WASHINGTON (AP) — Days from a deadline, President Joe Biden and House Speaker Kevin McCarthy are narrowing in on a two-year budget deal aiming to curb federal deficits in exchange for lifting the nation’s debt ceiling and staving off an economically devastating government default.

The Democratic president and Republican speaker hope to strike a budget compromise this weekend. With Republicans driving for steep cuts, the two sides have been unable to agree to spending levels for 2024 and 2025. Any deal would need to be a political compromise, with support from both Democrats and Republicans to pass the divided Congress.

But the budget flow isn’t the only hang-up.

A person familiar with the talks said the two sides are “dug in” on whether or not to agree to Republican demands to impose stiffer work requirements on people who receive government food stamps, cash assistance and health care aid, some of the most vulnerable Americans.

Yet both Biden and McCarthy expressed optimism heading into the weekend that the gulf between their positions could be bridged. A two-year deal would raise the debt limit for that time, past the 2024 presidential election.

“We knew this would not be easy,” McCarthy, R-Calif., said as he left the Capitol for the evening Thursday.

McCarthy said, “It’s hard, but we’re working and we’re going to continue to work until we get this done.”

House Republicans have pushed the issue to the brink, displaying risky political bravado in leaving town for the Memorial Day holiday. The U.S. could face an unprecedented default as soon as June 1, hurling the global economy into chaos.

In remarks at the White House, Biden said, “It’s about competing versions of America.”

“The only way to move forward is with a bipartisan agreement,” Biden said Thursday. “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 the early June deadline when Treasury Secretary Janet Yellen has said the U.S. could start running out of cash to pay its bills and face a federal default.

Biden will also be away this weekend, departing Friday for the presidential retreat at Camp David, Maryland, and Sunday for his home in Wilmington, Delaware. The Senate is on recess and will be until after Memorial Day.

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

Weeks of negotiations between Republicans and the White House have failed to produce a deal — in part because the Biden administration resisted negotiating with McCarthy over the debt limit, arguing that the country’s full faith and credit should not be used as leverage to extract other partisan priorities.

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.

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

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.

On work requirements for the aid recipients, the White House is particularly resisting measures that would drive Americans into poverty or take their health care, said the person familiar with the talks, who was granted anonymity to describe behind-closed-door discussions.

On the Republican demand to rescind money for the Internal Revenue Service, it’s still an “open issue” whether the sides will compromise by allowing the funding to be pushed back into other domestic programs, the person said.

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

“Let’s hold the line,” said Rep. Chip Roy, R-Texas, a Freedom Caucus member.

McCarthy said Donald Trump, the former president who is again running for office, told him, “Make sure you get a good agreement.”

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 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.

In one potential development, Republicans may be easing their demand to boost defense spending, instead offering to keep it at levels the Biden administration proposed, according to another person familiar with the talks.

The teams are also eyeing a proposal to boost energy transmission line development from Sen. John Hickenlooper, D-Colo., that would facilitate the buildout of an interregional power grid, according to a person familiar with that draft. Those two people were also granted anonymity to discuss the private negotiations.

The White House has continued to argue that deficits can be reduced by ending tax breaks for wealthier households and some corporations, but McCarthy said he told the president as early as their February meeting that raising revenue from tax hikes was off the table.

While Biden has ruled out, for now, invoking the 14th Amendment to raise the debt limit on his own, Democrats in the House announced they have all signed on to a legislative “discharge” process that would force a debt ceiling vote. But they need five Republicans to break with their party and tip the majority to set the plan forward.

They are all but certain to claw back some $30 billion in unspent COVID-19 funds now that the pandemic emergency has officially been lifted.

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Associated Press writers Chris Megerian, Josh Boak, Zeke Miller and Mary Clare Jalonick contributed to this report.

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WASHINGTON (AP) — An optimistic President Joe Biden declared Wednesday he is confident the U.S. will avoid an unprecedented and potentially catastrophic debt default, saying talks with congressional Republicans have been productive. He left for a G-7 summit in Japan but planned to return by the weekend in hopes of approving a solid agreement.

Biden’s upbeat remarks came as a select group of negotiators began meeting to try and hammer out the final contours of a budget spending deal to unlock a path for raising the debt limit as soon June 1. That is when the Treasury Department says the U.S. could begin defaulting on its obligations and trigger financial chaos.

“I’m confident that we’ll get the agreement on the budget and America will not default,” Biden said from the Roosevelt Room of the White House. Later Wednesday evening, negotiations resumed behind closed doors at the Capitol.

Democrat Biden and Republican House Speaker Kevin McCarthy have traded blame for a debt-ceiling impasse for weeks. But Biden said of the latest White House session with congressional leaders that “everyone came to the meeting, I think, in good faith.”

McCarthy was upbeat, too, though contending Biden had given ground. The president said the budget talks were still separate from the debt limit issue, but the speaker said Biden had “finally backed off” his refusal to negotiate.

“Keep working — we’ll work again tonight,” McCarthy told reporters later. “We’re going to work until we can get it done.”

Biden said that every leader at Tuesday’s Oval Office meeting — Vice President Kamala Harris, McCarthy, House Minority Leader Hakeem Jeffries, D-N.Y., Senate Majority Leader Chuck Schumer, D-N.Y., and Senate Minority Leader Mitch McConnell, R-Ky. — agreed the U.S. must not default on its obligations.

“It would be catastrophic for the American economy and the American people if we didn’t pay our bills,” Biden said. “I’m confident everyone in the room agreed … that we’re going to come together because there’s no alternative. We have to do the right thing for the country. We have to move on.”

He said he would be in “constant contact” with White House officials while at the summit in Hiroshima. He is canceling stops in Australia and Papua New Guinea that were to follow so he can return to Washington on Sunday.

Biden and McCarthy tasked a handful of representatives to work swiftly to try and close out a final deal. They include Steve Ricchetti, counselor to the president; legislative affairs director Louisa Terrell and Office of Management and Budget Director Shalanda Young for the administration, and Rep. Garret Graves, R-La., a close McCarthy ally, for the Republicans.

McCarthy, who has said he would personally be involved, said he planned to stop by the talks later Wednesday. He said he would be in Washington for the weekend while negotiations are underway.

Agreement by the negotiators would still leave any deal needing approval by Democratic Senate and Republican House.

Democrats are upset about the possibility of new work requirements for some recipients of government aid. And Republicans want much tougher budget restraints than the Democrats support.

The positive comments by Biden and McCarthy suggest they believe they can gain the backing of their parties’ lawmakers.

McCarthy was flanked Wednesday on the Capitol steps by some of the most conservative Republicans from the House and Senate in a feisty show of support.

The national debt currently stands at $31.4 trillion. 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.

The contours of an agreement have begun to take shape, but the details of spending cuts and policy changes will make or break whether the divided Congress can strike a bipartisan deal with the White House.

In exchange for lifting the debt limit to keep paying the bills, newly majority House Republicans are trying to extract steep budget caps of no more than 1% growth a year over the next decade, alongside bolstered work requirements.

Negotiators are preparing to claw back some $30 billion of unspent COVID-19 aid, now that the government has lifted the pandemic emergency. And they are working on a potential agreement for permit changes that would speed the development of energy projects that both Republicans and Democrats want, though the details remain daunting.

But Democrats are not at all willing to accept the 10-year cap on spending that Republicans approved in their own House bill, and the Democrats are instead pushing for a shorter window of budget cuts.

Biden is facing fierce blowback from progressive Democrats after he opened the door to tougher work requirements. But he insisted Wednesday any new work requirements would be of “no consequence” and that he’s not willing to impact health programs, presumably referring to Medicaid.

Asked about that, the Republicans behind McCarthy — who support more work requirements on Medicaid, food stamps and cash assistance programs — broke out in laughter at the Capitol.

The Republicans scoffed aloud as helicopters with the presumably departing Biden flew overhead.

McCarthy, who depended on Donald Trump’s backing to become the new speaker, still has work to do to keep his narrow House majority in line for any final deal, particularly among the hardline Freedom Caucus conservatives who almost blocked his election earlier this year for the gavel.

Former President Trump has encouraged Republicans to “do a default” if they don’t get everything they want from Biden.

“Bipartisanship is needed,” Schumer said Wednesday. “It’s the only way to go.”

As backup on Wednesday, House Democratic leader Hakeem Jeffries launched a process that would force a vote on raising the debt limit.

It’s a cumbersome legislative discharge procedure, but Jeffries urged House Democrats to sign on to the measure in hopes of gathering the 218 majority backers including Republicans needed to put it in motion.

“Emerging from the White House meeting, I am hopeful that a real pathway exists to find an acceptable, bipartisan resolution that prevents a default,” Jeffries said in a letter to colleagues.

“However, given the impending June 1 deadline and urgency of the moment, it is important that all legislative options be pursued in the event that no agreement is reached.”

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