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US Debt Ceiling: Republicans Hopeful Of Deal To Avert Default

Media caption, Watch: The debt ceiling explained – in under 90 seconds

By Bernd Debusmann Jr

BBC News, Washington

After emergency talks at the White House, US President Joe Biden and Republican congressional leaders are sounding hopeful that a deal to raise the US debt ceiling is within reach.

But House of Representatives Speaker Kevin McCarthy told reporters the two sides are still far apart.

The fiscal impasse has forced President Biden to cut short a foreign trip to Asia.

Without a deal, the US could default on its $31.4tr (£25tr) debt by 1 June.

The White House said on Tuesday that Mr Biden is “optimistic” an agreement can be reached.

Mr McCarthy said he believed a deal was possible by the end of this week. In exchange for their support for raising the debt ceiling, Republican leaders are demanding budget cuts.

President Biden had been due to fly to the G7 summit in Japan on Wednesday. He was then heading to Papua New Guinea for talks on regional security and Australia for a meeting of the “Quad” alongside leaders from India, Japan and Australia.

He will now return after the 19-21 May summit ends to meet congressional leaders in Washington.

In a statement, the White House said that Mr Biden will head back to Washington DC to “ensure that Congress takes action” to avert a default.

Reaching the debt ceiling would mean the US government is unable to borrow any more money, triggering a calamitous default.

Republican congressional leaders had criticised Mr Biden for travelling to Asia amid debt ceiling talks.

Speaking to Bloomberg News, Mr McCarthy said a seven-day foreign trip during a domestic fiscal emergency would raise questions about the president’s priorities.

Earlier on Tuesday, White House National Security Council spokesman John Kirby hinted that Mr Biden’s travel plans might change as a result of “how seriously the president takes this priority about defaulting on the national debt and what that says about the United States”.

“There’s countries like Russia and China that would love nothing more than for us to default,” Mr Kirby said.

A default – which would be a first in US history – could upend global financial markets and shatter trust in America’s political ability to pay its bills.

Image source, Getty Images

Experts have warned it could also see the US spiral into recession and stoke unemployment.

A deal to avoid this scenario has so far proven elusive. In April, Republicans proposed an agreement that would suspend the debt limit by $1.5tn or until 31 March, whichever comes first.

In exchange, they would maintain spending at key government agencies at 2022 levels for the next financial year and limit growth to 1% annually over the next 10 years.

They argued this would lead to $4.8tn in savings.

The proposal, however, would scupper several of Mr Biden’s legislative priorities, including student loan forgiveness.

The White House has argued that the Republican terms would force working families to “bear the burden of tax cuts for the wealthiest”.

The last time the US was approaching a default in 2011, lawmakers struck a deal just hours before the deadline.

The US debt ceiling has been raised, extended or revised 78 times since 1960.