Republican says US debt-ceiling talks to resume

Republican House Leader Kevin McCarthy said in a TV interview that negotiations with the administration of US President Joe Biden over the US debt ceiling will resume this evening after a temporary pause earlier in the day rattled financial markets.

The two sides have little time to agree on a deal to raise the federal government’s $31.4 trillion borrowing limit or risk a catastrophic default. The Department of the Treasury has warned that the government could be unable to pay all its bills by June 1.

“We’ll be back in the room tonight,” McCarthy said in an interview on Fox Business on Friday. The White House has yet to comment.

While it falls to Congress to adjust the government’s spending limits, Republicans in the House of Representatives have used their majority as leverage to demand spending cuts to social programmes in exchange for a debt ceiling increase.

Earlier on Friday, McCarthy’s lead negotiator and Biden’s representatives had temporarily paused talks, sparking concern in financial market as the US approaches the deadline of early June to raise the ceiling and avoid potential default.

House and Senate Democrats have raised concern about the inclusion in the talks of new work requirements for some federal food benefit programmes for low-income Americans.

US stocks, Treasury yields and the dollar all moved lower on Friday following the pause and after comments from Federal Reserve Chairperson Jerome Powell on monetary policy saying it was still unclear if interest rates would be hiked further or not.

“It could be for theatrics. It could be to put more pressure on the Democratic caucus and also take advantage of the fact that Biden is overseas. But this headline on a Friday afternoon is definitely not a positive,” Quincy Krosby, chief global strategist at LPL Financial, said in an interview.

Biden was in Japan attending a meeting of the Group of Seven wealthy nations. Republicans have criticised his decision to go forward with his trip at a sensitive time in the talks.

“@POTUS waited months before agreeing to negotiate with @SpeakerMcCarthy on a spending deal,” top Senate Republican Mitch McConnell said on Twitter. “They are the only two who can reach an agreement. It is past time for the president to get serious. Time is of the essence.”

Republicans, who control the House by a 222-213 majority, for months had been insisting that Democrats agree to spending cuts in exchange for a deal to raise Congress’s self-imposed debt limit. The limit needs to be lifted regularly because the government spends more than it takes in taxes.