(Bloomberg) -- House Speaker Kevin McCarthy told Republicans Tuesday that debt-limit talks still have some distance to go and pleaded with them to stay united on the party's demands for spending cuts to avert a US default.
McCarthy's comments at a closed-door meeting for all House Republicans suggested urgency and uncertainty as Washington's stand-off over a potential US default enters the end game.
Republican Representative Ralph Norman, who was in the meeting, said McCarthy told them the two sides are โnot anywhere near closeโ to a deal. Another person who was in the room confirmed McCarthy's comments.ย
Negotiators for McCarthy and President Joe Biden resumed talks at 11 a.m. at the Capitol with the two sides still short of an agreement and a catastrophic US default drawing closer.
โBack to work,โ Biden adviser Steve Ricchetti said as he returned to the Capitol.ย
By mid-day, McCarthy said he hadn't yet spoken to Biden since their Monday meeting at the White House. When asked if a deal could be reached today, he responded, โthere is always a possibility.โย
The S&P 500 index of equities declined 0.2% Tuesday morning. The yield on two-year Treasuries climbed for an eighth straight day and reached 4.38%, the highest since March 10. The dollar was 0.2% higher against a basket of major currencies.
Both McCarthy and Biden signaled optimism after a meeting at the White House Monday evening that lasted more than an hour. On Monday, Treasury Secretary Janet Yellen warned it's โhighly likelyโ her department would run out of sufficient cash in early June and that default could come as soon as June 1.
On Tuesday, McCarthy told reporters Democrats โstill want to spend more money this year than they did last year.โย
โThat's the red line,โ he said. But, he added, he believes a deal can be reached by June 1.ย
Republican negotiator Patrick McHenry said the White House must agree to cut spending levels in 2024 rather than just freeze them. Once that happens the rest of the deal can fall into place.ย
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He dodged when asked if the GOP still needs the full $130 billion cut to funds it has been seeking.
The current standoff over the debt ceiling has the potential to put more strain on the US economy, which is already vulnerable to a recession after a series of interest-rate increases by the Federal Reserve, according to Bloomberg Economics.
But some conservative House members said Tuesday they even doubt the drama is necessary, with Representative Chip Roy of Texas even calling it a โmanufactured crisisโ to force Republicans into stepping back from some demands.
โThe fact is, we're not going to default on our debt. That's just completely false. We've got the money to do it,โ Roy said. โSo everybody just needs to be patient. Let us work through it.โ
Republicans want to slash domestic spending over as many years as possible, while Democrats have offered slimmer cuts over a couple of years. Democrats also want to include defense spending limits in any agreement.ย
That sets up a key tension for hawkish Republicans, who want to increase the Pentagon budget at the expense of deeper cutbacks in social spending. McCarthy said defense cuts shouldn't be on the table.ย
The California Republican said he would not waive a rule that allows House lawmakers 72 hours to review legislation before a vote. Conservatives have demanded the time but it adds to the pressure to get an agreement.ย
Senate Republican leader Mitch McConnell in Kentucky continued to express confidence that a deal would be reached in time to avert a default.
โI think everybody needs to relax,โ he told reporters. โRegardless of what may be said about the talks on a day to day basis, the president and the speaker will reach an agreement, it will ultimately be passed on a bipartisan basis in both the House and the Senate.โ
--With assistance from Steven T. Dennis, Anna Edgerton, Laura Litvan, Ana Monteiro and Matthew Boesler.
More stories like this are available on bloomberg.com
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