Biden says debt ceiling deal 'very close.' Here's why it remains elusive

Updated: 8:05 a.m.

White House and GOP negotiators are entering the weekend without a deal to stop the country from defaulting on its loans, despite President Biden saying the two sides are "very close."

While leaving the White House on Friday for Camp David, Biden told reporters he was "hopeful" a deal could be reached before the day closed, adding that he was "very optimistic."

Yet a bipartisan agreement remains just out of reach.

"I'm hopeful, but we have to make sure that we are aligned on text, we have aligned on agreements." Rep. Patrick McHenry, one of McCarthy's negotiators, told reporters Friday evening when asked about the president's optimism. "There's significant challenges ahead and I don't know if that's hours or days."

Over the last week, negotiators have hashed out some details of a deal to prevent the country from defaulting on its debt as soon as next month, according to a source familiar with the talks.

The contours of a debt ceiling deal are largely worked out – including on discretionary spending and defense spending — but thorny areas remain like work requirements for federal assistance programs, the source told NPR.

House Speaker Kevin McCarthy told reporters Friday morning that it's "crunch time."

"We know it's not easy, but we're going to make sure we're not just trying to get an agreement," he said. "We're trying to get something that's worthy of the American people that changes the trajectory."

The deal being worked out by negotiators would raise the government's borrowing limit for two years, while putting two-year caps on federal spending, said the source, who was not authorized to speak about the ongoing negotiations. Preliminary details were first reported by the New York Times.

The two sides are also close to an agreement on IRS funding, which Republicans are hoping to cut.

Work requirements debate heats up as a red line for both GOP and White House

Both sides are dug in on whether to add work requirements for able-bodied adults without dependents who rely on federal assistance programs, such as food stamps and Medicaid. Republicans are also seeking to make changes to the Temporary Assistance for Needy Families program.

Moments after Biden expressed confidence that a deal was in sight Friday evening, the White House issued a statement saying the president and congressional Democrats are "standing against" what it called a "cruel and senseless tradeoff" on work requirements.

"House Republicans are threatening to trigger an unprecedented recession and cost the American people over 8 million jobs unless they can take food out of the mouths of hungry Americans," said White House spokesperson Andrew Bates in a statement. "This would be done through new, additional work requirements designed to tie the most vulnerable up in bureaucratic paperwork, which have shown no benefit for bringing more people into the workforce."

But Republicans are also standing firm.

"Democrats right now are willing to default on the debt so they can continue making welfare payments for people that are refusing to work," said Louisiana Rep. Garret Graves, one of McCarthy's negotiators. "If you're really going to fall on the sword for that versus actually negotiating something that changes the trajectory of the country for spending, I mean, it's crazy to me that we're even having this debate."

Graves added that he is not willing to drop Republicans' demands to increase the number of people who are subject to work requirements.

"Hell no. Not a chance. Not happening," he told reporters before heading out to an event at the White House with Biden celebrating the Louisiana State University women's basketball team.

Last month, House Republicans approved a bill that would raise the debt ceiling in exchange for spending cuts. The bill included a plan to raise the age limit of so-called able-bodied adults without dependents who would be subject to work requirements from 50 to 55 for food stamps and Medicaid.

The Supplemental Nutrition Assistance Program (SNAP), also known as food stamps, limits these adults to three months of SNAP benefits during any 36-month period when they cannot show they are employed or in a work or training program for at least 20 hours a week. Medicaid specifies 80 hours a month.

"I think it's totally appropriate to ask able bodied, work capable people without dependents to volunteer for their church, to have job training, to go to job assistance programs, to go to school or education for 20 hours a week — I think it's a fair trade off," Graves told reporters.

Lawmakers near a deadline to pay nation's bills

In a letter to Congress on Friday, Treasury Secretary Janet Yellen said unless Congress raises the debt ceiling, the U.S. will run out of money to pay its bills on June 5.

That's a more precise estimate than Yellen had earlier offered, when she said the government could run short on cash "as early as June 1."

"Based on the most recent available data, we now estimate that Treasury will have insufficient resources to satisfy the government's obligations if Congress has not raised or suspended the debt limit by June 5," Yellen said in her letter.

Yellen again urged Congress to raise or suspend the debt ceiling by then or risk a devastating default.

McCarthy has vowed to give members 72 hours to review text before putting it to a floor vote. The Senate will then have to vote on the measure if passed by the House.

When asked if negotiators could reach a deal this weekend, Graves said it's possible and "certainly that's the objective."

On Friday morning, Deputy Treasury Secretary Wally Adeyemo told CNN that defaulting should not be an option.

"We're making progress and our goal is to make sure that we get a deal because default is unacceptable," Adeyemo said in an interview on CNN. "The president has committed to making sure that we have good-faith negotiations with the Republicans to reach a deal because the alternative is catastrophic for all Americans."

He added that Biden would not invoke the 14th amendment as an option to avoid default.

Most economists agree an actual default could result in a recession. A default would severely affect financial markets, increase mortgage rates and interest rates on credit cards, could cause government workers and Social Security recipients to go unpaid, and could make it difficult for businesses and citizens to borrow money.

McHenry said that he believes the negotiators are on track to pass a measure by June 5.

"It ensures and maintains the urgency," McHenry said. "We now have a solid date that we have to perform to."

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