President Joe Biden and House Speaker Kevin McCarthy will soon offer the clearest sign yet about whether a deal can be reached to avert a historic US default.
(Bloomberg) — President Joe Biden and House Speaker Kevin McCarthy will soon offer the clearest sign yet about whether a deal can be reached to avert a historic US default.
The two leaders are poised to reconvene Tuesday after staff-level talks held throughout the weekend, with the White House sending signs of guarded optimism. Biden said talks were “moving along” while National Economic Director Lael Brainard said the negotiations were serious and constructive.
The meeting will be a key litmus test of whether a deal can be reached before a potential default in June — and comes before Biden leaves Wednesday for a trip to Japan, Papua New Guinea and then Australia.
“I remain optimistic because I’m a congenital optimist, but I really think there’s a desire on their part as well as ours to reach an agreement and I think we’ll be able to do it,” Biden told reporters Sunday.
McCarthy has sought a deal tied to budget cuts as a condition of increasing the debt limit, which would avert an unprecedented US default that could come in as few as 17 days. A default would sink markets, leave potentially millions out of work and hike borrowing costs for families and the US government alike.
McCarthy on Monday said the two parties would have to have a deal by this weekend to push it through Congress in time to avoid default. But he said they’re still “far apart” in negotiations.
“They’re not talking anything serious,” McCarthy said of Democrats. “It seems more that they want to default than have a deal.”
Biden said he thinks the meeting will happen Tuesday. A person familiar with discussions confirmed that plan but cautioned that it wasn’t finalized and could change. The White House declined comment.
The standoff has simmered for months and is already rattling markets as investors assess whether they’ll reach a deal. Both sides were tight-lipped through the weekend about the specifics around the negotiations.
“The staff is very engaged. I would characterize the engagement as serious, as constructive,” Brainard told CBS’s Face The Nation on Sunday, warning that a default would be “catastrophic” for the economy.
“It would lead to higher borrowing costs for cars, for mortgages, for small businesses, even for the US government and so the most important thing is making sure that Congress fulfills its basic responsibility to avert default,” Brainard said.
Treasury Secretary Janet Yellen has said the department could run out of money as soon as June 1. Yellen told Bloomberg News on Saturday that she was preparing a fresh estimate.
Treasury said Friday that it had just $88 billion left as of May 10. Other estimates of the so-called X-date, or a potential default, range from early June to July or even August.
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The White House sent signals over the weekend that it’s not considering contingencies, as it continues to place the onus on Congress to suspend or raise the debt ceiling.
Biden himself underscored the urgency for a deal when asked if one could be reached by June 1, replying: “It has to be.” Brainard downplayed chances for some kind of short-term suspension or increase, while Deputy Treasury Secretary Wally Adeyemo poured cold water on calls for Biden to invoke the 14th amendment as a last resort, and effectively try to nullify the debt.
Biden does “not think the 14th Amendment would solve our problems now,” Adeyemo told CNN’s State of the Union on Sunday.
Biden and McCarthy met last week at the White House with McCarthy’s Democratic counterpart, Hakeem Jeffries, along with Senate Majority Leader Chuck Schumer and Senate Minority Leader Mitch McConnell.
The leaders emerged from that and launched their staff on talks toward a deal, and eventually delayed a second meeting of the top principals to allow the staff negotiations to continue.
–With assistance from Billy House and Erik Wasson.
(Updates with McCarthy in sixth and seventh paragraphs)
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