WASHINGTON, May 22 (Reuters) – President Joe Biden and House Speaker Kevin McCarthy ended discussions on Monday with no agreement on how to raise the U.S. government’s $31.4 trillion debt ceiling. American economy.
The Democratic leader and top congressional Republicans have struggled to make progress on a deal, as McCarthy presses the White House to agree to spending cuts in the federal budget that Biden considers “radical” and the president pushes new taxes on wealthy Republicans. Reject.
“I felt like we had a constructive discussion. We still don’t have an agreement,” McCarthy told reporters after an hour of talks with Biden in the Oval Office. “I believe we can still get there,” he said, adding that his staff will continue to negotiate.
They have just 10 days – until June 1 – to reach an agreement to raise the government’s self-borrowing limit or trigger unprecedented debt repayments that economists say could bring on a recession.
Before the meeting began, Biden said he was “hopeful” they could make some progress. He said a bipartisan agreement is needed for both parties to “sell” to their constituencies, and there may still be some disagreements.
Treasury Secretary Janet Yellen on Monday offered a sobering reminder of how little time remains, saying the previous estimated default date was June 1 and that it was “highly likely” the Treasury would not be able to pay off all government obligations by early June. The debt ceiling has not been raised.
White House aides met with Republican negotiators on Capitol Hill for two hours Monday, and there were early signs that the talks were going well.
Any deal to raise the cap would have to pass both houses of Congress and would therefore depend on bipartisan support. McCarthy’s Republicans control the House 222-213, while Biden’s Democrats hold the Senate 51-49.
Failure to raise the debt ceiling could roil financial markets and trigger defaults that would raise interest rates on everything from car payments to credit cards.
US markets rose on Monday as investors awaited updates on the talks.
If Biden and McCarthy come to an agreement, it will take several days to push the legislation through Congress. McCarthy said a deal must be reached this week to pass Congress and that Biden would need to sign the legislation to avoid default.
A White House official on Monday said Republican negotiators last week proposed additional cuts to programs that provide food assistance to low-income Americans, and stressed that no deal could pass Congress without bipartisan support.
[1/5] House Speaker Kevin McCarthy (R-CA) sits with U.S. President Joe Biden for debt ceiling talks in the Oval Office at the White House in Washington, May 22, 2023. REUTERS/Leah Millis
Cuts and clawbacks
Republicans favored spending cuts, new work requirements for some programs for low-income Americans and a clawback of Covid-19 aid approved by Congress but not yet spent in exchange for a debt ceiling increase to cover the costs of lawmakers’ previously approved spending and tax cuts.
Democrats want to keep spending steady at this year’s levels, while Republicans want to return to 2022 levels. A plan passed by the House last month would cut government spending by 8% next year.
Biden, who has made the economy a centerpiece of his domestic agenda and is seeking re-election, has said he would consider spending cuts along with tax changes, but called the Republicans’ latest offer “unacceptable.”
The president tweeted that he would not support “Big Oil” subsidies and “rich tax cheats” while putting health and food assistance for millions of Americans at risk.
Both sides must weigh any concessions against pressure from hard-line factions within their own parties.
Some members of the far-right House Freedom Caucus insisted on halting the talks, demanding that the Senate take up their House-passed legislation, which was rejected by Democrats.
McCarthy, who made extensive concessions to right-wing hardliners to win the speakership, risks being fired by members of his own party if he doesn’t like the cut deal.
After losing to Biden in the 2020 election, former Republican President Donald Trump has downplayed any economic consequences and has urged Republicans to force default if they don’t meet all of their targets.
Liberal Democrats have pushed back against any cuts that would harm families and low-income Americans, with some urging Biden to act on his own by invoking the Constitution’s 14th Amendment — something the president said Sunday would face sanctions.
The amendment states that “the validity of the public debt of the United States … shall not be questioned,” but this provision has often been overlooked by courts.
Reporting by David Morgan, Richard Cowan and Andrea Shalal; Written by Susan Hevey; Editing by Lisa Shumaker and Stephen Coates
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