(Bloomberg) -- White House negotiators meeting with Republicans to hash out a deal to avert a historic US default have been instructed not to offer concessions on drug pricing, access to health care, or programs to combat climate change, Lael Brainard, the president’s top economic adviser, said Thursday.
“The administration’s negotiating team is fighting against extreme attempts to reverse the progress we’ve made, creating clean energy jobs, combating climate change and lowering costs for middle class families, including for students and for insulin and other drugs,” Brainard told activists and community leaders in a virtual briefing alongside Vice President Kamala Harris.
“Negotiators are also instructed to resist extreme attempts to take health care away from Americans or otherwise push Americans into poverty,” she added.
Brainard’s comments come as some progressives on Capitol Hill have openly fretted that a debt-limit deal could see substantial cuts to assistance for the poor, including through new work requirements on social safety net programs like grocery benefits. White House officials have said Biden would not accept a rollback of his signature Inflation Reduction Act, or new work requirements toughening access to Medicaid.
Brainard spoke just hours after House Speaker Kevin McCarthy told reporters he could envision a deal coming together in the coming days, with a vote as soon as next week.
Read more: McCarthy Says Debt Deal Is Close, Predicts House Vote Next Week
The rosy update from McCarthy pushed stocks to a session high, while the dollar maintained gains against a basket of currencies. The Treasury Department has said the US risks breaching the debt ceiling as soon as June 1, and economists have projected that if lawmakers are unable to strike a deal by then, a default would rattle markets and spike borrowing costs.
Brainard reiterated those warnings in the briefing, pointing to a recent White House analysis that said even a brief default could result in the loss of a half million US jobs while knocking 0.6% off annual GDP. The Treasury has been deploying special accounting measures since January to stay within the $31.4 trillion statutory ceiling, but those have been steadily running out.
“Defaulting on our obligations would likely lead millions of Americans to lose their jobs. It would lead the stock market to fall sharply, which of course would hurt retirement accounts,” said Brainard. “It would mean car loans would become much more expensive, mortgage loans would become more expensive, and the cost of borrowing for the US government would become much, much more expensive.”
Some of the impacts of a potential default are already being felt. Investors have in recent weeks been incorporating the risk of the Treasury running out of sufficient cash, demanding higher premiums on Treasury securities maturing in early June.
But both sides have expressed cautious optimism since a meeting Tuesday between President Joe Biden and congressional leaders, which Harris called “productive.”
“We believe that it occurred in good faith, with all the leaders in that meeting agreeing that America will not default,” Harris said.
In the meeting, the two sides agreed to narrow the team involved in the negotiations to a small set of White House and McCarthy aides, alongside Representative Garret Graves, a Louisiana Republican.
Biden also announced he would cut short his trip overseas. He plans to return Sunday after attending a Group of Seven leaders meeting in Hiroshima, Japan. The president had previously planned to visit Australia and Papua New Guinea, but said he would instead return to Washington for another meeting with lawmakers that he hoped would yield a final agreement.
Read More: Averting a US Default Is Now the Job of Five Washington Insiders
Negotiations appear to be circling around a framework that would see the debt limit extended in exchange for federal spending caps in future years, as well as permitting reform that could speed energy products and the clawing back of unspent pandemic funds. But some Democrats, including Senator Elizabeth Warren, have said the administration should instead consider extraordinary executive action, like evoking a provision in the 14th Amendment of the Constitution, to avoid making concessions in the talks.
A deal will depend on whether negotiators can strike an agreement that garners enough bipartisan support to overcome resistance in both parties. In the House, McCarthy holds a razor-thin majority, and must ensure a deal pacifies hardline conservatives who have warned they could push to remove him as speaker if he doesn’t extract enough concessions from the White House.