WASHINGTON — White House and Republican negotiators tentatively narrowed differences but were still clashing Friday on key issues as the Treasury Department signaled extra time was available before a potential U.S. default.
Treasury Secretary Janet Yellen announced the department expects to be able to make payments on U.S. debts up until June 5, four days longer than her previous estimate. That gets Treasury past a critical June 2 date for Social Security payments.
The new so-called X-date buys negotiators for House Speaker Kevin McCarthy and President Joe Biden more time to strike a deal. Their negotiating teams haven’t met in person since Wednesday but spoke late into the night Thursday and were in regular communication throughout the day Friday.
“I thought we made progress yesterday. I want to make progress again today,” McCarthy told reporters as he entered the Capitol after a morning bike ride with top negotiator Representative Garret Graves.
New work requirements for social programs such as food stamps and Medicaid health coverage have been pushed by Republicans and rejected by the White House.
“Hell no! Hell no! Not a chance,” Graves said when asked whether House Republicans would drop demands for more work requirements. “This is not happening.”
Biden didn’t make public comments on the talks, except to recognize one of his negotiators at a White House event honoring the championship Louisiana State University women’s basketball from her home state, saying she was “putting together a deal, hopefully.” Graves, who represents Louisiana, was also at the ceremony.
Republican Patrick McHenry, who on Thursday said he was “not pessimistic” about the talks, emerged from McCarthy’s office early Friday afternoon and vented frustrations as two dozen reporters shouted for details on the talks.
“There is forward progress, but each time there’s forward progress the issues that remain become more difficult and more challenging,” McHenry said. “So that is step by step, small step by small step. At some point this thing can can come together or go the other way.”
McCarthy, who noted he hasn’t spoken with Biden in the last 24 hours, has signaled over the last several days that a deal is slowly coming together.
With less than a week to go and at least one Republican senator threatening to tie up any bill with procedural obstacles that would take days to resolve, lawmakers are exploring other options. One such move would be a short-term measure that would allow Treasury to issue enough debt to cover a few days of payment obligations while a deal works through the legislative process, a Republican aide said on Friday.
The Capitol complex is nearly empty with most lawmakers gone ahead of a long holiday weekend. Negotiators have been asked to keep working until they reach a deal.
The two sides have narrowed differences in talks over recent days, people familiar with the discussions said, though the details agreed to are tentative and a final accord is still not in hand.
The emerging deal, which is not yet finalized, would raise the debt limit and cap federal spending for two years, according to people familiar with the matter. Also, defense spending would be permitted to rise 3% next year in line with Biden’s budget request.
The benchmark S&P 500 stock index was up 1.3% Friday as traders weighed the reports of an emerging deal against strong economic data pointing toward another Federal Reserve interest-rate increase. Yields on Treasury bills maturing in early June tumbled, a sign investors are regaining confidence in on-time repayment during the window when a U.S. default would be likely without a deal.
Deputy Treasury Secretary Wally Adeyemo warned Friday that payments to Social Security beneficiaries, veterans and others would be delayed if there’s a default. But he said he’s gaining some confidence an agreement will be reached.
“We’re making progress and our goal is to make sure that we get a deal because default is unacceptable,” Adeyemo said in an interview on CNN. “The president has committed to making sure that we have good-faith negotiations with the Republicans to reach a deal because the alternative is catastrophic for all Americans.”
The accord would also include a measure to upgrade the nation’s electric grid to accommodate renewable energy, a key climate goal, while speeding permits for pipelines and other fossil fuel projects that the GOP favors, people familiar with the deal said.
The deal would cut $10 billion from an $80 billion budget increase for the Internal Revenue Service that Biden won as part of his Inflation Reduction Act. Republicans have warned of a wave of agents and audits while Democrats said the increase would pay for itself through less tax cheating.
What is taking shape would be far more limited than the opening offer from Republicans, who called for raising the debt ceiling through next March in exchange for 10 years of spending caps. House conservatives were already balking Thursday at the notion of a small deal, with the House Freedom Caucus sending a letter to McCarthy demanding he hold firm.
(With assistance from Erik Wasson, Akayla Gardner and Jennifer Jacobs.)