Congress is closing in on a deal before shutting down for a recess, reports say

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By Chloe Kim and Natalie Sherman BBC News May 25, 2023

Updated 31 minutes ago

Image source, Getty Images

US President Joe Biden and ranking Republican Kevin McCarthy appear to be closing in on a deal on the US debt ceiling, even as Congress breaks for the weekend.

And US media reported that the initial deal would increase the ceiling for two years, and restrict federal spending except for the military and veterans.

Investors’ concerns have grown, despite earlier assurances that the talks are making progress.

The deal is not final yet.

The US Treasury has warned that the country will not have enough money to pay all its bills as soon as June 1.

Analysts say that if the United States fails to live up to its commitments, it could have dire economic consequences.

Two-year agreement

The details identified by Reuters and the New York Times would allow Republicans to say they cut spending, while Democrats could say they defended domestic programs.

A US official told the news agency that the White House is considering scaling back the Internal Revenue Service’s increase to hire more auditors, which was intended to target wealthy Americans.

The Times reported that negotiators were closing in on a deal that would raise the debt limit for two years while imposing strict limits on spending alongside the military or veterans for the same period.

Republicans are seeking to cut spending on government programmes, in return for increasing the $31.4tn (£25tn) cap on government borrowing.

Biden said the two sides have different visions of how America’s “house fiscal” should be regulated, but added that all of the leaders involved agreed that default is not an option.

McCarthy, who leads House Republicans and has been the most prominent public face in the talks for his party, said earlier that Democrats and Republicans worked after midnight on Wednesday and would continue negotiating.

“There are still two outstanding issues that we have to complete,” he said. “We’re going to work 24/7 to try and make that happen.”

Another major Republican said he believes a deal to raise the nation’s debt ceiling is “likely” by Friday afternoon.

“We’re getting closer and closer to an agreement,” Representative Kevin Hearn told Reuters. “I think those are some of the finer points that they’re working on right now.” “You’ll probably see a deal by noon tomorrow.”

“Neither side will get exactly what they want,” said White House press secretary Karen Jean-Pierre, adding that the recent negotiations were “productive.”

The S&P 500 and Nasdaq were trading higher at midday Thursday, buoyed by positive updates on earnings of some companies, while the Dow Jones Industrial Average was down about 0.6%.

This came after several days of backtracking.

Fitch Ratings, one of the big three credit rating agencies, said on Wednesday it had placed the United States on “negative watch” — the first step toward downgrading the country’s credit rating.

It cited “increased political partisanship” and poor governance compared to other top-ranked countries.

The company said: “The policy of brinkmanship with regard to the debt ceiling, the failure of the US authorities to meaningfully address the fiscal challenges in the medium term that will lead to an increase in the budget deficit, and the growing debt burden, indicate negative risks to the creditworthiness of the United States.”

McCarthy has promised to give lawmakers 72 hours to review the law, and at least 24 hours’ notice if they have to return to Washington early. If an agreement is reached this week, a vote could take place as early as next week.

There is little room for maneuver to raise objections, as the Senate would also have to vote on the bill, which would then go to the White House for signature.

Lawmakers could also temporarily raise the debt ceiling to give talks more time.

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