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US negotiators agreed on a new deadline for repayment of US debt, but no agreement to raise the $31.4 trillion debt ceiling, as the Treasury Department warned that a default on June 5 loomed. take action.

US President Joe Biden and a Republican negotiator said they are working to reach an agreement on raising the US government’s debt ceiling, and the two sides have been negotiating for weeks an agreement to raise the federal government’s borrowing limit, as Republicans are also pressing for a sharp reduction in spending. Without a deal, the United States could face a default with catastrophic consequences.

“Things are looking good,” Biden told reporters. I am optimistic”. Republican Representative Patrick McHenry said he agreed with Biden’s comments, but cautioned that negotiations were far from over.

The two made their comments separately shortly after US Treasury Secretary Janet Yellen said the government would be unable to find the money needed to pay its bills by June 5. Yellen had previously said that this deadline could be June 1.

Negotiators are discussing a deal that would raise the limit by two years, but remain at odds over whether to tighten labor requirements for some anti-poverty programmes.

CNN reported that Republican House Speaker Kevin McCarthy left the Capitol on Friday after a conference call during which he told one of his top Republican aides that no agreement had been reached.

Any deal must win approval in the Republican-controlled House of Representatives and the Democratic-led Senate before Biden signs it into law, a process that could take more than a week.

A US official said negotiators had reached a tentative agreement that would limit spending on several government programs next year.

New deadline

“Based on the latest available data, we now estimate that the Treasury Department will not have sufficient resources to meet government obligations if Congress does not raise or suspend the debt ceiling by June 5,” US Treasury Secretary Janet Yellen said in a letter to members of Congress.

She added that more than 130 billion dollars allocated to pensions and health, especially for veterans, must be paid in the first two days of June, explaining that this “will make the amount of resources in the treasury very small.”

Thus, the White House and the negotiators from the Republican Party narrowed the differences initially, but the dispute continued until Friday evening, on major issues, while the Treasury indicated that there was additional time before a possible inability to pay the US debt, according to “Bloomberg”.

Treasury Secretary Janet Yellen said that the department expects to be able to pay the US debt until June 5, if the lawmakers are unable to reach a ceiling for the US debt. This sets a more accurate date for possible default. This comes four days after the minister’s previous statements, in which she indicated that problems would occur on the first of June, at the earliest.

The so-called deadline buys negotiators, House Speaker Kevin McCarthy and President Joe Biden time to reach an agreement. The negotiating teams have not met in person since last Wednesday, but their members spoke late Thursday and were in regular contact throughout Friday.

As he left the White House on Friday evening for the Camp David resort, Biden said he was “very optimistic” about the chances of reaching an agreement. Patrick McHenry, a representative of the Republican negotiators, said the June 5 date meant there was still a need for the two sides to reach an agreement. He added, “Now we have a specific date.”

The negotiating teams continued to work until the early hours of Saturday morning to reach a formula for an agreement.

there is hope

A source close to the discussions said, “We are closer (to an agreement), but that has not been done yet,” questioning the possibility of announcing the agreement on Saturday. For his part, Republican House Speaker Kevin McCarthy, one of the heroes of this financial political series, spoke of progress. But he said, “Nothing is certain until everything is agreed upon,” in an effort to maintain pressure on the president.

There is no shortage of pressure on this hard-to-understand issue outside the United States and more generally outside the Washington bubble. A major sticking point has been Republican insistence that those who receive government support, such as food aid, must work for it.

White House spokesman Andrew Bates said Republicans were prepared to jeopardize “more than eight million jobs if they cannot get bread out of the mouths of hungry Americans.”

This parliamentary maneuver has always been a bipartisan formality. But this time, the Republicans are demanding, in exchange for their agreement to raise the debt ceiling, a reduction in public spending. Officially, Joe Biden refuses to negotiate this, stressing that he is a “hostage”.

But in reality, the advisors of the two camps have been continuing non-stop talks for days, according to US media, and have agreed on some main lines.

The New York Times and The Washington Post reported, for example, that the agreement would freeze some expenditures, but without prejudice to the budgets allocated to defense and veterans. A two-year deferral, until after the next presidential election, will be allowed for the risk of default.

reduce debt

Kevin McCarthy, who needs to cement his position as Speaker of the House, can say that he has tightened the budget, while the Democrats can say that they have protected social privileges and major investment projects.

On Thursday, Biden, who ran for a second presidential term, said that the discussions are taking place between “two conflicting visions.”

He presented himself as a champion of social and financial justice. However, the media reported that Biden (80 years old) waived in these negotiations any increase in the means allocated to combating tax evasion.

And if an agreement is reached, it is supposed to be approved by the Senate, in which the Democrats enjoy a slim majority, and the House of Representatives, where the conservatives enjoy a fragile majority.

But the congressional program is compressed. Many of its members have returned to their strongholds, where they will spend a long weekend on Remembrance Day.

On the other hand, some progressives within the Democratic Party and some Republican Party parliamentarians threatened not to ratify a text – or to delay it as much as possible – that includes exaggerated concessions to the opposition camp.

Tough choices

In mid-January, the US federal government reached a debt ceiling of more than $31 trillion. Since then, it has used special accounting methods to extend the life of the money it is allowed to spend without raising the debt ceiling.

But it can only continue to do so for a limited time before it faces a debt ceiling dilemma. In that case — the new date is June 5 — she will only be able to spend what she collects in tax revenue.

Between June 1 and June 15, the Treasury will face a financing shortfall of more than $100 billion, according to an analysis of Treasury data by the think tank Baypartisan Policy.

And if the US hits the debt ceiling, it “will have hard choices about which bills to pay,” Janet Yellen said recently.

With both sides in the negotiations emphasizing that the United States will not default on its debt, government spending becomes the issue on which those difficult decisions must be made. The Treasury could choose to defer some payments for Social Security, Medicare and Medicaid programs, which help tens of millions of people with retirement and healthcare costs. Or, it could pause some payments across the board, which would mitigate the fallout for Social Security and Medicare recipients, but increase the number of affected government services.

If the Treasury Department can reach the June 5 date without defaulting on any of its financial obligations, it may be able to avoid a hurtful default in subsequent weeks. There is about $80 billion in revenue owed from quarterly income taxes to individuals and corporations, according to the Bipartisan Policy think tank, far exceeding the $22 billion in spending.

This would breathe new life into the government’s coffers, and keep the problem out of the treasury for a longer period, provided that there is no unexpected need for large financial payments.

But given that the amount of tax revenue is always less than what the government spends, this plan is not sustainable.

“Default is not an option, and all responsible lawmakers understand that,” the White House said in a recent statement. Republicans and Democrats will at some point have to reach an agreement to raise the debt ceiling, or to make major spending cuts.