WASHINGTON — High-stakes talks over raising the debit limit will continue Friday evening, said House Speaker Kevin McCarthy, after they were paused at midday when Republican negotiators walked out of the room and blamed the White House for holding up discussions.
Financial markets dipped on the news of the pause, which came after a positive week of talks that appeared to signal a deal was close.
One of the toughest sticking points in the talks has been the question of spending caps, a key GOP demand but a red line for a significant bloc of Democrats.
As the White House presses for a debt limit hike that would push the next deadline past the 2024 presidential election, Republicans are insisting on a spending cap for next year that goes beyond a freeze on the current topline number, and actually rolls government spending back to 2022 levels.
“Look, we can’t be spending more money next year,” McCarthy told reporters Friday after the talks broke down. “We have to spend less than we spent the year before. It’s pretty easy.”Â
Each side’s demands may sound simple, but holding their respective caucuses together has become more difficult this week for party leaders — not less — as opposition to any compromise has grown among blocs of conservative Republicans and progressive Democrats
Any deal to raise or suspend the debt limit will need to pass in both the GOP-led House and the Democratic-controlled Senate, and key lawmakers in both parties have acknowledged that the eventual compromise bill could be unacceptable to hardliners on either side.
“There are real differences between the parties on budget issues and talks will be difficult,” a White House spokesperson told NBC News after the talks broke up. “The President’s team is working hard towards a reasonable bipartisan solution that can pass the House and the Senate.”
The break in negotiations came just a day after McCarthy said he was optimistic that congressional negotiators could reach a deal in time to hold a House vote on it next week.
“I see the path that we can come to an agreement,” the California Republican told reporters on Thursday.
President Joe Biden is in Japan this weekend for a G-7 leaders summit, but he cut short his trip in order to return home on Sunday and continue negotiations.
The House and Senate both kept their original plans to leave for the weekend on Thursday. The Senate is not scheduled to be back session until the last few days of May.
But Senate Majority Leader Chuck Schumer, D-N.Y., advised members to be ready to return to the Capitol with 24 hours notice.
Investors have been watching Washington closely this week for any signs of progress in the monthslong debt ceiling standoff. Earlier this month, Treasury Secretary Janet Yellen pegged June 1 as the earliest date on which the United States could run out of money to pay debts the government has already incurred.
The date was earlier than either the White House or Wall Street had anticipated, and injected fresh urgency into talks that had been effectively stalled since February.
Following a meeting at the White House on Tuesday with congressional leaders, President Joe Biden tapped two of his closest aides to take over the talks, which had made little progress to that point.
McCarthy praised Biden’s choice of presidential counselor Steve Ricchetti and Office of Management and Budget Director Shalanda Young, calling the pair “exceptionally smart.”
This story originally appeared on CNBC
