Pentagon to share in any budget cuts, which runs counter to Republican objectives to boost military and border-security spending.

Mr Biden also wants any deficit reduction to be achieved in part by raising taxes on corporations and the wealthy, not only through spending cuts, which Republicans have ruled out.

Agencies contributed to this report

Updated: May 24, 2023, 12:28 AM