Arrow-right Camera
The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

McCarthy notes progress as debt-limit talks narrow toward deal

U.S. President Joe Biden (right) meets with House Speaker Kevin McCarthy in the Oval Office of the White House in Washington, D.C. on Monday, May 22, 2023.  (Yuri Gripas/Abaca Press/TNS)
By Billy House and Christian Hall Bloomberg News

WASHINGTON – House Speaker Kevin McCarthy said talks on the debt ceiling resumed Friday, with negotiations stretching into the final days before the U.S. risks defaulting.

“We worked into the night. I thought we made progress,” McCarthy said as he entered the Capitol. “I thought we made progress today.”

McCarthy noted he hasn’t spoken with President Joe Biden in the last 24 hours.

The Capitol complex is nearly empty with most lawmakers gone ahead of a long holiday weekend. Negotiators have been asked to keep working until they reach a deal.

The two sides have narrowed differences in talks over recent days, people familiar with the discussions said, though the details agreed to are tentative and a final accord is still not in hand.

Under the terms of the emerging agreement, defense spending would be permitted to rise 3% next year in line with Biden’s budget request.

The benchmark S&P 500 stock index was up more than 1% late Friday morning as traders weighed the reports of an emerging deal against strong economic data pointing toward another Federal Reserve interest-rate increase. Yields on Treasury bills maturing in early June tumbled, a sign investors are regaining confidence in on-time repayment during the window when a US default would be likely without a deal.

Deputy Treasury Secretary Wally Adeyemo warned Friday that payments to Social Security beneficiaries, veterans and others would be delayed if there’s a default. But he said he’s gaining some confidence an agreement will be reached.

“We’re making progress and our goal is to make sure that we get a deal because default is unacceptable,” Adeyemo said in an interview on CNN. “The president has committed to making sure that we have good-faith negotiations with the Republicans to reach a deal because the alternative is catastrophic for all Americans.”

The accord would also include a measure to upgrade the nation’s electric grid to accommodate renewable energy, a key climate goal, while speeding permits for pipelines and other fossil fuel projects that the GOP favors, people familiar with the deal said.

The deal would cut $10 billion from an $80 billion budget increase for the Internal Revenue Service that Biden won as part of his Inflation Reduction Act. Republicans have warned of a wave of agents and audits while Democrats said the increase would pay for itself through less tax cheating.

What is taking shape would be far more limited than the opening offer from Republicans, who called for raising the debt ceiling through next March in exchange for 10 years of spending caps. House conservatives were already balking Thursday at the notion of a small deal, with the House Freedom Caucus sending a letter to McCarthy demanding he hold firm.

An adviser to the House Democratic leadership said the White House had not shared any word about agreements on spending caps or IRS funding.

Should a deal be reached soon, Tuesday is emerging as the likely day for a House vote. The Senate would then have to act quickly to send it to Biden’s desk before June 1, the date by which Treasury Secretary Janet Yellen has said her department could run out of cash.

The following day sees a payment due to millions of Social Security beneficiaries, putting pressure on politicians to resolve the impasse.

Fitch Ratings Wednesday placed the AAA credit rating for the U.S. on watch for a potential downgrade. The U.S. lost its AAA grade at S&P Global Ratings during a similar partisan standoff on the debt ceiling in 2011.