Biden says US debt ceiling deal 'very close'

Democrats and Republicans appeared closer to a deal on Saturday, in the latest attempt to end a standoff over the US debt ceiling limit. 

President Joe Biden said an agreement was "very close," while Republican congressional leader Kevin McCarthy acknowledged that a deal was "not there yet," but said he was confident of meeting the latest near-deadline put forward by Treasury Secretary Janet Yellen, June 5.

"Yes," the House speaker said. "I feel we can get there. I really do. I am an optimist."

If reached, the deal would reportedly include an agreement to extend the government's borrowing authority for two years. 

Treasury Secretary Janet Yellen on Friday told Congress that the US could default on its debt obligations by June 5, slightly later than the June 1 date she had previously mooted, seemingly to allow time for negotiators to reach a compromise.

Yellen again warned that inaction on the debt ceiling would "cause severe hardship."

Why is debt limit deal needed?

The clash in the US Congress was triggered when Republicans refused to vote to raise the nation's debt limit unless Democrats agree to changes to their spending plans.

The debt ceiling and the budget are two separate bills, but, in almost any given year, any US government is highly likely to borrow money. So securing regular (typically annual) congressional approval to raise the debt ceiling is effectively a pre-requisite not just to execute plans in a budget, but for the US government to operate at all. 

As the Republicans control the house, their majority is required for the debt limit to be raised. President Joe Biden had for months ruled out negotiating over the nation's ability to pay the bills, despite observers warning it would prove unavoidable, and ultimately entered the talks with US House Speaker Kevin McCarthy with just weeks left to solve a problem that materialized at the start of the year.

If a deal is not reached, the US government says it will run out of money to pay its bills. This would raise the prospect of at least a technical default by the US, which would likely have serious economic ramifications for the US and would probably cause more severe ripple effects in poorer countries. 

Impasse over work requirements

Negotiators deliberated into the early hours of Saturday, with talks stalled over Republican demands to impose stricter work requirements for Americans who receive food and other government assistance.

The White House has rejected the plan, calling Republican proposals "cruel and senseless."

The Biden administration accused Republicans of putting at risk the country's economy and more than 8 million jobs "unless they can take food out of the mouths of hungry Americans."

But Republicans shrugged off criticism, with McCarthy telling reporters that "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." 

As the three-day Memorial Day holiday weekend began in the US, Congress began a 10-day recess, with Biden also leaving Washington for his Camp David retreat and then his home in Delaware. But both sides are said to be continuing the talks during this time.

Congress can return from recesses early if the need arises; McCarthy said members would be given 24 hours' notice if they were needed back in the Capitol.

jcg/msh (AFP, AP, Reuters)