Negotiation between White House and Republicans on debt ceiling shows no progress

representatives of the president Joe Biden and congressional Republicans ended another round of debt ceiling talks on Tuesday with no sign of progress, days away from the deadline to raise the government’s $31.4 trillion borrowing limit or run out of the risk of defaulting on payments.

Both parties remain deeply divided on how to curb the federal deficit, with Democrats arguing wealthy Americans and businesses should pay more taxes, while Republicans want spending cuts.

The negotiators met for about two hours and left without making any substantive comment to the media.

“We had very good discussionsHouse Republican Leader Kevin McCarthy told reporters.

The Treasury Department has warned that the federal government could no longer have enough money to pay all its bills as of June 1, causing a default that would hit the US economy and raise borrowing costs.

The sides remain in disagreement over spending and it’s unclear when talks will resume, said Republican Patrick McHenry, who chairs the House Finance Committee.

White House spokeswoman Karine Jean-Pierredescribed the talks as “incredibly hard”.

“Both parties have to understand that they are not going to get everything they want,” Jean-Pierre said. “And we’re trying to come up with a budget that’s reasonable, that’s bipartisan, that House and Senate Democrats and Republicans can vote on and agree with.”

The lack of clear progress continued to weigh on Wall Street, with stocks falling sharply and world markets on edge.

Biden and Democrats want to freeze spending in fiscal 2024 at 2023 levels, arguing that would represent a spending cut because agency budgets won’t adjust for inflation. The idea was rejected by Republicans, who want spending cuts.

Biden he wants to cut the deficit by raising taxes on the rich and closing tax loopholes in the oil and pharmaceutical industries. McCarthy stated that increasing revenue is not effective.

“I don’t think it’s a revenue issue. It’s a spending problemMcCarthy said.

Unless Congress raises the debt ceiling and allows the federal government to borrow money to pay its bills, the United States could default on its obligations for the first time in history, which could send the country into a recession and plunge the World financial markets in chaos.

Any agreement to raise the limit must be approved by both houses of Congress, so it depends on bipartisan support. McCarthy’s Republicans control the House 222-213, while Biden’s Democrats hold a 51-49 Senate majority.

Source: Reuters