U.S. President Joe Biden, House Speaker Kevin McCarthy and other top congressional leaders are meeting Tuesday at the White House in a new effort to reach agreement on raising the country’s debt ceiling so the government can borrow more to pay its existing obligations.
Biden has insisted that Congress raise the current $31.4 trillion debt ceiling without conditions on future spending. McCarthy and congressional Republicans have called for substantial cuts in future government spending in exchange for raising the debt limit for a year.
That scenario would require a new round of debt ceiling negotiations amid the early phase of the 2024 presidential primary elections.
Although the current debt limit was reached in January, Treasury Secretary Janet Yellen and U.S. financial officials have taken what they describe as “extraordinary measures” to juggle U.S. spending accounts to keep paying the government’s bills. She says the U.S. could run out of cash to meet all its obligations by June 1 and then could default on some of them.
The U.S. has never defaulted on its debt. Yellen and other top government officials have warned that doing so would have immediate and widespread consequences, including calamity on U.S. and global stock markets, massive U.S. worker layoffs and delayed payments to U.S. pensioners, government contractors and health care providers treating older Americans.
The U.S. Congress has raised the debt ceiling 78 times under both Democratic and Republican presidents, including three times during the four-year term of former President Donald Trump. Biden has adamantly called for an increase, but Trump, the leading 2024 Republican presidential contender after losing his 2020 reelection bid to Biden, expressed indifference to a possible default last week at a political town hall in New Hampshire.
“I say to the Republicans out there, congressmen and senators, if [Biden and Democrats] don’t give you massive cuts you are going to have to do a default,” Trump said. “But it’s better than what we are doing right now because we are spending money like drunken sailors.”
“You might as well do it now because you’ll have to do it later,” he said.
Last week, Biden and the congressional leaders of both political parties met without reaching a debt ceiling agreement but directed their staffs to continue discussions in the last few days.
While Biden has said he would not link an increase in the debt ceiling to future government spending cuts, he has said that separately, he is willing to talk about future spending limits to pare the chronic overspending by the government, where annual trillion-dollar deficits have been common for years.
If an agreement is reached, in Washington’s politically charged atmosphere, it might be a matter of semantics whether a debt ceiling increase and a tandem cut in future spending are linked. Both Biden and congressional Republicans want to be able to claim victory.
In recent days, the White House has voiced cautious optimism on a potential agreement, but on Monday, McCarthy expressed doubts.
“I don’t think we’re in a good place,” McCarthy said. “I know we’re not.”
Chuck Schumer, the Senate Democratic Majority Leader, said, “We welcome a bipartisan debate about our nation’s fiscal future. But we’ve made it plain to our Republican colleagues that default is not an option. Its consequences are too damaging, too severe. It must be taken off the table.”
The two sides are debating to what extent the debt ceiling would be raised and for how long, as well as specific spending cuts Republicans in the House of Representatives recently approved in a narrow vote over united Democratic opposition.
The Republicans have called for future spending caps, new work requirements for able-bodied poor people receiving government financial assistance and implementing changes to approve domestic energy projects at a faster pace.
The urgency of the talks is complicated because of Biden’s plans to leave Washington on Wednesday for a trip to Japan for a meeting of the leaders of the Group of 7 allied countries, with stops also planned in Australia and Papua New Guinea.
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