Debt constrains negotiators under pressure to reach a deal as the risk of default grows

CNN
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There are signs that talks to raise the nation’s debt limit are picking up, but wide gaps remain and it is unclear how quickly an agreement can be reached. Time is running out as the risk of a first-ever default grows.

Without a bill to vote on, House lawmakers left Washington for the Memorial Day weekend and will be given 24 hours’ notice to return if and when a deal is reached.

For now, the White House and House GOP negotiators have yet to reach a consensus on a number of contentious issues. One of the most critical issues in the negotiations has been spending cuts, which Republicans have demanded in return for voting to raise the debt limit.

In a sign of how far apart the two sides were on Thursday, Rep. Patrick McHenry, a top GOP negotiator, told reporters: “We still have fundamental disagreements that we need to resolve. And it’s complicated.”

Asked by CNN if spending levels have been resolved, McHenry said, “Nothing has been resolved.”

There were a number of outstanding issues beyond spending levels as of Thursday night, with the two sides particularly far apart on work requirements for social safety net programs.

Under a potential deal that negotiators are eyeing, the debt ceiling would be raised for two years while also limiting federal spending — except for defense and veterans spending — for the same period, two sources familiar with the negotiations said. A separate source familiar with the negotiations said the two sides were still working out details on the length of the spending ceiling deal, which Democrats have insisted should last only as long as a debt ceiling is raised.

If and when a deal is secured, the text of the legislation still needs to be written, and congressional leaders will have to lock down votes and craft a bill that must pass through both chambers. None of it will be easy or immediate, and any number of pitfalls may appear along the way.

The stakes are only growing steadily higher as the US moves closer to a potential default with each passing day.

Treasury Secretary Janet Yellen has continued to warn Congress that it has little time left to address the debt ceiling before the nation defaults on its obligations.

It is “very likely” that the agency will not be able to pay all of its bills in full and on time as early as June 1, Yellen wrote in a letter to House Speaker Kevin McCarthy on Monday.

Adding to the uncertainty is the fact that deadline predictions for debt limits are not clear. Rather than a set deadline, they are more of a best-guess estimate, making it far more difficult to know exactly how much time Congress has to act to avert potential financial disaster—and increasing the chances that lawmakers could inadvertently trigger a default by not acting quickly enough.

The Treasury Department has emphasized this uncertainty by urging Congress to act. “It is impossible to predict with certainty the exact date when the Treasury Department will be unable to pay all of the government’s bills,” Yellen wrote in her letter to McCarthy on Monday.

“We have learned from previous debt limits that waiting until the last minute to suspend or raise the debt limit can cause serious damage to business and consumer confidence, increase short-term borrowing costs for taxpayers and negatively affect the credit rating of the United States,” Yellen warned.