![Defense spending has emerged as a key point of tension in the talks, as congressional Republicans have pushed to exempt the Pentagon from potential budget cuts.](https://media.guim.co.uk/2d89e72c410bf0e7df87f39dbfcaa9d7f37e91f3/0_139_6618_3971/1000.jpg)
Joe Biden and Republican lawmakers on Thursday appeared to be nearing a deal to cut spending and raise the debt ceiling, with little time to spare to avoid a potential default that could wreak havoc on the economy and global markets.
The deal under consideration by negotiators would raise the government’s $31.4tn debt ceiling for two years while capping spending on most items, a US official told Reuters. It would also increase funding for discretionary spending on military and veterans while essentially holding non-defense discretionary spending at current year levels, the official said.
The agreement would specify the total amount the government could spend on discretionary programs including housing and education, according to a person familiar with the talks. The two sides, who met virtually on Thursday, are just $70bn apart on a total figure that would be well over $1tn, according to another source.
Republican negotiators have backed off plans to increase military spending while cutting non-defense spending and instead backed a White House push to treat both budget items more equally. Conversations are set to continue into the night.
Kevin McCarthy, the Republican House speaker, told reporters Thursday evening the two sides have not reached a deal. “We knew this would not be easy,” he said.
The US House adjourned on Thursday for the Memorial Day holiday weekend, but lawmakers have been told to be ready to come back to vote if a deal is reached.
Lawmakers left Washington for their home districts as advisers to McCarthy, and members of the Biden administration continued to haggle over the details.
“Speaker McCarthy and I have had several productive conversations, and our staffs continue to meet – as we speak, as a matter of fact – and they’re making progress,” Biden said on Thursday at the White House. “There will be no default, and it’s time for Congress to act now.”
Emphasizing that default was not an option, Biden said the negotiations have focused on creating the outlines of a budget that can win bipartisan support, as the president and McCarthy have clashed over their “competing visions for America”.
“Speaker McCarthy and I have a very different view of who should bear the burden of additional efforts to get our fiscal house in order,” Biden said. “I don’t believe the whole burden should fall on the backs of middle-class and working-class Americans. My House Republican friends disagree.”
With just one week left before the potential default deadline of 1 June, negotiators plan to continue their efforts to reach an agreement over the holiday weekend. Speaking to reporters on Capitol Hill on Thursday, McCarthy said the previous day’s talks continued well past midnight, and negotiators were meeting around the clock until a deal is reached.
“I thought we made some progress,” McCarthy said. “There’s still some outstanding issues, and I’ve directed our teams to work 24/7.”
Congressman Patrick McHenry of North Carolina, one of the chief Republican negotiators in the talks, said he did not expect a deal to be announced on Thursday.
“Everything’s sensitive at this moment,” McHenry told reporters. “There’s a balance that has to be struck, and there’s a lot more work that has to be done. But the work that we’re doing centers in on a shorter and shorter array of issues.”
Defense spending has emerged as a key point of tension in the talks, as congressional Republicans have pushed to exempt the Pentagon from potential budget cuts. Democrats have flatly rejected that proposal, insisting they will not allow non-defense priorities like education and healthcare to bear all of the proposed cuts.
According to the Associated Press, Republicans have expressed openness to the idea of keeping defense spending at the levels proposed by the Biden administration while redirecting some of the funding previously allocated to the Internal Revenue Service.
As negotiators edged closer to a deal, some hard-right lawmakers complicated matters for McCarthy by adding additional demands to their budgetary wishlist.
Members of the House Freedom Caucus sent a letter to McCarthy on Thursday calling on him to add border security provisions to the debt ceiling bill while cutting funding to build a new headquarters for the Federal Bureau of Investigation.
They also demanded that the treasury secretary, Janet Yellen, provide evidence to substantiate the threat of a default as early as 1 June.
“The power of an undivided Republican party guided by conservative principles cannot be overstated,” the Republican members wrote to McCarthy. “As you navigate the debt limit debate, you are the steward of this unity and will determine whether it continues to strengthen and places a historic stamp on this Congress or evaporates.”
The letter underscored that McCarthy will probably need some Democratic support to get a debt ceiling compromise through the House, but his colleagues on the other side of the aisle voiced sharp criticism of Republicans’ proposed spending cuts and their decision to leave Washington without a deal.
“Republicans have decided to skip town,” the progressive congresswoman Alexandria Ocasio-Cortez of New York said in a floor speech on Thursday. “They are accusing Democrats, saying we spend too much. For anyone that wants to entertain that thought, I ask you to think about the last time a person has said in this country that the government does too much for them, that their social security check was too high, that teachers are paid too much. When was the last time anyone has heard or seen that?”