The outline of a deal to raise the $31.4tn debt ceiling and avoid a US government default for the first time in the country’s history has begun to emerge following a weekend of talks between the White House and its political opponents.
People familiar with the matter said the gap between senior officials in Joe Biden’s administration and aides to the Republican Speaker of the House Kevin McCarthy had begun to narrow.
A pact to limit domestic spending will be at the heart of any deal. Republicans are demanding deep cuts to many government programmes over 10 years, while the White House wants to see more modest curbs over two years.
Biden has signalled he is open to applying savings from unspent Covid-19 relief funds to any agreement to help reduce the differences between the sides. He has also indicated he is willing to speed up the permit process for big investment projects.
But key differences remain. The White House has rejected Republican calls for the repeal of clean energy tax credits that were part of the Inflation Reduction Act and demands to scrap student debt relief measures implemented by the president.
Democrats are also opposed to a Republican demand for work requirements to be applied to anti-poverty and social safety net programmes in areas such as healthcare and nutrition.
The risk of the US running out of money and not being able to meet its financial obligations is rising by the day.
The Congressional Budget Office warned on Friday that there was a “significant risk” that the US government may not be able to pay its bills in the first two weeks of June if the debt ceiling is not raised. The CBO’s warning follows similar comments from Treasury secretary Janet Yellen.
A person close to the talks between the White House and McCarthy said any agreement was unlikely before Biden’s attendance at the G7 summit in Hiroshima this weekend.
Glenn Hubbard: The talks on raising the debt ceiling could get ugly but they don’t have to, writes the professor of economics and finance at Columbia University.
Here’s what else I’m keeping tabs on today:
Argentina: The government in Buenos Aires will push up interest rates to 97 per cent as it tries to stave off the country’s worst economic crisis in two decades.
War in Ukraine: Rishi Sunak will promise to send more military hardware to Ukraine when he meets Volodymyr Zelenskyy near London. The Ukrainian president visited other European capitals over the weekend as he prepares to launch a counter-offensive against Russia.
Monetary policy: Raphael Bostic, Federal Reserve Bank of Atlanta president, and Austan Goolsbee, Federal Reserve Bank of Chicago president, both appear on business television channel CNBC this morning.
Five more top stories
1. Turkey’s leader Recep Tayyip Erdoğan and rival Kemal Kılıçdaroğlu appear to be heading for an unprecedented second round of voting in the country’s presidential election. With 99 per cent of the votes counted Erdoğan has 49.4 per cent, just shy of the majority needed, according to state media. Read more on the tight race to lead Turkey.
Thailand: Voters delivered a rebuke to Thailand’s military in parliamentary elections.
2. The top US cryptocurrency enforcement tsar is promising a crackdown on illicit behaviour on digital platforms, saying the scale of crypto crime has grown “significantly” in the past four years. Read more of the interview with the Department of Justice’s Eun Young Choi.
3. Envision Healthcare filed for bankruptcy yesterday just five years after it was taken private by KKR in a blockbuster leveraged buyout that valued the physician-staffing company at $10bn. Read more on the Tennessee-based company.
4. A deal to create one of the largest oil and gas infrastructure companies in North America was announced yesterday. Pipeline giant Oneok is buying Magellan Midstream Partners for $18.8bn, creating a company with an enterprise value of $60bn and a sprawling 25,000-mile network of pipelines stretching from North Dakota to Texas. Read more.
More deal news: The board of Australia’s Newcrest Mining has unanimously backed a A$29bn (US$19bn) takeover offer by its US rival Newmont.
5. The EU is coming under mounting pressure from Europe’s biggest derivatives houses to radically rethink its plans for wresting euro-denominated clearing from the City of London. Finance bosses have warned of the grave risk to financial stability should Brussels’ blueprint be adopted.
The Big Read
More than a decade after bailouts and austerity measures pulled Greece from the brink of bankruptcy and a eurozone exit, the country has rebounded and is on the cusp of regaining its investment-grade rating. Read more on Greece’s ‘greatest turnround.’
We’re also reading . . .
The ‘donut effect’ and US cities: Many commercial business districts in America are struggling but their urban outer rings are often thriving, writes Rana Foroohar.
A sanctioned ship’s journey: The FT has reconstructed the five-month covert journey that a sanctions-hit Russian cargo ship, Lady R, allegedly took to secretly transport weapons sought by Moscow.
Chinese tech goes global: With the Chinese economy in the doldrums, a wave of tech entrepreneurs, inspired by the success of TikTok and Shein, is looking overseas for growth.
Chart of the day
The hole in the Earth’s ozone layer has stopped growing and begun to close in recent years, according to Nasa’s Ozone Watch. A UN panel says the ozone layer should recover to pre-1980 levels by the middle of this century if current policies remain in place.
Take a break from the news
Before Covid, clothes were earmarked for either office, home or going out. Then lockdowns happened and we all gave into The Great Slobification, writes Emma Jacobs. The world has reopened but the division between work and weekend wardrobes has not returned for many, she writes.
Additional contributions by Gary Jones and Annie Jonas