A defiant House Speaker Kevin McCarthy said on Wednesday the debt ceiling standoff was “not my fault” as he sent Republican negotiators to the White House to finish talks, but warned the two sides need more time as they try to reach a budget deal with President Joe Biden.
McCarthy said he remained optimistic they could reach an agreement before a deadline as soon as next week, when the Treasury Department could run out of cash to pay its bills.
Financial markets are teetering as Washington edges closer to a debt default crisis that would be unprecedented in modern times, sending shockwaves around the globe.
The White House blamed the Republicans led by Mr McCarthy for risking a devastating default that would hit “every single part of the country” as they demand “extreme” spending cuts that would hurt millions of Americans.
The Republican speaker said the negotiators “made some progress” at the White House. “I want to work as hard as we can and not stop.”
Debt ceiling negotiations are locked on a classic problem that has vexed, divided and disrupted Washington before: Republicans led by McCarthy want to roll back federal government spending, while Mr Biden and other Democrats do not.
From the White House, press secretary Karine Jean-Pierre decried what the administration called a “manufactured crisis” set in motion by Republicans pushing “extreme proposals” that would hurt “every single part of the country, whether you’re in a red state or a blue state”.
Time is short to strike a deal. Treasury Secretary Janet Yellen said on Wednesday that “it seems almost certain” that the United States would not make it past early June without defaulting.
That would be catastrophic, as the government risks running out of cash to pay its bills as soon as June 1.
“We are seeing some stress already in Treasury markets,” Ms Yellen said at a Wall Street Journal event.
Failure to raise the nation’s debt ceiling, now at 31 trillion US dollars (£25 trillion), would risk a potentially chaotic federal default, almost certain to inflict economic turmoil at home and abroad.
Anxious retirees and social service groups are among those making default contingency plans.
While Mr Biden has ruled out, for now, invoking the 14th Amendment to raise the debt limit on his own, Democrats in the House announced they have all signed on to a legislative “discharge” process that would force a debt ceiling vote.
But they need five Republicans to break with their party and tip the majority to set the plan forward.
All sides have been eyeing the potential for a package to include a framework to ease federal regulations and speed energy project developments.
They are all but certain to claw back some 30 billion dollars (£24 billion) in unspent Covid-19 funds now that the pandemic emergency has officially been lifted.
The White House has countered by keeping defence and non-defence spending flat next year, which would save 90 billion dollars (£72 billion) in the 2024 budget year and one trillion US dollars (£800 billion) over 10 years.