President Joe Biden and top Republican lawmakers will declare their positions face to face on raising the USD 31.4 trillion U.S. debt ceiling on Tuesday, with the looming prospect of an unprecedented default in three weeks if Congress does not act.
Ahead of the 4 p.m. (ET) Oval Office session, there were no signs that either side would immediately agree to any concessions to head off a default as early as June 1.
Economists warn that a lengthy default could send the U.S. economy into a deep recession with soaring unemployment while destabilizing a global financial system that’s built on U.S. bonds. Investors are bracing for impact.
The Democratic president is calling on lawmakers to raise the federal government’s self-imposed borrowing limit without conditions. House of Representatives Republican Speaker Kevin McCarthy has said his chamber will not approve any deal that does not cut spending to address a growing budget deficit, and on Tuesday signaled he wasn’t open to short-term fixes.
Past debt ceiling fights have typically ended with a hastily arranged agreement in the final hours of negotiations, thus avoiding a default. In 2011, the scramble prompted a downgrade of the country’s top-notch credit rating. Veterans of that battle warn that the current situation is riskier because political divides have widened.
Tuesday’s meeting was likely to be the start of an increasingly fraught period.
McCarthy, whose party holds only a slim majority in the House, wants to tie a vote on the debt ceiling to broad spending cuts the White House considers draconian.
On Tuesday, McCarthy appeared to close the door to one short-term solution, saying he opposed a deal that would lift the debt ceiling through September to allow more time for an agreement with Democrats on spending.
“No,” McCarthy said when asked by reporters if he would agree to align the debt ceiling with the budget process should Biden propose such an idea.
“He’s got to stop ignoring problems,” McCarthy added. “And why continue to kick the can down the road? Let’s solve it now.”
The White House responded that “a short-term extension is not our plan either.” Spokeswoman Karine Jean-Pierre called the clash a “man-made crisis that the speaker is leading.”
The U.S. Chamber of Commerce, the nation’s largest business association, on Tuesday urged a “swift” bipartisan agreement on the debt limit that would also include energy project permitting reform and an agreement on discretionary spending caps.
Few countries in the world have debt ceiling laws, and Washington’s periodic lifting of the borrowing limit merely allows it to pay for spending Congress has already authorized.
Biden would agree to a separate discussion on the budget but not tied to the debt ceiling, the White House said.
His meeting with McCarthy will be their first since February 1. They will be joined by Senate Majority Leader Chuck Schumer, a Democrat, as well as top Senate Republican Mitch McConnell and top House Democrat Hakeem Jeffries.
White House staff and aides to the congressional leaders quietly met on Friday to begin talking about the debt limit. Louisa Terrell, the head of the White House Legislative Affairs Office, was present, as were representatives from the Office of Management and Budget and the National Economic Council.
Treasury Secretary Janet Yellen said on Monday that a failure to raise the debt limit would cause a huge hit to the U.S. economy and weaken the dollar as the world’s reserve currency.
White House officials have discussed whether Biden has the authority to lift the debt limit on his own by invoking the U.S. Constitution’s 14th Amendment, but Biden told MSNBC last week that “I’ve not gotten there yet” on this argument.
The 14th Amendment says the validity of the public debt of the United States “shall not be questioned.” Invoking it would likely trigger a legal challenge.