Yet, Yellen renewed her warning in a letter to Congress that inaction on raising the borrowing limit would “cause severe hardship.”
They had hoped to end weeks of frustrating talks and strike a deal by this weekend. Treasury now says the government could start running out of money as soon as a week from Monday, sending the U.S. into a potentially catastrophic default with economic spillover around the world. Any deal would need to be a political compromise, with support from both Democrats and Republicans to pass the divided Congress.
While the contours of the deal have been taking shape to cut spending for 2024 and impose a 1 per cent cap on spending growth for 2025, the two sides remain stuck on various provisions. The debt ceiling, now at US$31 trillion, would be lifted for two years to pay the nation’s incurred bills. "Each time there is forward progress, the issues that remain become more difficult and more challenging,” said negotiator Rep. Patrick McHenry, R-N.C., at midday Friday.
In one potential development, Republicans may be easing their demand to boost defense spending beyond what Biden had proposed in his budget, instead offering to keep it at his proposed levels, according to another person familiar with the talks.