Tuesday May 23, 2023
President Joe Biden and House Speaker Kevin McCarthy were unable to reach an agreement on the $31.4 trillion U.S. government debt ceiling on Monday, with just 10 days left before a potential failure that could have serious consequences for the U.S. economy. Despite the challenges, both leaders expressed their commitment to ongoing discussions.
Negotiations between the Democratic president and the top Republican in Congress have been fraught with difficulty. McCarthy is pressuring the White House to accept spending cuts in the federal budget that Biden considers "extreme," while the president has advocated for new taxes that Republicans have rejected.
After Monday night's meeting, both sides stressed the importance of avoiding default and signaled their intention to continue negotiations in the coming days. A source familiar with the situation said White House negotiators would resume talks on Capitol Hill later that night.
In a statement after the meeting, President Biden said default was not an option and reiterated the need for a bipartisan deal. McCarthy expressed optimism after more than an hour of talks, saying negotiators would work through the night to find common ground. But he made it clear that he opposes Biden's plan to raise taxes on the wealthy and close tax loopholes, focusing instead on spending cuts in the 2024 federal budget.
Both Democrats and Republicans have until June 1 to raise the government's borrowing limit or risk an unprecedented debt default that economists say could trigger a recession. Treasury Secretary Janet Yellen emphasized the limited time remaining and the likelihood that the Treasury Department will not be able to meet all of the government's obligations by early June unless the debt ceiling is raised.
Republican Representative Patrick McHenry, present at the White House meeting, ruled out a partial budget deal to raise the debt ceiling and insisted on a final deal. The success of any deal depends on bipartisan support because it must pass both houses of Congress. Republicans control the House by a narrow 222-213 margin, while Democrats hold a slim majority in the Senate.
Failure to raise the debt ceiling would have far-reaching consequences, shaking financial markets and leading to higher interest rates on various financial obligations. Despite the ongoing negotiations, US markets rose on Monday as investors awaited updates on the situation.
Once Biden and McCarthy reach an agreement, it will take several days for the necessary legislation to pass through Congress. McCarthy stressed the urgency of reaching a deal this week to ensure Biden signs it into law on time and avoid failure.
Republicans are advocating discretionary spending cuts, work requirements for some low-income programs and clawing back unspent COVID-19 aid in exchange for raising the debt ceiling. Democrats aim to keep spending at current levels in 2024, while Republicans want to return to 2022 levels and impose caps on spending growth in subsequent years. Biden has expressed openness to spending cuts along with tax overhauls, but found the Republicans' latest offer unacceptable.
Both parties are also facing pressure from their own partisan factions, with far-right members of the House calling for a halt to the talks and liberal Democrats opposing cuts that could hurt families and lower-income Americans. The outcome of these negotiations will have significant implications for the financial stability of the country and the political future of the leaders involved.
