Congressional Debt Ceiling Talks Gain Momentum, Critical Deal In Sight 'Because Default Is Unacceptable': Report

As Congressional negotiations about raising the debt ceiling continue, reports indicate that progress is being made despite potential payment delays to Social Security beneficiaries and veterans.

Bloomberg reported that Deputy Treasury Secretary Wally Adeyemo, on Friday, expressed optimism about reaching an agreement soon, "because default is unacceptable."

• An impending deal is believed to have provisions that support both parties' interests. It is expected to provide for the modernization of the nation's electric grid to foster renewable energy, which aligns with the administration's climate change goals. It would also streamline permit processes for fossil fuel projects, a preference of the GOP.
• One significant compromise involves the slashing of $10 billion from the $80 billion budget increase intended for the Internal Revenue Service (IRS) under President Joe Biden's Inflation Reduction Act. While Republicans express concerns about a surge in audits and agents, Democrats believe the funding boost would minimize tax evasion and effectively pay for itself.
• The prospective deal appears more restrained compared to the Republicans' initial proposal. They initially sought a debt ceiling increase until March of next year, coupled with a decade of spending caps. Resistance to a modest deal has already emerged among House conservatives, with the House Freedom Caucus pressuring House Speaker Kevin McCarthy to stand his ground.

The White House has so far not disclosed any agreements on spending caps or IRS funding to the House Democratic leadership, according to an adviser. As these negotiations intensify, Bloomberg reports that the odds of reaching a deal on Friday are promising.

Also Read: Gold Bull Peter Schiff Calls Social Security An 'Intergenerational Ponzi Scheme' As Debt Default Looms

Treasury Secretary Janet Yellen has cautioned that her department might exhaust its cash reserves by June 1. The following day, a large payment is due to Social Security beneficiaries, further pressuring legislators to settle the disagreement. 

If the negotiations conclude successfully soon, a House vote could occur as early as Tuesday, with the Senate following up swiftly to forward the deal to President Biden before the critical June 1 deadline. Bloomberg reports the impact of the negotiation's outcome is crucial, as it may determine whether the U.S. staves off a recession.

While the White House and Treasury stress the need for a speedy resolution, according to Fitch Ratings, the U.S.' AAA credit rating is under review for a potential downgrade. 

Now Read: Jim Cramer Warns Politicians 'Aren't Done Hurting You' On Debt Ceiling: 'Most Of Us Need To Take The Pain'

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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