HIROSHIMA, Japan, May 21 (Reuters) – President Joe Biden on Sunday called “unacceptable” the latest Republican offer in negotiations to raise the government’s debt ceiling, but said he was willing to cut spending along with tax changes to reach a deal.
Before leaving Hiroshima, Japan, after a meeting of G7 leaders, Biden suggested some Republicans in Congress were willing to default on the U.S. debt so that disastrous results would prevent Biden, a Democrat, from winning re-election in 2024.
With less than two weeks to go until June 1, the Treasury Department has warned that the central government may not be able to pay off all its debts. This would trigger chaos in financial markets and defaults that would raise interest rates.
Biden said he would speak with the top Republican in Congress, Kevin McCarthy, on his flight home and was waiting to talk directly with House Speaker Biden.
“Most of what they’ve already proposed is simply, quite frankly, unacceptable,” Biden said. “It’s time for Republicans to accept that there is no bipartisan deal, only on their party terms. They need to move, too.”
McCarthy said in an interview on Fox News that he expects to speak with Biden on Sunday morning.
“There’s no acknowledgment of the difficulty,” McCarthy said on “Sunday Morning Futures with Maria Bartiromo,” accusing Biden of changing course after earlier debates promised compromise. “We were in a good place and he’s going overseas and now he wants to change the debate.”
Talks have heated up over the past two days. Democratic and Republican negotiators said Friday’s meetings at the Capitol produced no progress and the two sides did not meet Saturday. Instead, each has turned to calling the other’s position extremist.
The Democratic president has said he has the power to invoke the 14th Amendment to the U.S. Constitution to raise the debt ceiling without Congress, but it’s not clear there is enough time to invoke the untested legal doctrine to avoid default.
US Treasury Secretary Janet Yellen said in a televised interview Sunday that June 1 is a “hard deadline” to raise the federal debt ceiling, telling NBC News that the chances of the government collecting enough revenue to pay its bills through June are “very slim.” 15, when more tax receipts arrive.
Republicans have proposed increasing defense spending while cutting overall spending, a source familiar with the negotiations said. The source said the Biden administration proposed keeping non-defense discretionary spending flat for next year.
Default concerns weigh on markets. The U.S. was forced to pay higher interest rates on worries about the latest debt relief and a lack of deal weighing on U.S. stocks on Friday.
The Republican-led House passed legislation last month that would cut government spending by 8% next year. Democrats say they would force at least 22% average cuts in programs like education and law enforcement, which Republicans don’t dispute.
Republicans hold a slim majority in the House and Biden’s fellow Democrats have narrow control of the Senate, so no deal can pass without bipartisan support.
In exchange for raising the government’s self-imposed debt limit, Republicans are pushing for sharp spending cuts in several domestic programs, which are usually needed to offset spending cuts and tax cuts previously approved by lawmakers.
Biden said he was willing to make spending cuts and was not worried they would lead to a recession, but he couldn’t agree to Republican demands.
The last time the country got this far was in 2011 with a Democratic president and a Republican-led Senate.
Congress eventually blocked default, but the economy suffered severe shocks, including the first downgrade of the US’s top-tier credit rating and a massive stock selloff.
Reporting by Trevor Hunnicutt; Editing by Simon Cameron-Moore
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