The first White House debt ceiling meeting between President Biden and House Speaker Kevin McCarthy ended Tuesday no closer to a deal. But the follow-up gatherings this week among aides are offering new hints about what could be on the table.

The leading areas of potential compromise are some limits on federal spending for the years ahead as well as Democratic openness to the GOP's push to “claw back” unspent money from COVID relief bills.

Cutting the red tape tied to permits for new energy development projects is another intriguing possibility. The White House “sees an opportunity” of making a real deal on that complex issue, according to one person familiar with the talks.

The nascent talks to avert an economy-shaking default remain very fluid. But a very tentative optimism —based on the fact that the two sides are in the same room as much as anything else — could give observers and markets new confidence on the issue before the leaders are scheduled to gather again next week.

A meeting between leaders originally scheduled for today was postponed to give both sides more time to negotiate.

Nothing is certain of course and “it's going to be one of those things where we won't know until a deal is struck,” notes energy expert Philip Rossetti.

Both sides are saying that Friday simply wasn’t the right moment to bring leaders back together, with Speaker McCarthy adding a note of caution.

“If these were staff meetings happening on Feb. 1, I’d call them productive,” he said Thursday night, noting that these still-preliminary conversations are taking place just weeks ahead of a possible default.

Both sides are now rushing to show the country significant progress, especially before next Wednesday when President Biden is scheduled to leave for a trip to Asia.

Possible areas of agreement

Two main areas of common ground seem to have emerged as the sides have been sifting through the sprawling Republican debt ceiling proposal as well as Biden’s priorities.

One is a cap on federal spending and the other is money that can be clawed back from COVID relief bills.

Experts estimate that there is somewhere in the neighborhood of $50-$70 billion that was appropriated by Congress in the flurry of COVID relief bills during the pandemic but then was not actually spent.

McCarthy reiterated his focus on the issue Thursday, calling it “just a start” of the cuts that will be needed for a deal.

President Biden has likewise signaled a willingness to talk there, saying “it's on the table” in talks that the White House maintains are independent of debt-limit discussions. “I have to take a hard look at it,” Biden said.

Federal spending levels are another area where a middle ground may be possible. Observers have noted that McCarthy’s bill would, on net, cut deficits by $4.8 trillion over 10 years. Meanwhile, President Biden’s budget from earlier this year includes about $3 trillion in deficit reduction.

There are still many disagreements on exactly where the cuts should fall, but it’s an issue seen as solvable.

Marc Goldwein, policy director at the Committee for a Responsible Federal Budget, recently told Yahoo Finance if the talks can stay on track and “we end up somewhere in the middle, I would consider that a huge victory.”

Mixed signals

Another open question is whether energy permitting reform could be included.

Many in Washington want to make it easier for energy producers to meet the country's immediate needs while also encouraging new types of renewable sources. The slow permitting process on new projects is a hurdle on both fronts, many say.

Finding ways to cut that red tape remains on the table, said one source familiar with the meetings. “The White House wants a bipartisan deal and sees an opportunity here,” this person said.

Politicians across the spectrum have long bemoaned the years it can take to get energy projects of all types off the ground. The Biden team also laid out their priorities for permitting legislation this week with senior advisor John Podesta saying, “President Biden has elevated this issue to the highest levels of government.”

“The permitting reforms would make a lot of sense for both sides to compromise on to make a deal, since they both seem to want it,” added Rossetti, who is a senior energy fellow at Washington’s R Street Institute.

But at the same time, two key Senators on the issue signaled that they are aiming to tackle the complex issue separately. On Thursday, Sens. Joe Manchin (D-WV) and John Barasso (R-WY) convened a Senate hearing to restart their efforts and promised a separate bipartisan Senate bill later this summer.

“No matter what you want to build, it simply takes too long,” Manchin said Thursday about hamstrung efforts to increase America’s clean energy infrastructure as well as efforts by fossil fuel companies to extract oil and natural gas.

Permitting reform is also an issue that has long animated the business community. Marty Durbin, the U.S. Chamber of Commerce’s Senior Vice President for Policy, told Yahoo Finance in an interview this week his group will continue "aggregate different sectors of the economy" to pressure Washington.

“Stop waiting, start building, let's get permitting reform done,” he added.

Business leaders also say the issue is quickly nearing a breaking point, with a wave of new clean energy projects being spurred by government incentives passed in the Inflation Reduction Act and in the Bipartisan Infrastructure Law.

“Uptick would be an understatement, we have seen an absolute surge of activity,” said Jason Grumet, the CEO of the American Clean Power Association, at Thursday’s hearing.

Issues that could tank a deal

But even with the areas of possible agreement, there remain clear red lines that are a top priority to one side but anathema to the other.

White House officials are likely to reject the elements of McCarthy’s bill aimed at rolling back much of Biden’s signature legislative achievements, especially proposed cuts to green tax credits in the Inflation Reduction Act designed to fight climate change

Two other proposals are unlikely to gain much traction with the Democratic side of the aisle. One is a GOP idea to impose new work requirements on low-income Americans who participate in federal programs like food stamps and Medicaid. Another is a push to reverse $80 billion in new funding set to go to the Internal Revenue Service in the coming decade.

Likewise, where McCarthy and other Republicans have signaled that an area where they will not move is ongoing efforts by Democrats to pass a “clean” debt ceiling increase now even if it is paired with promises to negotiate over other issues in the fall.

But even though time is short, there is some optimism that leaders across Washington are at least beginning to think about what a deal could look like after months of being largely incommunicado.

Speaking of the push for energy issues in particular, Durbin added, “this is a pivotal time and we're kind of hitting a sweet spot” where real movement on the issue might be possible. “But something has to get done.”

Ben Werschkul is a Washington correspondent for Yahoo Finance.

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