United States President Joe Biden, a Democrat, held a sit-down with House Republican Speaker Kevin McCarthy to discuss raising the nation’s debt ceiling, which limits how much the federal government can borrow to pay its bills.
But once again, a solution to the country’s looming debt crisis remains elusive as the government scrambles to run out of funds as early as June.
Still, McCarthy struck a note of optimism as he left the White House on Monday. “I think the tone tonight was better than any other time we’ve had discussions,” McCarthy told reporters at a news conference. “I felt it was effective.”
Representative Patrick McHenry of North Carolina, part of the Republican negotiating team, echoed that assessment.
“We played tough matches. We had difficult matches. This meeting was productive,” McHenry said at the press conference. “It told us as a negotiating team a little bit more of the details that we need to get to a package, a package that can pass Congress.”
McCarthy added that he felt a deal to raise the debt ceiling was within reach before the June deadline. “I believe we can do it,” but he offered few details on what compromises, if any, he would be willing to make.
“There is nothing agreed upon. Everything is talked about,” he said, teasing that negotiators would “work through the night” on possible solutions.
The $31.4 trillion debt ceiling has become a constant subject of political gridlock in recent years as Republicans seek to limit government spending by cutting welfare programs, which many Democrats oppose.
Meanwhile, the Biden administration has previously been called on to raise the debt ceiling “cleanly” without strings attached. Separately, Biden called on wealthy Americans and big corporations to pay “their fair share” in taxes to increase government revenue and address the national debt.
There is a “high probability” of a default in early June
Monday’s White House meeting came shortly after Treasury Secretary Janet Yellen sent her third letter to Congress in as many weeks, urging lawmakers to act “as soon as possible.”
On Monday, Yellen’s mission emphasized that it was “highly likely” that the US government could start defaulting on its payments as early as June 1, less than a week and a half away.
He also warned that the political impasse has already led to real-world consequences. “We have already seen Treasury borrowing costs rise significantly for securities maturing in early June,” he wrote.
“If Congress fails to raise the debt limit, it will cause severe hardship for American families, damage our global leadership position, and raise questions about our ability to protect our national security interests.”
Economists have predicted that if the US government defaults on its loans, it could trigger a recession and lower the country’s credit rating, leading to higher interest rates and a greater overall burden on the economy. Veterans, Social Security recipients and other individuals and businesses dependent on government funds may see their payments stopped or delayed.
Convenient negotiations and short travel
Monday’s meeting at the White House was preceded by a flurry of negotiations as members of Biden’s and McCarthy’s respective camps met to hash out the details.
The discussions took place after intense negotiations. Talks between White House advisers and congressional Republicans hit an impasse on Friday when McCarthy abruptly ended the talks.
He attributed the “pause” to White House frustration and lack of progress in negotiations. Talks resumed briefly later in the evening.
Biden was in Japan at the time for the Group of Seven (G7) summit as part of a trip that originally included stops to allies in the Pacific region. However, amid criticism for missing key debt talks, Biden’s team cut the trip short, canceling scheduled stops in Australia and Papua New Guinea.
On Sunday, as he returned to Washington from Japan, Biden spoke to McCarthy by phone, reigniting the debt talks. Both sides appeared optimistic.
“It went well. We’ll talk tomorrow,” Biden told reporters upon landing in the US. Meanwhile, McCarthy described the call as “very effective”, confirming he felt they could find “common ground”.
After Sunday’s phone call, negotiators met for more than two hours at the US Capitol on Sunday night and again for nearly three hours on Monday, setting the stage for the two leaders’ meeting.
Republicans are pushing the current bill
After a meeting at the White House on Monday, McCarthy once again dismissed the prospect of a “clean” debt ceiling hike, saying he would raise the nation’s borrowing limit only if government spending was reined in.
He also ruled out defense spending cuts to limit government spending, as well as allowing a short-term extension of the debt ceiling.
“I don’t think a short-term extension does anybody any good,” McCarthy told reporters. “If it’s a short-term extension, I think the country looks like it’s failed in some way, that we can’t do the job that we need to do.”
Republicans have proposed capping next fiscal year’s spending at 2022 levels, but the White House is seeking to keep government spending at 2023 levels.
Another question on the negotiation table is how long such a spending limit will last. Republicans drop from 10 to six years. But Democrats hope to cap any spending restrictions in a two-year deal by allowing government spending to adjust for inflation.
Republican negotiators like McHenry also continued to defend a bill passed by the House in April that would raise the debt ceiling by $1.5 trillion in exchange for concessions aimed at Biden’s domestic platform.
The bill would increase work requirements for recipients of government safety net programs such as Medicaid and the Supplemental Nutrition Assistance Program (SNAP), and restore increased funding to the Internal Revenue Service (IRS), which is expected to increase federal revenue.
It would also block Biden’s signature student aid loan initiative and end renewable energy tax credits as part of the De-Inflation Act. Biden had earlier threatened to veto the bill if it reached his desk.
“We have a position. We left it out of the chamber. For days, weeks, months, the president demanded that we hand over goods. We have delivered goods. We are negotiating here,” McHenry said Monday. “No detail is settled until everything is settled.”