WASHINGTON -- President Joe Biden said he was optimistic about progress on debt ceiling talks as he opened a critical meeting with House Speaker Kevin McCarthy late Monday at the White House, a pivotal moment as Washington works to strike a budget compromise and raise the nation's borrowing limit in time to avert a potentially chaotic federal default.
It's a crucial conversation for the Democratic president and the Republican speaker, just 10 days before a looming deadline to raise the debt limit.
As soon as June 1 the U.S. could start running short of cash to cover its debts, a daunting situation. Treasury Secretary Janet Yellen said in a letter to Congress on Monday "it is highly likely" that Treasury would be unable to pay all the nation's bills. An unprecedented default would be financially damaging for many Americans and others around the world relying on U.S. stability, sending shockwaves through the global economy.
"We both talked about the need for bipartisan agreement," Biden said at the start of the meeting.
The president said he was "optimistic we're going to make some progress."
McCarthy said the two had a 'very productive' conversation on a phone call Sunday and thinks they can find "common ground."
But both men said there remain disagreements. The White House chief of staff and top administration negotiators joined the session, as did McCarthy's own chief of staff as well as a top Republican involved in the negotiations, Rep. Patrick McHenry of North Carolina, the Financial Services Committee chairman.
The contours of an agreement appear within reach, and the negotiations have narrowed on a 2024 budget year cap that would be key to resolving the standoff. Republicans have insisted next year's spending cannot be more than current 2023 levels, but Democrats have refused to accept the steeper cuts McCarthy's team proposed and the White House instead offered to hold spending flat.
A budget deal would unlock a separate vote to lift the debt ceiling, now $31 trillion, to allow more borrowing. Treasury Secretary Yellen said Sunday that June 1 is a "hard deadline."
McCarthy told reporters midday at the Capitol that "decisions have to start being made" since "we're 10 days out" from the deadline.
"We have to spend less next year than we spent this year," McCarthy, R-Calif. reiterated and pointed to the House's spending cuts as the "framework" for a deal.
"I'm hopeful," he added.
After a weekend of start-stop talks, both Biden and McCarthy have declared a need to close out a compromise deal.
Negotiators for the White House met again for nearly three hours Monday morning with McCarthy's team at the Capitol ahead of the session at the White House.
Biden and McCarthy spoke by phone Sunday while the president was returning home on Air Force One after the Group of Seven summit in Japan. "It went well, we'll talk tomorrow," Biden said in response to a shouted question upon his return late Sunday.
The call revived talks, and negotiators met for 2 1/2 hours at the Capitol late Sunday evening, saying little as they left. Financial markets turned down last week after talks stalled.
"We'll keep working," said Steve Ricchetti, counselor to the president, as the White House team exited talks late Sunday.
McCarthy, R-Calif., told reporters earlier Sunday that the call with Biden was "productive," and Biden told a press conference before departing from Japan: "I think that we can reach an agreement."
Bur McCarthy continued to blame Biden for having refused to engage earlier on annual federal spending, a separate issue but linked to the nation's debt.
After the Monday morning's three-hour session with the White House team, McHenry, who is the chairman of the House Financial Services Committee, told reporters: "We're at a very sensitive point here, and the goal is to get something that can be legislated into law."
Over the weekend, Biden used his concluding news conference in Hiroshima, Japan, to say he had done his part by agreeing to spending cuts and to warn, "It's time for Republicans to accept that there is no deal to be made solely, solely, on their partisan terms."
"Now it's time for the other side to move from their extreme position," he said.
GOP lawmakers have been holding tight to demands for sharper spending cuts with caps on future spending, rejecting the alternatives proposed by the White House that call for reducing deficits in part with new revenue from taxes.
McCarthy has insisted personally in his conversations with Biden that tax hikes are off the table
Republicans want to roll back next year's spending to 2022 levels, but the White House has proposed keeping 2024 the same as it is now, in the 2023 budget year. Republicans initially sought to impose spending caps for 10 years, though the latest proposal narrowed that to about six. The White House wants a two-year budget deal.
A compromise on those topline spending levels would enable McCarthy to deliver for conservatives, while not being so severe that it would chase off the Democratic votes that would be needed in the divided Congress to pass any bill.
Republicans also want work requirements on the Medicaid health care program, though the Biden administration has countered that millions of people could lose coverage. The GOP additionally introduced new cuts to food aid by restricting states' ability to waive work requirements in places with high joblessness. But Democrats have said any changes to work requirements for government aid recipients are nonstarters.
GOP lawmakers are also seeking cuts in IRS money and, by sparing Defense and Veterans accounts from reductions, would shift the bulk of spending reductions to other federal programs.
The White House has countered by keeping defense and nondefense spending flat next year, which would save $90 billion in the 2024 budget year and $1 trillion over 10 years.
All sides have been eyeing the potential for the 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 in unspent COVID-19 funds now that the pandemic emergency has officially lifted.
For months, Biden had refused to engage in talks over the debt limit, contending that Republicans in Congress were trying to use the borrowing limit vote as leverage to extract administration concessions on other policy priorities.
But with June nearing and Republicans putting their own spending legislation on the table, the White House launched talks on a budget deal that could accompany an increase in the debt limit.
McCarthy faces a hard-right flank that is likely to reject any deal, which has led some Democrats encouraging Biden to resist any compromise with the Republicans and simply raise the debt ceiling on his own to avoid default.
The president, though, said he was ruling out the possibility, for now, of invoking the 14th Amendment as a solution, saying it's an "unresolved" legal question that would become tied up in the courts.
Miller reported and Associated Press writer Josh Boak contributed from Hiroshima, Japan. Associated Press writers Kevin Freking, Farnoush Amiri, Fatima Hussein, Colleen Long and Will Weissert contributed to this report from Washington.