They faced a looming deadline as soon as June 1, when the Treasury Department said it would run out of money to pay off the government’s debt.
WASHINGTON — Debt limit Talks came to an abrupt halt on Friday after Republican House Speaker Kevin McCarthy said it was time to “suspend” talks and a White House spokesman acknowledged there were “real differences” complicating talks.
McCarthy said resolving the standoff is “easy” if only President Joe Biden agrees to some of the spending cuts Republicans are demanding. It is not yet clear when the negotiations will resume.
“We need to get movement in the White House, and we don’t have movement yet,” McCarthy, D-Calif., told reporters at the Capitol. “So, yes, we should pause.”
A White House official, who spoke on condition of anonymity Friday to discuss private conversations, said there are “real differences” between the two sides over the budget and further “negotiations will be difficult.”
The official added that the president’s team is working hard on a “sensible bipartisan solution” that can pass both the House and Senate.
The Biden administration race to seal the deal with McCarthy-led Republicans as the country heads toward a potentially catastrophic debt default if the government can’t raise the current $31 trillion borrowing limit to keep paying the nation’s bills.
Wall Street fell as talks to raise the national debt limit came to an abrupt halt, raising concerns that the country could be inching closer to the risk of a very damaging default on the US sovereign debt.
The president, who was in Japan for the G7 summit, has not yet commented. Biden had already planned to cut the rest of his trip short and is expected to return to Washington later on Sunday.
Negotiators met for a third day behind closed doors at the Capitol with hopes of reaching an agreement this weekend before a possible House vote next week. They faced a looming deadline as soon as June 1, when the Treasury Department said it would run out of money to pay off the government’s debt.
Republicans want to extract drastic cost cutting which Biden has so far refused to accept. Any deal needs support from both Republicans and Democrats to find approval in a divided Congress and pass it into law.
“Look, we can’t spend more money next year,” McCarthy said at the Capitol. “We have to spend less than last year. It’s pretty simple.”
But McCarthy faces a hard right wing caucus and other Republican lawmakers who will almost certainly oppose any deal with the White House.
The domestic political dynamics facing an embattled McCarthy have Democrats skeptical of giving too much to Republicans, which would deprive them of the Democratic support they would need to push any compromise through Congress.
Experts warn that even the threat of debt default will shock the economy.
Markets rose this week on hopes of a deal. But that changed dramatically on Friday after the talks ended late in the morning an hour after they started.
Rep. Garrett Graves, R-La., whom McCarthy appointed to lead the talks, emerged from an hour-long session at the Capitol and said rifts remain between House Republicans and the Democratic administration.
“It’s time to hit pause because it’s just not productive,” Graves told reporters.
He added that the talks had become “simply unwise” and that it was unclear when talks would resume.
The S&P 500 rose 0.3% to lose 0.1%, while the Dow Jones Industrial Average rose 117 points to lose about 90 points.
Biden left early from a dinner with G7 leaders in Hiroshima on Friday night. White House spokeswoman Karin Jean-Pierre said Biden plans to brief his team on the talks Friday night.
While Republicans are demanding spending cuts and policy changes, Biden is facing increasing pushback from Democrats, especially progressives, to not give in to demands they believe will be harmful to Americans.
Another Republican, Rep. Patrick McHenry of North Carolina, said, “There is a ‘serious divide’ between the parties.”
“We are in a difficult position,” said McHenry, chairman of the House Financial Services Committee, as he left the meeting.
McCarthy is facing pressure from his hard-right wing to make as tough a deal as possible with Republicans, and he risks jeopardizing his leadership as speaker if he fails to do so.
A day earlier, the conservative House Freedom Caucus said there should be no further discussion until the Senate acts on a House Republican bill approved last month to raise the debt limit through 2024 in exchange for spending curbs and policy changes. Biden said he would veto the Republican measure.
In the Senate, which is controlled by a majority of Democrats, Republican leader Mitch McConnell has publicly stepped aside and is pushing Biden to make a deal directly with McCarthy.
McConnell accused Biden of “waiting months before agreeing to negotiate” with the speaker.
“They are the only ones who can reach an agreement,” McConnell said on Twitter. “It’s time for the White House to get serious. Time is of the essence.”
Democrats are wary of any deal with Republicans, and have particularly rejected a Republican proposal to protect the defense and veterans accounts from spending caps, arguing that the cuts would be too severe for other domestic programs.
Republicans also want to introduce tougher work requirements for public assistance recipients. Biden suggested he might be open to considering it, but Democrats in Congress said it was a non-starter.
Miller reported from Hiroshima, Japan. Associated Press business writer Stan Chow and writers Stephen Groves and Mary Claire Jalonik contributed to this report.