Debt limit talks halted again late Friday at the U.S. Capitol shortly after resuming, another sudden turn of events after negotiations had come to an abrupt standstill earlier in the day when Republican House Speaker Kevin McCarthy said it was time to “pause” negotiations, and a White House official acknowledged there are “real differences.”
Top Republican negotiators for McCarthy exited the brief meeting shortly after talks restarted Friday evening. They said there were no further negotiations planned for Friday and they were uncertain on next steps. But a top White House adviser to President Joe Biden said they were hopeful for a resolution. The negotiators are racing to strike a budget deal to resolve the standoff.
“We reengaged, had a very, very candid discussion, talking about where we are, talking about where things need to be, what’s reasonably acceptable,” said Rep. Garret Graves, R-La., a top McCarthy ally leading the talks for his side.
As the White House team left the nighttime session, counselor to the president Steve Ricchetti, who is leading talks for the Democrats, said he was hopeful for an outcome. “We’re going to keep working,” he said.
Biden’s administration is reaching for a deal with Republicans led by McCarthy as the nation careens toward a potentially catastrophic debt default if the government fails to increase the borrowing limit, now at $31 trillion, to keep paying the nation’s bills.
Earlier in the day, McCarthy said resolution to the standoff is “easy,” if only Biden’s team would agree to some spending cuts Republicans are demanding.
The biggest impasse was over the fiscal 2024 top-line budget amount, according to a person briefed on the talks and granted anonymity to discuss them. Democrats staunchly oppose the steep reductions Republicans have put on the table as potentially harmful to Americans.
“We’ve got to get movement by the White House, and we don’t have any movement yet,” McCarthy, R-Calif., told reporters at the Capitol. “So, yeah, we’ve got to pause.”
The White House official, who was granted anonymity to talk about the private discussions, had said at that time there are “real differences” between the parties on the budget issues and further “talks will be difficult.”
Wall Street turned lower as negotiations came to a sudden halt, raising worries that the country could edge closer to risking a highly damaging default on U.S. government debt.
The president, who has been in Japan attending the Group of Seven summit, had no immediate comment. Biden had already planned to cut short the rest of his trip, and he is expected to return to Washington on Sunday.
Negotiators met Friday for a third day behind closed doors at the Capitol with hopes of settling on an agreement this weekend before possible House votes next week. They face a looming deadline as soon as June 1, when the Treasury Department has said it will run out of cash to pay the government’s incurred debt.
McCarthy faces pressures from his hard-right flank to cut the strongest deal possible for Republicans, and he risks a threat to his leadership as speaker if he fails to deliver. Many House Republicans are unlikely to accept any deal with the White House.
The internal political dynamics confronting the embattled McCarthy leaves the Democrats skeptical of giving away too much to the Republicans and driving off the Democratic support they will need to pass any compromise through Congress.
Markets had been rising this week on hopes of a deal. But that shifted abruptly Friday after negotiators ended late morning an hour after they had begun.
The S&P 500 went from a gain of 0.3% to a loss of 0.1% and the Dow Jones Industrial Average went from a gain of 117 points to a loss of about 90 points.
As Republicans demand spending cuts and policy changes, Biden is facing increased pushback from Democrats, particularly progressives, who argue the reductions will fall too heavily on domestic programs that Americans rely on.
Some Democrats want Biden to invoke his authority under the 14th amendment to raise the debt ceiling on his own, an idea that raises legal questions and that the president has so far said he is not inclined to consider.