McCarthy says nowhere near deal on US debt ceiling

Republicans who control the House of Representatives in Washington and the Biden administration are not close to a deal on avoiding a potentially hugely damaging US debt default, speaker Kevin McCarthy has said.

However he maintained that an agreement to allow the US to borrow more in return for spending cuts could be reached ahead of a deadline at the beginning of June when the federal Government could run out of money to pay its bills.

At a private meeting with his Republican Party representatives in Washington on Tuesday Mr McCarthy is understood to have said: “I need you all to hang with me on the debt limit.”

“We are nowhere near a deal yet.”

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Following direct talks with US president Joe Biden on Monday both men described their meeting as “productive”.

The White House said on Tuesday that the US Congress needed to act on the debt ceiling and that a bipartisan agreement on the budget was required. It said neither party was going to get everything it wanted.

However before the talks on Tuesday Republican negotiator Garret Graves said he had seen little progress.

“I don’t think things are going well,” Mr Graves told reporters. “They are refusing to truly change the trajectory, to truly reduce spending, and that is a red line.”

On Monday US treasury secretary Janet Yellen warned that unless Congress raised or suspended the official debt limit, it was “highly likely”. that the US Government would no longer be able to satisfy all of its obligations “by early June, and potentially as early as June 1″.

However, on Tuesday hard-line Republican members of the House of Representatives were sceptical about these concerns.

“I don’t buy June 1,” Ralph Norman, a member of the conservative House Freedom Caucus, said.

“We need to subpoena her and get her plan.”

Republican congressman Matt Gaetz said: “If Janet Yellen can really prove that the receipts and deposits create this default on June 1, she should come to Congress and prove that.”

At present the US government is limited by law to borrowing no more than $31.4 trillion (€28.5 trillion).

The US treasury has for several months been in essence juggling money around to pay its bills as it approached this ceiling on the amount it can legally borrow.

Ms Yellen was essentially signalling on Monday that the “extraordinary measures” the government has been employing to keep afloat financially are coming to an end and that at some point on or shortly after June 1 the country could default on scheduled payments.

The White House has warned that a US debt default would trigger widespread domestic and international economic turmoil. It has maintained that in the event of a protracted default, about eight million jobs could be lost in the United States.

On Tuesday the Washington Post reported that the US treasury had asked federal agencies whether they could postpone upcoming payments until a later date.

Republicans are seeking to use the debt ceiling issue as leverage to secure reductions in overall federal government spending.

The White House and Republicans are deeply divided about how to address the government’s financial deficit.

The president on Monday again suggested that revenue raising measures had to form part of the equation – while ruling out tax rises for those earning below $400,000.

Mr McCarthy rejected any increase in taxation.

Mr Biden and his Democrats want to freeze spending for next year at the same level as in 2023. However Republicans want deeper cuts while boosting military expenditure which would result in sharper expenditure reductions in other areas.

Republicans are also seeking stricter work requirements for those availing of federal aid programmes – something strongly opposed by Democrats.