WASHINGTON: Republicans have paused crunch US debt talks less than two weeks before a possible catastrophic default, House Speaker Kevin McCarthy said on Friday, citing lack of movement from Democrats.

Negotiators for President Joe Biden have been locked in talks with Republicans as they seek a deal to raise the US borrowing limit and allow the world’s largest economy to avoid defaulting on its debt repayments.

“We’ve got to pause,” the Republican leader told reporters in Congress, adding, “we can’t be spending any more money next year.”

A default could ignite a firestorm in global markets, with investors nervously watching as the talks have unfolded.

Stock indexes, which had been trending higher, changed course later Friday on the news.

Republicans continue to insist Biden must sign up to spending cuts in exchange for their support to raise the debt ceiling, ignoring repeated Democratic calls for a “clean” increase of the borrowing limit with no strings attached.

Democrats have framed the talks as an opportunity to discuss the upcoming budget ahead of June 1, when the Treasury predicts the United States could start defaulting on its debts, with dire economic consequences.

On Friday, the White House said significant problems remained between the two sides over the budget.

“There are real differences between the parties on budget issues and talks will be difficult,” a White House official said in a statement, adding “the President’s team is working hard towards a reasonable bipartisan solution that can pass the House and the Senate.”

Rolling back spending

The unexpected pause to the talks came just a day after McCarthy voiced optimism that he could get a bill in the floor by next week, although he indicated that an in-principle agreement would likely need to be in place by Sunday or Monday for that to happen.

On Friday, Republicans’ chief negotiators in the talks, congressmen Garret Graves and Patrick McHenry, abruptly left a negotiating session alongside McCarthy and have no plans to return, a political website reported.

The main sticking point was reportedly the rolling back of federal spending to 2022 demanded by House Republicans’ right-wing Freedom Caucus, which accounts for around a fifth of the membership.

Published in Dawn, May 20th, 2023