WASHINGTON, May 26 (Reuters) – Democratic and Republican negotiators struggled on Friday to reach a deal to raise the U.S. government’s $31.4 trillion debt ceiling, as they remained at odds over whether to stiffen work requirements for some anti-poverty programs.
Time is running short for Democratic President Joe Biden and Republican House of Representatives Speaker Kevin McCarthy to reach an accord to raise the federal government’s self-imposed borrowing limit and avert a potentially disastrous default.
Negotiators appeared to be nearing a deal to lift the limit for two years, with agreement reached on funding for the Internal Revenue Service and the military while capping spending on many government programs, according to a U.S. official.
But the safety-net programs remained a sticking point.
“We continue to have major issues that we have not bridged the gap on – chief among them work requirements,” lead Republican negotiator Garret Graves told reporters.
An administration official briefed on the talks said they could easily slip into the weekend.
Biden and his Democrats have resisted a Republican push to require childless adults under 56 years old to show they are working or looking for work in order to qualify for the Medicaid health plan and the SNAP food-assistance program.
The Republican proposal would require more participants in those programs to show they are working or looking for work. That would save $120 billion over 10 years but also force more than 1 million Americans out of those programs, according to the nonpartisan Congressional Budget Office.
“I do not think it’s right that you borrow money from China to pay people to stay home – that are able-bodied with no dependents,” McCarthy told reporters.
Democrats say the proposal would only create more red tape that would exclude people who would otherwise qualify.
Both Medicaid and SNAP have scaled back in recent months after expanding dramatically during the COVID-19 pandemic. Biden in particular has resisted the work requirements for Medicaid, which covered 85 million Americans as of January.
A failure by Congress to raise its self-imposed debt ceiling in the coming week could trigger a default that would shake financial markets and send the United States into a deep recession.
Wall Street’s main indexes rose on Friday as investors hoped for progress in the negotiations. A two-year extension would mean Congress would not need to address the limit again until after the 2024 presidential election.
The deal under consideration would increase funding for military and veteran care while essentially holding non-defense discretionary spending at current-year levels, said the official, who requested anonymity because they are not authorized to speak about internal discussions.
The deal might also scale back funding for the IRS, which got an extra $80 billion last year, in part to bolster enforcement and bring in more tax revenue. Republicans have sought to revoke that funding.
The White House is working on a way to preserve its effort to target wealthy taxpayers, the official said.
The Treasury Department has warned that it could be unable to cover all its obligations as soon as June 1, but also has made plans to sell $119 billion worth of debt that will come due on that date, suggesting to some market watchers that it was not an iron-clad deadline.
Several credit-rating agencies have said they have put the United States on review for a possible downgrade, which would push up borrowing costs and undercut its standing as the backbone of the global financial system.
A similar 2011 standoff led Standard & Poor’s to downgrade its rating on U.S. debt.
Even if they succeed in reaching a deal, leaders from both parties will have to work hard to round up enough votes for approval in Congress. Right-wing Republicans have insisted that any deal must include steep spending cuts, while Democrats have resisted the new work requirements for benefit programs.
Most lawmakers have left Washington for the Memorial Day holiday, but their leaders have warned them to be ready to return for votes when a deal is struck.
House of Representatives leaders have said lawmakers will get three days to ponder the deal before a vote, and any single lawmaker in the Senate has the power to tie up action for days. At least one, Republican Mike Lee, has threatened to do so.
Reporting by Jarrett Renshaw, Richard Cowan, Trevor Hunnicutt, Andy Sullivan, Gram Slattery, David Lawder and Nandita Bose; writing by Andy Sullivan; Editing by Scott Malone, Alistair Bell and Rosalba O’Brien
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