Washington — With a deadline looming in the, negotiators for the White House and House Republican leaders were closing in on a deal that would stave off a .
The potential deal would raise the debt limit for about two years and cap federal spending at the same level as fiscal year 2023 for two years, CBS News learned Thursday evening.
Under the proposal, spending on defense and veterans' programs would increase in 2024, while non-defense discretionary spending would decrease, including in areas such as health care and education.
The proposal would also include transferring $10 billion of the $80 billion IRS funding plan that Congress approved last year as part of the Inflation Reduction Act to non-defense discretionary funding.
All discretionary spending, both defense and non-defense, would increase by 1% in the 2025 fiscal year, under the proposal.
The White House had also proposed a deal to rescind up to $30 billion in unspent COVID-19 relief funds, CBS News learned earlier Thursday.
The two sides are hoping to reach a deal to avert a government default, an unprecedented event that would have wide-ranging impacts on the global economy. The latest proposal from the White House would extend the debt ceiling for about two years, which would put the issue off the table until after the 2024 elections.
House Speaker Kevin McCarthy has insisted he wants to limit spending to 2022 levels, and conservative Republicans have been pressuring McCarthy to "hold the line" on spending cuts. House Republicans passed a bill in April to extend the debt ceiling and cap spending at 2022 levels. The White House argues a two-year cap on spending would cut spending by more than $1 trillion, a view not shared by House Republicans.
Negotiations between the White House and McCarthy's representatives continued on Thursday, with some indications that a deal was in sight. On Thursday morning, McCarthy said negotiators worked "well past midnight" the night before, and said he directed his negotiating team to work "24/7" to reach an agreement.
Republican Rep. Garret Graves of Louisiana, one of the House negotiators, told reporters Thursday evening that the negotiation process was going "slow."
"They're refusing to negotiate on work requirements," Graves said.
Permitting reform and work requirements remain a work in progress for negotiators, according to a source familiar with the talks. The two sides were also working to develop a mechanism to incentivize Congress to pass all 12 annual appropriations bills to fund the government. If agreement can't be reached, any short-term continuing resolution would be subject to different spending caps, the source said.
Treasury Secretary Janet Yellen has warned the U.S. could default and be unable to pay its bills as soon as early June, and it will take some time for any negotiated deal to pass both chambers of Congress. Lawmakers are leaving Washington, D.C., for the Memorial Day recess, although congressional leaders have warned them to be ready to return on short notice.
President Biden reiterated on Thursday afternoon that he and McCarthy were at least on the same page about avoiding default.
"Speaker McCarthy and I have had several productive conversations, and our staffs continue to meet as we speak, as a matter of fact, and they're making progress," the president said Thursday afternoon. "I made clear time and again, defaulting on our national debt is not an option. The American people deserve to know that their Social Security payments will be there, that veterans' hospitals remain open, and that economic progress will be made and we're going to continue to make it. Default puts all that at risk. Congressional leaders understand that, and they've all agreed — there will be no default."
— Nancy Cordes, Kathryn Watson and Rebecca Kaplan contributed to this report.
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