Washington (AFP) - Top US Republican Kevin McCarthy said Thursday he saw “the path” to a breakthrough in talks to avert a looming debt default, despite signals from his party’s hard right that they would not soften their demands for deep spending cuts.

The government is expecting to hit the legal borrowing limit by as soon as June 1, raising the possibility of the world’s largest economy defaulting on repayments on its $31.8 trillion debt and igniting a firestorm in global markets.

“We’re not there – we haven’t agreed to anything yet – but I see the path (where) we could come to an agreement,” the House speaker said in his most upbeat assessment yet of the high-stakes standoff between Republicans in Congress and Democratic President Joe Biden.

“I think we have the structure now and everybody’s working hard.”

McCarthy secured the House speaker’s gavel in January by pledging to his party’s ultra-conservative Freedom Caucus that any raise in the borrowing limit would only come with an evisceration of the federal budget.

In April, his lawmakers passed the Limit, Save, Grow Act, which would raise the ceiling through March 2024 – or until it reaches $31.9 trillion, if that comes first. But it was not taken up by the Democratic-led Senate, as the bill rolls back major portions of Biden’s agenda.

Democrats point out that the debt limit has been raised dozens of times without budget negotiations, and accuse the Republicans of holding the US economy “hostage.”

Congressional leaders have held two rounds of talks with Biden, but time is running out for legislation to move through Congress before the coffers run dry.

Any deal would need to pass the Republican-led House and the Senate ahead of the deadline, and McCarthy said it would need 11 days to get through both chambers of Congress.

The House is session for just four more days this month, and senators have been told they may have to come back early from Memorial Day recess, which sees them out of Washington until May 30.

- ‘Congress must act’ -

Some Senate Democrats are urging Biden to invoke the 14th Amendment to the Constitution – which states that “the validity of the public debt of the United States… shall not be questioned” – to lift the borrowing cap and avert default on his own, without the approval of Congress.

Previous administrations have looked at the viability of the move, however, and voiced concerns that if such an action were challenged in court, it could undermine the full faith and credit of the United States.

“Our position is clear and simple: Congress must act to prevent default,” Vice President Kamala Harris told reporters at a separate briefing.

“That is what Congress has done more than 70 times… since 1960 and that is what it did three times under the previous administration. America must pay our bills.”

The independent Congressional Budget Office said the Limit, Save, Grow Act would save $4.8 trillion over a decade, although ratings agency Moody’s Analytics estimated it could stunt 2024 growth by 0.6 percentage points and kill 780,000 jobs.

In a sign of the challenge McCarthy faces in selling a watered-down version to the Republican right wing, the 45-member Freedom Caucus hardened its stance on the debt limit Thursday, calling for an end to negotiations.

The group has the power to call a vote on ousting the speaker at any point if he falls short of their expectations.

“The House Freedom Caucus calls on Speaker McCarthy and Senate Republicans to use every leverage and tool at their disposal to ensure the Save, Limit, Grow Act is signed into law,” the group said in a statement.

“There should be no further discussion until the Senate passes the legislation.”