US debt ceiling talks teeter on brink as lawmakers leave for holiday

House Republicans have pushed debt ceiling talks to the brink, displaying risky political bravado in preparing to leave town for the holiday weekend just days before the US could face an unprecedented default hurling the global economy into chaos.

However, Speaker Kevin McCarthy also said he had directed his negotiating team "to work 24/7 to solve this problem." At the Capitol, McCarthy, R-Calif, said that "every hour matters" in talks with President Joe Biden's team as they try to work out a budget agreement.

Republican are demanding spending cuts the Democrats oppose as their price for raising the legal debt limit.

In remarks at the White House, Biden said, "It's about competing versions of America." Yet both men expressed optimism that the gulf between their positions could be bridged.

He vowed there would be no default. "There will be no default," he said.

The White House said that discussions with the Republicans have been productive, including by video conference on Thursday, though serious disagreements remained as the president fights for his priorities.

"The only way to move forward is with a bipartisan agreement," Biden said.

"And I believe we'll come to an agreement that allows us to move forward and protects the hardworking Americans of this country."

Lawmakers are tentatively not expected back at work until Tuesday, just two days from June 1, when Treasury Secretary Janet Yellen has said the US could start running out of cash to pay its bills and face a federal default.

Biden will also be away, departing on Friday for the presidential retreat at Camp David and Sunday for his home in Wilmington, Delaware.

The Senate is on recess and will be until after Memorial Day.

Default contingency plans

Meanwhile, Fitch Ratings agency placed the United States' AAA credit on “ratings watch negative,” warning of a possible downgrade.

McCarthy is holding out for steep spending cuts that Republicans demand in exchange for their vote to raise the nation's borrowing limit.

The White House has offered to freeze next year's 2024 spending at current levels and restrict 2025 spending, but the Republican leader says that's not enough.

One idea is to set those topline budget numbers but then add a "snap-back" provision that enforces the cuts if Congress is unable during its annual appropriations process to meet the new goals.

"We have to spend less than we spent last year. That is the starting point," said McCarthy.

Pressure is bearing down on McCarthy from the House's right flank Freedom Caucus not to give in to any deal, even if it means blowing past the June 1 deadline.

"Don't take an exit ramp five exits too early," said Representative Chip Roy, R-Texas, a Freedom Caucus member. "Let’s hold the line."

Failure to raise the nation’s debt ceiling, now at $31 trillion, to pay America's already incurred bills would risk a potentially chaotic federal default.

Anxious retirees and social service groups are among those already making default contingency plans.

Even if negotiators strike a deal in coming days, McCarthy has promised lawmakers he will abide by the rule to post any bill for 72 hours before voting — now likely on Tuesday or even Wednesday.

The Democratic-held Senate has vowed to move quickly to send the package to Biden’s desk, right before next Thursday's possible deadline.

Pushing a debt ceiling increase to the last minute is not uncommon for Congress, but it leaves little room for error in a volatile political environment.