Biden ‘hopeful’ of imminent US debt deal

President Joe Biden said Friday that Democratic and Republican negotiators were on the verge of resolving a debt ceiling standoff, as the deadline for a potentially catastrophic US default was pushed back to June 5.

“It’s very close and I’m optimistic,” Biden told reporters at the White House. “I’m hopeful we’ll know by tonight whether we’re going to be able to have a deal.”

Although there was no indication of an imminent public announcement, it was the strongest sign yet that the drama in Washington might end, allowing the government to borrow and avoid a default that would likely trigger a recession and send shockwaves through the global economy.

Earlier, Treasury Secretary Janet Yellen said the dreaded X-date, when the government runs out of money unless it can borrow, will now be June 5, not June 1. Yellen, however, warned that the deadline extension does not change the urgency.

“Waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States,” she said in a letter to the Republican leader of the House of Representatives, Speaker Kevin McCarthy.

According to unconfirmed US media reports, the deal taking shape would include an agreement to extend the government’s borrowing authority for two years, meaning no repeat of the current drama before the 2024 presidential election.

Democrats, however, would have to offer concessions on Republican demands for sweeping spending limits on social safety and other domestic programs.

McCarthy told reporters that negotiators had “made progress” but added: “Nothing is agreed to until it’s all agreed to.”

A sign of how difficult it may be to nail down a deal revolved around a Republican demand that those applying for benefits like food assistance work for them.

White House spokesman Andrew Bates asserted that Republicans were willing to put at risk “over eight million jobs unless they can take food out of the mouths of hungry Americans.”

IMF Managing Director Kristalina Georgieva cited new data that she said showed the “US economy has proven resilient,” but urged a “speedy resolution” to avoid the first default in the country’s history.

“We think of the US Treasury market as an anchor for the global financial system, and this anchor needs to hold,” she said.