Race for US debt deal as talks go to the wire

Democrats and Republicans seemed within grasping distance Saturday of a deal to end the US debt ceiling standoff, with both sides playing hardball in the final race for an agreement to avert a potentially catastrophic default.

President Joe Biden gave the strongest sign yet on Friday night that the drama in Washington might be drawing to an end – saying an agreement was "very close."

And Republican congressional leader Kevin McCarthy sounded positive as negotiators reconvened Saturday morning, telling reporters on Capitol Hill: "I feel we can get there."

As the clock toward a calamitous national default ticked down, Biden spoke directly with McCarthy early Saturday evening, as well as with the top Democrats in both houses of Congress, according to a source familiar with the negotiations.

Democrats reportedly drew a red line at Republican demands for tougher work requirements in exchange for social aid that they say would kill party support for a deal.

In his morning briefing McCarthy acknowledged negotiators were "not there yet" – but said he was confident of meeting the critical June 5 deadline for a deal.

That is the day when, short of an accord allowing it to keep borrowing, the US government says it will run out of money to pay its bills – raising the prospect of a default that would likely trigger a recession and send shock waves through the global economy.

"I feel closer to an agreement now than I did a long time before," McCarthy said, adding: "Some things we just have to finish out."

McCarthy said once a deal is reached, he will give legislators 72 hours before bringing the bill to a vote. He added Saturday morning that the bill would not be lengthy, likely around 150 pages.

The dreaded June 5 deadline is four days later than a previous X-date, but still guarantees that – even with a deal this weekend – it will be a frantic race to get a bill through Congress in less than 10 days.

And winning bipartisan support for its adoption will test the skills of party whips, with grumblings already on both sides over the concessions being made.

The deal believed to be taking shape would include an agreement to extend the government's borrowing authority for two years, meaning there would be no repeat of the current drama before the 2024 presidential election.

But Democrats would have to offer some ground on Republican demands for sweeping spending limits on social safety and other domestic programmes – most controversially a demand that those applying for benefits such as food assistance work for them.

Hostage-taking accusation 

The White House has pushed back hard, accusing Republicans of putting at risk "over eight million jobs unless they can take food out of the mouths of hungry Americans."

McCarthy earlier set the tone for the final-stretch negotiations by reposting a clip of himself telling reporters: "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 on the couch.

"That is not the American way. That is not what we believe."

Members of Congress left for a 10-day recess at the start of the long Memorial Day weekend – with Biden himself, to the consternation of some in his own party, spending the weekend at his Camp David retreat, then his home in Delaware.

Economists have spent months raising the prospect of economic catastrophe should the government default, but both the White House and Republican leadership insist they are negotiating in good faith and are confident a deal will be reached in time.

McCarthy has said lawmakers would get 24 hours' notice if they are required to return to Washington for a vote.

The debt ceiling raise is an annual accounting maneuver that usually passes with little notice. It simply allows the government to keep borrowing money to pay for bills already incurred through the budget.

This year, the increasingly hard-right Republican Party has decided to turn the debt ceiling into leverage to force Biden to roll back favorite Democratic spending priorities.

Republicans call this taking responsibility for the US$31 trillion (RM142.63 trillion) national debt. The White House accuses the opposition party, which controls the House of Representatives, of taking the economy hostage.

The Treasury Department said its cash balance fell on Thursday to US$38.8 billion – which observers noted was less than the net worth of several dozen of the world's wealthiest people, including Elon Musk, Jeff Bezos and Bill Gates.