House Speaker Kevin McCarthy on debt ceiling talks: We told Biden we're not going to raise taxes

WASHINGTON — House of Representatives Kevin McCarthy said negotiations with the White House to raise the U.S. debt limit on Wednesday were still hanging over a disagreement over future spending, indicating the two sides were far apart with just eight days before the government could meet an unprecedented default.

A substantial cut in government spending in exchange for raising the debt ceiling is a core GOP demand, but a red line so far for the White House. An increase in the loan limit does not allow new expenses.

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As the United States neared default and possible economic chaos, McCarthy blamed Democrats for the break.

“And the exit here is to solve the problem of spending less than we spent last year,” he said during a news conference at the Capitol.

The California Republican repeatedly touted a bipartisan spending bill that House Republicans passed in April without Democratic votes as the only option to raise the debt ceiling. “Don’t blame us Republicans when we put a reasonable bill,” McCarthy said.

Stock fell to session lows after McCarthy’s comments, as investors closely watched the talks for signs of progress.

“I think we can make progress today,” McCarthy said, but he ignored a question about whether the discussions had made progress in the past 24 hours.

After a week of meeting outside McCarthy’s office, Republican negotiators headed to the White House on Wednesday, where they were expected to continue haggling in an office building adjacent to the mansion.

The talks hit a “speed bump,” a Democratic official familiar with the situation told NBC News on Wednesday.

But off the ring road, concern grew on whether McCarthy and President Joe Biden could reach an agreement to cut government spending enough to win the GOP votes needed to pass a bill raising the debt ceiling before June 1.

Minister of Finance Janet Yellen said on Wednesday that she was already seeing “some stress in financial markets”, driven by fears that the US could stumble into a first-ever debt default.

Debt ceiling-related stress particularly affected financial markets, Yellen said at a Wall Street Journal event. These signs of stress “should be a reminder of the importance of reaching an agreement in a timely manner.”

But after a week of daily sessions led by a group of veteran negotiators, people on both sides say the gulf between what House Republicans want and what the White House is willing to give appears wider than ever.

For example, one of the leading Republican delegates, Representative Patrick McHenry of North Carolina, revealed on Tuesday night what up to that point had only been hinted at, when a reporter asked him what concessions Democrats were getting as part of the talks to win their votes in the chamber.

“The debt ceiling,” he said.

“That’s what they get,” added rep. Garret Graves of Louisiana, another GOP negotiator.

This view of the past week as one in which Democrats are forced to accept Republican demands, while Republicans in return offer only the chance to avoid a disastrous debt bailout, would anger Democrats and reduce the odds of a deal. The GOP has pushed to cut spending as part of a deal to raise the debt ceiling, which itself does not allow for new spending.

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A default would wreak havoc on the US economy and force millions to at least temporarily lose government subsidy payments that many rely on to survive.

With talks at an apparent deadlock for the second time in a week, and the likelihood of a deal in the next 24 hours — in time for the House to turn a deal into a bill and vote on it before the weekend — looking slim, McCarthy appeared open to letting members of the House leave DC for the Memorial Day weekend without an agreement.

“I haven’t made that decision yet,” he told reporters Tuesday, but added, “I would have, depending on where we are at that moment, have them come home and come back.”

With Republicans only appearing to strengthen their position as time goes by, Democrats on Wednesday accused McCarthy of succumbing to pressure from the far right in his caucuses. They said he has given in to members who have made a laundry list of demands, but are still unlikely to vote for a debt increase, no matter what it includes.

One of those laundry lists was released Wednesday by rep. Chip Roy, R-Texas, a member of the ultraconservative House Freedom Caucus. Presented as a memothe list contained seven provisions that were included in the debt limit bill that House Republicans passed this spring, but are dead on arrival in the Democratic-controlled Senate.

“The following reforms were part of the Limit, Save, Grow Act — each is critical and none should be abandoned solely for the pursuit of a ‘deal,'” Roy’s memo reads.

Pressure like this from hardliners within his own party has made McCarthy’s path to passing a bill much more treacherous, as he will need Democratic votes.

Biden has offered compromises, the Democratic official told NBC News, including freezing spending, withdrawing unused Covid funds and putting a two-year cap on spending.

But McCarthy has dismissed those concessions.

“Let me be very clear, we’re not putting anything on the floor that doesn’t spend less than we spent this year,” he said Tuesday.

This is a developing story, check back for updates.