US debt talks continue ahead of 1 June deadline

Talks late Monday between US president Joe Biden and Republicans to raise the limit on federal debt were "productive" but have yet to produce an agreement, US House speaker Kevin McCarthy (R-California) said.

The negotiations at the White House had a tone that was "better than any other time" and worked through remaining areas of dispute, McCarthy said, including spending levels. Staff members intend to work through the night to work toward an agreement before negotiations resume tomorrow.

"We know the deadline," McCarthy told reporters after the meeting. "I think the president and I are going to talk every day until we get this done."

The US remains on track to no longer be able to pay all its bills by "early June" and as soon as 1 June, US treasury secretary Janet Yellen said in a letter to lawmakers today. Failure to raise the debt limit in time could cause "severe hardship" for families, raise borrowing costs and threaten national security interests, she said.

The White House is trying to reach a debt ceiling deal as soon as possible, fearing the potential for market turbulence as the deadline gets closer. McCarthy said a deal needs to be done by this week to offer time to write the legislation, give House members time to review the bill and vote on passage, before sending it to the US Senate. But key parts of the deal are still being negotiated, with Republicans ruling out any cuts to defense spending or increasing taxes.

It remains unclear if changes to permitting for major projects like pipelines and power lines will be part of the debt limit deal.

"There's nothing agreed to, everything's being talked about," McCarthy said.

The high-stakes negotiations over the debt limit slowed over the weekend. Republicans had been seeking larger spending cuts, as the White House dug in on a push for tax revenue and changes to pharmaceutical spending to be part of negotiations to reduce the deficit.

Even if a debt limit breach only lasts a week, it could cause the loss of 1.5mn US jobs and a 0.7 percentage point drop in US GDP, in addition to financial markets being "roiled," financial services company Moody's Analytics said in a report on 1 May. If credit ratings agencies downgrade US debt, it would cause a "cascade" of downgrades of other institutions, the report said, adding turbulence to the market.

Oil and gas groups, along with business interests, have lobbied heavily for permitting changes to be part of the debt bill, but they are also preparing for permitting legislation to be part of more exhaustive negotiations over the coming months.

"I don't think we should build our expectations up that something either completely or perhaps even partially will be resolved in the debt ceiling bill," industry group LNG Allies president Fred Hutchison said at an event today held by the American Council for Capital Formation. He added that he was "optimistic" that permitting could be in the bill.

By Chris Knight