By Jarrett Renshaw

White House and congressional Republican negotiators will meet again on Tuesday to resolve a months-long impasse over raising the government's $31.4 trillion debt ceiling, with the nation facing the risk of default in as soon as nine days.

President Joe Biden's Democrats and the Republicans who control the House of Representatives, led by Speaker Kevin McCarthy, remained deeply divided about how to rein in the federal deficit. Democrats argue wealthy Americans and businesses should pay more taxes while Republicans want spending cuts.

Biden and McCarthy emerged on Monday evening from their third meeting this year on the debt ceiling talking about the need to find bipartisan compromise, even as they cling to policies that expose the divides between the two parties.

White House aides headed back to Capitol Hill after the meeting for further talks Monday night.

Biden and Democrats want to freeze spending in the 2024 fiscal year at the levels adopted in 2023, arguing that would represent a spending cut because agency budgets won't match inflation. The idea was rejected by Republicans, who are insisting on cuts to 2022 levels, Democratic leaders said on Monday.

Republicans are insisting federal spending must be significantly reduced from current levels so that overall spending goes down in the upcoming fiscal year even as military spending goes up.

Biden wants to cut the deficit by raising taxes on the wealthy and closing tax loopholes for the oil and pharmaceutical industries. McCarthy declared that boosting revenue is a non-starter.

"I don't think it's a revenue problem. It's a spending problem," McCarthy said.

McCarthy said both he and Biden directed their negotiators — who already met for several hours earlier Monday — to “work through the night” as they race toward a deal before June 1, when the Treasury Department warns the federal government could run out of money.

COMMON GROUND

Unless Congress raises the debt ceiling and allows the federal government to borrow money to pay its bills, the United States could default on its obligations for the first time in history, potentially tipping the nation into recession and plunging global financial markets into chaos.

Any deal to raise the limit must pass both chambers of Congress, and therefore hinges on bipartisan support. McCarthy's Republicans control the House 222-213, while Biden's Democrats hold the Senate 51-49.

Despite the gridlock, the two sides have found some common ground on several areas, including permit reform that will help energy projects move forward and clawing back unused COVID relief funds. The two sides are also discussing imposing stricter work requirements on two popular public benefit programs aimed at helping Americans out of poverty.

But leaders cautioned that nothing has yet to be agreed upon.

"No one's going to agree to anything until we have a finalized deal," said Republican Representative Patrick McHenry, who chairs the House Finance Committee.

(Reporting By Jarrett Renshaw; Editing by Heather Timmons and Lincoln Feast.)