The negotiations to lift the U.S. government's $31.4 trillion debt ceiling remained gridlocked on Friday, as Democrats and Republicans sparred over strengthening employment conditions for specific welfare programs. The time is ticking for President Joe Biden and the Republican House Speaker Kevin McCarthy to come to an agreement that would increase the government's borrowing limit and circumvent a potentially catastrophic default.
Preliminary consensus appeared to be within reach for a two-year extension on the debt limit. Areas such as funding for the Internal Revenue Service and the military were agreed upon, along with restrictions on spending for many government schemes, as per a U.S. official. However, safety-net programs emerged as the bone of contention.
"Chief among our unresolved issues are work requirements," stated Garret Graves, the leading Republican negotiator. The negotiation talks may extend over the weekend, a close source to the administration indicated.
Republicans are advocating for work prerequisites for Medicaid and the SNAP food-assistance program for childless adults under 56, a proposal Democrats are staunchly resisting. The Republican plan would compel a higher number of program participants to prove employment or active job search, saving an estimated $120 billion over a decade. However, it would also eject more than a million Americans from these schemes, the nonpartisan Congressional Budget Office revealed.
House Speaker McCarthy voiced his opinion, stating, "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."
Conversely, Democrats argue that the proposal would only result in more bureaucracy, leading to the exclusion of eligible beneficiaries.
The stakes are high. If Congress fails to raise the debt ceiling within the week, the U.S. could default, leading to a financial upheaval that could plunge the country into a severe recession.
Despite the impasse, Wall Street's main indexes climbed on Friday, buoyed by investor optimism for a breakthrough in the negotiations. A two-year extension would push the next debt limit adjustment beyond the 2024 presidential election.
The proposed deal would escalate funding for military and veteran care, maintain current-year non-defense discretionary spending, and potentially decrease funding for the IRS. Meanwhile, the White House is strategizing ways to target wealthy taxpayers.
As the Treasury Department warns of potential defaults from June 1, credit-rating agencies are reviewing the U.S. for a possible downgrade, a move that would escalate borrowing costs and harm its global financial standing. The deal's approval is far from guaranteed, with resistance expected from right-wing Republicans and Democrats alike.
With the majority of lawmakers away for the Memorial Day holiday, they have been alerted to be prepared for a return to vote once a deal is agreed upon. The deal, once struck, will undergo three days of consideration before a House vote, but any Senate member could delay proceedings. Republican Mike Lee has already indicated a possible blockade.