Debt-limit negotiators will resume discussions in Washington ahead of a meeting on Monday between President Joe Biden and House Speaker Kevin McCarthy, as time grows short to avert a U.S. default.
The Republican leader said he and the president had a “productive” call Sunday, shifting back to a more optimistic outlook on talks that have whipsawed between progress and breakdown for days.
Negotiators for the two sides plan to resume talks 6 p.m. on Sunday, according to a statement from the White House.
McCarthy stressed in comments to reporters at the U.S. Capitol that the two sides don’t have an agreement as the country nears a catastrophic default that could come as soon as June 1.
“Time is of the essence,” the speaker said. But he added that he was more hopeful of a deal after talking with Biden about solutions to bridge their differences.
The president called McCarthy from Air Force One on his way back from an international summit in Japan.
Investors are girding for more volatility in markets this week as the two sides grapple for a deal.
Treasury Secretary Janet Yellen said earlier Sunday that the chances the U.S. can pay all its bills by mid-June are “quite low.” Yellen underscored the urgency of the situation, telling NBC that there are tax payments expected then that are substantial and “getting to that date is the problem.”
The current standoff over the debt ceiling has the potential to put more strain on the U.S. economy, which is already vulnerable to a recession after a series of interest-rate hikes by the Federal Reserve, according to Bloomberg Economics.
A U.S. default would risk triggering a market selloff, a surge in borrowing costs and a blow to the global economy. A temporary walkout from the debt-limit talks by Republican negotiators sent stocks down on Friday.
Biden told reporters in Japan Sunday before his departure that he proposed to cut spending and that the onus is now on Republicans to shift their demands. The president insisted he wouldn’t agree to a deal that protects tax breaks for the wealthy and the fossil-fuel and pharmaceutical industries while cutting health-care and education funding.
“Now it’s time for the other side to move from their extreme positions because much of what they’ve already proposed is simply, quite frankly, unacceptable,” Biden said.
Republicans have lowered their demands on spending caps from 10 years to six years, according to two people familiar with the talks, but the White House still wants the deal to last two years.
One of the people said the GOP is still seeking a large increase to defense spending next year, something that would deepen cuts to social services. Democrats have demanded that defense, which is about half of all federal discretionary spending, not be fenced off from cuts.
McCarthy and his spokesman didn’t reply when asked about the GOP spending cap offer.
Representative Garret Graves, one of the Republican negotiators, told reporters Sunday the GOP will insist on a multi-year spending limit and such a cap is a “foundational” focus of the talks. Energy permitting changes are “irrelevant” without a deal on caps, he said.
Graves said the two sides already have “made a lot of progress” in their discussions but had “a setback” on Saturday.
Asked about the possibility of a short-term extension to avoid a debt default, McCarthy dismissed the idea.