Biden and McCarthy speak as 'hard deadline' looms for raising debt ceiling

Treasury has warned that the US government could be unable to pay its dues by June 1

Kevin McCarthy, Speaker of the House of Representatives, left, Vice President Kamala Harris and President Biden at the White House. AP

US House Republican Speaker Kevin McCarthy said on Sunday that he and President Joe Biden will meet on Monday to discuss raising the federal $31.4 trillion debt ceiling.

The pair shared a “productive” phone call on Sunday as President Biden was flying back from a trip to Japan for the G7 summit, Mr McCarthy said.

Talks to keep the federal government funded have been off-again, on-again for several days, and Mr McCarthy indicated negotiations would resume later on Sunday.

Both sides have said progress was being made but that they remain far apart.

Before leaving Japan, Mr Biden suggested some Republicans in Congress were willing to see the US default on its debt so that the disastrous results would prevent the president, a Democrat, from winning re-election next year.

There are less than two weeks before June 1, when the US Treasury Department has warned that the federal government could be unable to pay all its debts.

That would trigger a default that could cause chaos in financial markets.

US Treasury Secretary Janet Yellen on Sunday said June 1 remains a “hard deadline” for raising the federal debt limit, warning that unless the standoff with Republicans in Congress is resolved, the government would be unable to pay its bills through the middle of next month

Ms Yellen, speaking on NBC's Meet the Press programme, said there would be hard choices to make about payments if Congress failed to raise the $31.4 trillion debt ceiling before the Treasury ran out of cash and was forced to default.

“I indicated in my last letter to Congress that we expect to be unable to pay all of our bills in early June and possibly as soon as June 1. And I will continue to update Congress, but I certainly haven't changed my assessment. So I think that that's a hard deadline,” she said.

White House press secretary Karine Jean-Pierre said that Mr Biden and Mr McCarthy, the Speaker of the House of Representatives, had agreed that any budget agreement would need to be bipartisan and accused Republicans of offering proposals too far to the right to pass Congress.

Late on Saturday afternoon, Mr McCarthy said at the Capitol that he did not think talks could move forward until Mr Biden was back in the country from the G7 meeting. He accused Democrats of taking a position that was too extreme towards the left.

White House officials said they were expecting the call between Mr Biden and Mr McCarthy would take place on Sunday morning, Washington time, after the President's scheduled press conference following the G7 meetings in Japan.

Mr Biden will be travelling back to Washington on Sunday after cutting his trip to Asia short to focus on the debt limit talks.

Mr McCarthy's office did not immediately respond to a request for comment.

The Republican-led House last month passed legislation that would cut government spending by 8 per cent next year. Democrats say that would force average cuts of at least 22 per cent on programmes like education and law enforcement, a figure top Republicans have not disputed.

Republicans hold a slim majority of seats in the House and Mr Biden's fellow Democrats have narrow control of the Senate, so no deal can pass without bipartisan support.

A source told Reuters the Republicans had proposed an increase in defence spending, while cutting overall spending. They also said House Republicans want to extend tax cuts passed under former president Donald Trump, which would add $3.5 trillion to the federal debt.

The source said the Biden administration had proposed keeping non-defence discretionary spending flat for the next year, which would cut spending when adjustments are made for inflation.

US Representative Patrick McHenry said Republican leaders were “going to huddle as a team and assess” where things stood.

Republicans are pushing for sharp spending cuts in many domestic programmes in exchange for the increase in the government's self-imposed borrowing limit, which is needed to cover the costs of spending and tax cuts previously approved.

Congressional Republicans voted to raise the debt ceiling three times, with no budget cut preconditions, when Republican president Donald Trump was in the White House.

Agencies contributed to this report