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With Time Running Out, McCarthy Says Debt Limit Talks Remain ‘Far Apart’ But Deal ‘Possible’

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Following a week of staff-level discussions, President Joe Biden and top congressional leaders left a high-stakes meeting at the White House on Tuesday without a deal in place to raise the debt limit, as both sides remain sharply divided over the GOP plan to cut spending by imposing tougher work requirements for federal aid programs.

House Speaker Kevin McCarthy told reporters after the meeting that it’s “possible” to get a deal by the end of the week, even though he believes negotiations with the White House over spending cuts and raising the debt ceiling remain “far apart.”

The President and congressional leaders are trying to strike a budget deal before the U.S. Treasury runs out of cash to keep paying the nation’s bills, which could occur as soon as June 1, according to Treasury Secretary Janet Yellen. Senate Majority Leader Chuck Schumer, who also attended the meeting, described the discussions as “good and productive,” telling reporters that both sides agreed to continue discussing how to pass a bipartisan bill in both chambers. “Everyone agreed default would be the worst outcome,” he said. Biden said after the meeting that “there is still work to do” but pledged that talks would continue regularly over the coming days.

The apparent progress on debt ceiling talks comes as Biden is preparing to depart on Wednesday for the G7 summit in Japan where U.S. leadership will be on the world stage. After Tuesday’s meeting, the White House announced that Biden will cut that trip short, skipping planned stops in Papua New Guinea and Australia amid increasingly urgent talks over how to raise the government’s debt limit and avoid a potentially catastrophic default.

Congressional leaders declined to comment on the specific details of negotiations with the President, but various areas of possible agreement appear to be emerging. For much of the past week, administration officials and congressional staff have discussed a range of issues, outlining a debt limit framework that includes clawing back some $30 billion in untapped COVID-19 relief money, imposing caps on government spending through the end of Biden’s term, and approving permitting reforms to ease energy development, according to those familiar with the talks.

McCarthy described the proposal to rescind unspent COVID-19 funds as a “no brainer” and expressed optimism that it would be included as a spending cut in the final debt limit bill. “The pandemic’s over, you can’t bring it back,” he said. “I think at the end of the day it will be in the bill.”

But despite the glimmer of hope that a deal will be reached by the end of the week, one key issue that appears to be holding up discussions is the GOP proposal on work requirements. McCarthy said on Tuesday that work requirements for public assistance programs are nonnegotiable in debt ceiling talks, laying out his first hard stance in the negotiations. “We put in work requirements that the President voted for as a senator,” he said. “The only thing we’re talking about is able-bodied people with no dependents… The idea that they want to put us into default because they will not work with us on that is ludicrous to me.”

Read More: What Republican Work Requirements in the Debt Ceiling Bill Would Do

Biden did signal over the weekend that he could be open to tougher work requirements for certain government aid programs, but he has also said that he will not accept anything that takes away people’s health care coverage. Other Democrats have balked at the idea of bolstering work requirements. House Democratic Leader Hakeem Jeffries, who attended Tuesday’s meeting, told members of the Democrats’ Steering and Policy Committee on Monday that he would not accept new work requirements for social safety net programs.

The Congressional Budget Office predicted last month that if the GOP bill became law, and tougher work requirements were imposed, about 600,000 Americans would lose health insurance and about 275,000 Americans a month would lose access to food stamps. That issue could prevent lawmakers from reaching a deal by the end of the week.

Later at the Capitol, Schumer told reporters that energy permitting was also discussed at the meeting but wouldn’t go into details about those talks. “A majority of my caucus voted for a permitting reform bill. I’m not going to get into any detail. But it was one of the things that was mentioned at the meeting today,” he said.

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The White House last week called on Congress to pass permitting legislation that would help speed up clean energy and fossil fuel projects, backing a bill by Democratic Sen. Joe Manchin of West Virginia, who has been critical of the Administration’s attacks on the fossil fuel industry. Some congressional Republicans, however, are seeking reform that focuses primarily on accelerating the approval of oil, gas, coal, and mining projects rather than clean energy.

But even if Democrats give in to GOP permitting legislation and claw back untapped COVID-19 relief money, it may not go far enough to satisfy McCarthy’s hard-right faction in the House—or even progressive Democrats. McCarthy defended his position after the meeting, telling reporters that House Republicans have already done their part by passing a bill that would undo several major elements of the President’s domestic agenda in exchange for raising the debt ceiling.

The White House continues to insist that it is not negotiating on the debt limit as it talks about spending changes with Republicans. “We are right now having a conversation negotiating on the budget,” White House Press Secretary Karine Jean-Pierre said Tuesday. Biden has insisted that Republicans must rule out default and consider budget issues separate from the need to raise the nation’s debt limit.

The Biden Administration has demanded that Republicans drop their effort to roll back key parts of their legislative accomplishments or priorities—such as the Inflation Reduction Act and his student debt relief plan—in exchange for raising the debt limit. Democrats are also pushing for as little as two years of debt limit breathing room, similar to the 2019 deal cut with former President Donald Trump that contained two years of spending caps. Under that framework, Biden would get through the 2024 election without having to negotiate over the debt ceiling again.

But time is running out. Yellen said Monday that agency estimates are unchanged on the possible X-date when the U.S. could run out of cash, which could be as early as June 1. Some Republicans have expressed doubt about that timeline, including House Majority Leader Steve Scalise, who said Tuesday: “We know that date is not an exact number.”

An increase in the debt limit would not authorize new federal spending; it would only allow for borrowing to pay for what Congress has already approved.

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Write to Nik Popli at nik.popli@time.com