Debt ceiling talks teeter on the brink, as lawmakers leave town for weekend without deal

Speaker of the House Kevin McCarthy, R-Calif., talks with reporters about debt limit negotiations at the Capitol in Washington, Thursday, May 25. AP-Yonhap

House Republicans pushed debt ceiling talks to the brink Thursday, displaying risky political bravado in leaving town for the holiday weekend just days before the U.S. could face an unprecedented default hurling the global economy into chaos .

However, Speaker Kevin McCarthy also said he had directed his negotiating team "to work 24/7 to solve this problem."

At the Capitol, McCarthy, R-Calif., said "every hour matters" in talks with President Joe Biden's team as they try to work out a budget agreement. Republican are demanding spending cuts the Democrats oppose as their price for raising the legal debt limit.

"We've been taking to the White House all day," he told reporters in the evening. "We're working hard to make it happen."

In remarks at the White House, Biden said, "It's about competing versions of America." Yet both men expressed optimism that the gulf between their positions could be bridged.

The White House said discussions with the Republicans have been productive, including by video conference Thursday, though serious disagreements remained as the president fights for his priorities.

"The only way to move forward is with a bipartisan agreement," Biden said. "And I believe we'll come to an agreement that allows us to move forward and protects the hardworking Americans of this country."

As the deadline nears, it's clear the Republican speaker ― who leads a Donald Trump-aligned party whose hard-right flank lifted him to power, and who spoke to the former president this week ― is now staring down a potential crisis.

Lawmakers are tentatively not expected back at work until Tuesday, just two days from June 1, when Treasury Secretary Janet Yellen has said the U.S. could start running out of cash to pay its bills and face a federal default. Biden will also be away, departing Friday for the presidential retreat at Camp David, Maryland, and Sunday for his home in Wilmington, Delaware. The Senate is on recess and will be until after Memorial Day.

Meanwhile, Fitch Ratings agency placed the United States' AAA credit on "ratings watch negative," warning of a possible downgrade.

Democratic lawmakers lined up on the House floor as the workday ended to blame "extreme" Republicans for the risky potential default. "Republicans have chosen to get out of town before sundown," said House minority leader Hakeem Jeffries of New York.

Weeks of negotiations between Republicans and the White House have failed to produce a deal ― in part because the Biden administration has resisted negotiating with McCarthy over the debt limit, arguing that the country's full faith and credit should not be used as leverage to extract other partisan priorities.

McCarthy is holding out for steep spending cuts that Republicans are demanding in exchange for their vote to raise the nation's borrowing limit. The White House has offered to freeze next year's 2024 spending at current levels and restrict 2025 spending, but the Republican leader says that's not enough.

One idea is to set those topline budget numbers but then add a "snap-back" provision that enforces the cuts if Congress is unable during its annual appropriations process to meet the new goals.

Members of Congress begin to leave the House, Thursday, May 25, for the Memorial Day weekend, as debt limit negotiations continue, on Capitol Hill in Washington. AP-Yonhap

"We have to spend less than we spent last year. That is the starting point," said McCarthy.

Pressure is bearing down on McCarthy from the House's right flank not to give in to any deal, even if it means blowing past the June 1 deadline.

"Don't take an exit ramp five exits too early," said Rep. Chip Roy, R-Texas, a Freedom Caucus member. "Let's hold the line."

Trump, the former president who is again running for office, has encouraged Republicans to "do a default" if they don't get the deal they want from the White House.

McCarthy said Trump told him, "Make sure you get a good agreement."

Failure to raise the nation's debt ceiling, now at $31 trillion, to pay America's already incurred bills would risk a potentially chaotic federal default. Anxious retirees and social service groups are among those already making default contingency plans.

Even if negotiators strike a deal in coming days, McCarthy has promised lawmakers he will abide by the rule to post any bill for 72 hours before voting ― now likely Tuesday or even Wednesday. The Democratic-held Senate has vowed to move quickly to send the package to Biden's desk, right before next Thursday's possible deadline.

Pushing a debt ceiling increase to the last minute is not uncommon for Congress, but it leaves little room for error in a volatile political environment. Both Democrats and Republicans will be needed to pass the final package in the split Congress.

"We still have a ways to go," said top Republican negotiator Rep. Garret Graves of Louisiana as he juggled leading a Capitol tour for players and supporters of the championship Louisiana State University women's basketball team.

The contours of a deal have been within reach for days, but Republicans are unsatisfied as they press the White House team for more.

In one potential development, Republicans may be easing their demand to boost defense spending, instead offering to keep it at levels the Biden administration proposed, according to one person familiar with the talks and granted anonymity to discuss them.

The Republicans may achieve their goal of rolling back bolstered funding for the Internal Revenue Service if they agree to instead allow the White House to push that money into other domestic accounts, the person said.

The teams are also eyeing a proposal to boost energy transmission line development from Sen. John Hickenlooper, D-Colo., that would facilitate the buildout of an interregional power grid, according to a person familiar with the draft.

The White House has continued to argue that deficits can be reduced by ending tax breaks for wealthier households and some corporations, but McCarthy said he told the president as early as their February meeting that raising revenue from tax hikes was off the table.

While Biden has ruled out, for now, invoking the 14th Amendment to raise the debt limit on his own, Democrats in the House announced they have all signed on to a legislative "discharge" process that would force a debt ceiling vote. But they need five Republicans to break with their party and tip the majority to set the plan forward.

Other issues remain unresolved. Republicans also want to beef up work requirements for government aid to recipients of food stamps, cash assistance and the Medicaid health care program that Democrats say are a nonstarter. It remains an issue where both sides have "dug in," according to another person familiar with the talks and granted anonymity to discuss them.

They are all but certain to claw back some $30 billion in unspent COVID-19 funds now that the pandemic emergency has officially been lifted.

The White House has countered by proposing to keep defense and nondefense spending flat next year, which would save $90 billion in the 2024 budget year and $1 trillion over 10 years. (AP)