Republicans hardened their battle lines Tuesday ahead of a pivotal White House meeting on averting a first-ever US default, the latest sign of trouble in negotiations over the debt limit.
(Bloomberg) — Republicans hardened their battle lines Tuesday ahead of a pivotal White House meeting on averting a first-ever US default, the latest sign of trouble in negotiations over the debt limit.
GOP leaders are focused on getting President Joe Biden to agree to expanded work requirements for federal aid to the poor. Other Republican priorities include cuts to domestic spending, easing energy permits and clawing back $65 billion in unused Covid-19 funds.
The two parties grappled over responsibility for potential economic catastrophe should talks fail and clashed over characterizing the state of negotiations. Republican House Speaker Kevin McCarthy declared Tuesday morning there had been “no progress” in talks among senior staff, even as Biden over the weekend described the same conversations as productive.
Treasury Secretary Janet Yellen warned that “time is running out” to avoid a default in remarks hours ahead of the scheduled 3 p.m. White House meeting, the first in-person talks among the leaders in a week.
There has been little reaction in financial markets to Yellen’s latest warnings, though Treasury bills maturing in early June continued to trade at a discount to other securities. Investors have historically demanded higher yields on securities that are due to be repaid shortly after the US is seen as running out of borrowing capacity. Stock traders were mostly sidelined in the morning, averting risk as the debt talks added to economic uncertainties.
Read More: Wall Street Bosses See US Debt Talks Doing Damage Before Default
Republicans are trying to add new work requirements for Medicaid for “able-bodied” adults without children. They also want to apply existing work requirements to older individuals receiving food stamps and to restrict waivers used by states in welfare programs.
McCarthy said Republicans would stand firm in their demands. Biden has rejected work requirements on Medicaid but otherwise has avoided a definitive response.
McCarthy also took aim at the president’s plan to proceed with a planned Asia trip, intended to showcase US determination to address strategic competition with China.
“We have 16 days more days to go, I don’t think I’d be spending eight days out of the country,” McCarthy, who traveled to Israel and Italy earlier this month, told reporters at the Capitol.
White House officials have said Biden plans to leave Wednesday for the Asia trip, though they have cautioned he could return to Washington early if he’s needed for debt ceiling negotiations.
In Japan, he’s slated to attend the annual Group of Seven meeting, where leaders are slated to discuss efforts to punish Russia and bolster Ukraine ahead of an expected counteroffensive, as well as the nuclear threat from North Korea. Leaders are also planning to discuss ways to blunt Chinese influence in the region – a conversation that will continue as Biden meets with leaders of Australia, India, and the UK next week in Australia.
Blame Game
House Democratic Caucus Chairman Pete Aguilar said the US is on “the verge of a Republican-led default.” He suggested GOP moderates needed to step up as McCarthy is being led by the “extreme elements” of their party.
But McCarthy urged fellow House Republicans in a closed-door meeting to stick together, and stay strong, as the pressure intensifies, a person familiar with the discussion said.
He later said he would prefer to negotiate directly with a Biden envoy rather than the wider talks with Democratic congressional leaders.
Yellen issued a fresh letter to congressional leaders Monday restating that the Treasury risks running out of sufficient cash for all federal obligations as soon as June 1. The livelihoods of millions of Americans “hang in the balance,” she said in excerpts of her speech to the Independent Community Bankers of America Capital Summit.
Biden and McCarthy have been at an impasse since January over raising the government’s $31.4 trillion borrowing limit. the two sides are at odds over the length of the debt ceiling extension and the number of years to cap spending. The GOP wants to extend the debt ceiling to next March and Democrats have proposed through December 2024.
Economists have cautioned that US default risks triggering a market selloff, a surge in borrowing costs and a blow to the global economy that could rival the 2008 crash.
People familiar with the meetings have said that the White House has pushed to exclude elements of a bill passed by House Republicans last month — including eliminating the president’s program to forgive some student loans, as well as signature legislative accomplishments — from discussions.
Republicans rejected a Democratic proposal that would seek to raise revenue — and decrease future deficits — by altering a dozen provisions of the tax code, including a loophole that allows investors in cryptocurrency to claim losses on assets that they then purchase. Democrats also proposed eliminating a loophole that allows large real estate investors to effectively receive interest-free financing from the government.
Those tax offerings were part of Biden’s budget proposal earlier this year. The White House offered to bring Republicans additional proposals but were told that the GOP would not consider any effort to raise taxes, according to the people familiar.
Last week, Representative Dusty Johnson of South Dakota, one of the authors of the House debt-limit plan, said the GOP has three red lines: no clean debt increase, no tax increase, and the bill must reduce the deficit.
–With assistance from Alexandra Harris, Viktoria Dendrinou, Christopher Condon, Jennifer Jacobs and Steven T. Dennis.
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