WASHINGTON, May 26 (Reuters) – Democratic and Republican negotiators were given more time on Friday to reach an agreement to raise the U.S. government debt ceiling to $31.4 trillion, as Treasury Secretary Janet Yellen said the government was likely to run out of money to pay its bills. on June 5, giving four days more breathing room than its previous forecast.
Yellen’s announcement gives Democratic President Joe Biden and Republican Speaker of the House of Representatives Kevin McCarthy a bit more time to reach an agreement to raise the federal government’s self-imposed borrowing limit and avoid a potentially disastrous default.
Negotiators appear close to an agreement to lift the limit for two years, but remain at odds over whether to toughen work requirements for some poverty programs.
Any deal would need to be approved by the Republican-controlled House and the Democratic-led Senate before Biden can sign it — a process that could take more than a week.
The two sides have tentatively reached an agreement that would limit spending on many government programs next year, according to a US official.
But safety net programs remained a sticking point. Chief Republican negotiator Garret Graves said his party would not back down from its demand to require more participants to take jobs.
“Hell no. Not a chance,” Graves told reporters.
A Biden administration official briefed on the talks said they could easily slip into the weekend.
Biden and his fellow Democrats resisted a Republican push to require childless adults under 56 to show they are working or looking for work in order to qualify for the Medicaid health plan and the SNAP food assistance program. .
The Republican proposal would require more participants in these programs to show that they are working or looking for work. That would save $120 billion over 10 years, but would also force more than a million Americans out of those programs, according to the nonpartisan Congressional Budget Office.
“I don’t think it’s fair for you to borrow money from China to pay able-bodied people without dependents,” McCarthy told reporters.
Democrats said the proposal would only create more bureaucracy that would exclude people who would otherwise be eligible.
Medicaid and SNAP have scaled back in recent months after experiencing dramatic expansion during the COVID-19 pandemic. Biden in particular resisted the work requirements of Medicaid, which covered 85 million Americans in January.
A failure by Congress to raise its debt ceiling by June 5 could trigger a default that would rattle financial markets and plunge the United States into a deep recession.
Major Wall Street indexes rose on Friday as investors hoped for progress in negotiations. A two-year extension would mean Congress would not need to revisit the limit until after the 2024 presidential election.
The deal under consideration would increase funding for military and veterans care while essentially keeping discretionary non-defense spending at current-year levels, according to the official, who spoke undercover. of anonymity.
The deal could also cut funding for the Internal Revenue Service, which got an additional $80 billion last year, in part to bolster law enforcement and generate more tax revenue. Republicans have sought to revoke that funding.
The White House is working on a way to preserve its efforts to target wealthy taxpayers, the official said.
The Treasury Department had initially warned that it might not be able to cover all of its obligations by June 1. But he also went ahead with his plan to sell $119 billion worth of debt that will mature on that date, suggesting to some market watchers it wasn’t an ironclad deadline.
Several rating agencies said they put the United States under review for a possible downgrade, which would raise borrowing costs and undermine its position as the backbone of the global financial system.
A similar stalemate in 2011 led Standard & Poor’s to lower its rating on US debt.
Even if they succeed in reaching an agreement, the leaders of both parties will have to work hard to muster enough votes for congressional approval. Right-wing Republicans have insisted any deal must include deep spending cuts, while Democrats have resisted new work requirements for benefits programs.
Most lawmakers have left Washington for the Memorial Day vacation, but congressional leaders have told them to be ready to return for votes when a deal is reached.
Parliamentary leaders said lawmakers would have three days to consider the deal before a vote. Any lawmaker in the Senate has the power to suspend the action for days. At least one, Republican Mike Lee, has threatened to do so.
Reporting by Jarrett Renshaw, Richard Cowan, Trevor Hunnicutt, Andy Sullivan, Gram Slattery, David Lawder and Nandita Bose; written by Andy Sullivan; Editing by Scott Malone, Will Dunham, Alistair Bell and Rosalba O’Brien
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