Biden says ‘very optimistic’ about debt ceiling deal

  • President Joe Biden said Friday night that negotiators were “very close” to reaching a compromise deal to raise the debt ceiling.
  • House Republicans appeared on track to win some of their top priorities, including revoking some of the $80 billion allocated to the IRS by last year’s Control Inflation Act.
  • New Treasury Department guidance estimates that the United States will not run out of money to pay its bills by June 5, four days later than previous estimates.

WASHINGTON — President Joe Biden said on Friday he was “very optimistic” about reaching a compromise agreement with House Republicans to raise the debt ceiling by the June 5 deadline announced earlier in the day. .

“Tonight, before the clock strikes 12:00, we hope to have clear evidence of a deal,” Biden told reporters on the South Lawn of the White House shortly after 6 p.m. ET. said. “It’s very close and I’m optimistic,” he added.

The White House and congressional negotiators were close to agreeing on an increase. debt ceiling Sources familiar with the negotiations told CNBC early Friday morning:

“Hopefully by tonight we’ll know if a deal is possible,” Biden said.

The two countries could breathe a sigh of relief Friday afternoon after Treasury Secretary Janet Yellen said the United States would never run out of money to pay its bills. By June 5th — four days later than her previous estimate.

But even as an agreement on the central issue of government spending emerges, new obstacles threaten progress on a final agreement.

Republican negotiator Garrett Graves of Louisiana told reporters at the Capitol on Friday afternoon that “there are still significant gaps that have not been bridged.”

market Rose Friday was fueled in part by optimism that the two sides would reach a deal before Treasury funds were exhausted. Failure to remove borrowing limits could damage the U.S. economy and threaten the benefits on which millions of people depend for survival.

Under the proposal that was tabled on Friday, House Republicans would achieve at least two highs. Priority In exchange for a vote to raise the debt ceiling. First, reduce the baseline federal spending for most discretionary programs in 2024. And second, to undo part of it. $80 billion It will be assigned to the Internal Revenue Service as part of the 2022 Inflation Control Act, two sources familiar with the discussions told CNBC earlier in the day.

This canceled IRS money will be used to make up much of the domestic funding shortfall created by Republican spending cuts, effectively sustaining the program while technically reducing overall sales. . The Department of Defense and veterans’ medical benefits will not be cut, and that funding will actually increase next year.

Details were still in flux as of Friday, with two officials calling the IRS funding trade-off a “real issue.”

A win for both sides?

At first glance, such a deal could be win-win.Republicans could rightly claim they secured it Reducing Basic Government Spending The Democrats, likewise, could be said to have kept most of their domestic programs at or below current funding levels.

But progress on one side of the negotiations betrayed new tensions on another. Republicans are demanding that any treaty include new employment requirements for federally-assisted health insurance (Medicaid) recipients.

House Democrats vehemently opposed the bill, arguing that including it in the final deal would cost the McCarthy Democrats the votes needed to pass it.

To show just how controversial the issue was on Friday, Graves responded curtly when a reporter asked if Republicans were willing to back down on working conditions in order to finalize the deal. .

“No way! No chance,” Graves replied.

Mr. Biden took a similarly defiant tone when reporters asked the president what he would say to “Democrats unwilling to bow to working conditions.”

Mr Biden replied, “I will not bow to anyone.”

Rep. Garrett Graves (R, Louisiana left) and Rep. Patrick McHenry (R-L) speak to reporters on debt ceiling negotiations after the House Republican caucuses at the Capitol Hill Club in Washington, May 23. (Republican).  2023.

Bill Clark | CQ-Roll Call Inc. | Getty Images

Rep. Garrett Graves (R, Louisiana left) and Rep. Patrick McHenry (R-L) speak to reporters on debt ceiling negotiations after the House Republican caucuses at the Capitol Hill Club in Washington, May 23. (Republican). 2023.

Graves is one of two House Republicans leading the negotiations. The other is Rep. Patrick McHenry of North Carolina. The White House has named Office of Management and Budget Director Shalanda Young and Biden’s adviser Steve Richetti to the negotiations. President Joe Bidenis a representative of

Both teams have been working around the clock for more than a week to find a way forward in time through a bitterly divided parliament to avoid a potentially catastrophic default.

what is the problem

The urgency of the negotiator’s task was underscored this week when Fitch’s credit rating agency released the US’ triple-A rating late Wednesday. “The watch has a negative rating.”

International Monetary Fund officials wrote: annual evaluation A U.S. report released on Friday said that “brinkmanship over the federal debt ceiling could create further systemic risks to both the U.S. and global economies that are entirely avoidable.”

“If Congress does not raise or suspend the debt ceiling by June 5, the United States will not have the funds to meet its government obligations,” Yellen told Congress on Friday.

Even a short-term technical default of a few days can raise interest rates, undermine confidence in the US dollar as the world’s reserve currency, and wreak havoc on domestic economies. Fitch, for example, has already said it intends to lower the U.S. credit rating if Congress misses Yellen’s deadline.

US Treasury Secretary Janet Yellen speaks at the Independent Community Bankers of America (ICBA) Capital Summit in Washington, DC, USA, Tuesday, May 16, 2023.

Nathan Howard | Bloomberg | Getty Images

US Treasury Secretary Janet Yellen speaks at the Independent Community Bankers of America (ICBA) Capital Summit in Washington, DC, USA, Tuesday, May 16, 2023.

Prolonged defaults could force governments to delay payments such as: social security benefits And food aid for low-income families, the money tens of millions of Americans depend on to survive.

The extra four days will give negotiators more time to reach a deal, while giving Congress enough time to vote on the borrowing cap bill. Lawmakers face a looming deadline for the June 1 deadline, especially since McCarthy has promised to give lawmakers 72 hours to read the bill before it is voted on. rice field.

Republicans have a narrow majority in the House, while Democrats have a slight edge in the Senate. Therefore, negotiators need to craft a bill that can pass both houses.

But this does not mean that negotiators need to reach an agreement that everyone supports. Democrats and Republicans acknowledged this week that the final bill could lose votes for hard-liners on both sides.

“I don’t think everyone will be happy at the end of the day,” McCarthy said Thursday at the Capitol. “That’s not how this system works.”


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Written by Natalia Chi

Chicago Popular; Chicago breaking news, weather and live video. Covering local politics, health, traffic and sports for Chicago, the suburbs and northwest Indiana.

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