House Speaker Kevin McCarthy said he expects to speak with President Joe Biden shortly on negotiations to avert a catastrophic US debt default even as he signaled that talks remain at an impasse.
(Bloomberg) — House Speaker Kevin McCarthy said he expects to speak with President Joe Biden shortly on negotiations to avert a catastrophic US debt default even as he signaled that talks remain at an impasse.
McCarthy reiterated his opposition to raising revenue and said Biden told him in their recent Oval Office meeting that he knew taxes were off the table. He’s now reversed course, McCarthy said.
“We have got 11 days to go,” McCarthy said at the Capitol on Sunday, urging Biden and fellow Democrats to be “sensible about this.”
McCarthy’s comments come amid turbulent talks to avoid a default, and as Treasury Secretary Janet Yellen said Sunday the chances that the US can pay all its bills by mid-June are “quite low.”
“It seems as though he wants default more than he wants a deal,” McCarthy said in an interview with Fox News’ Sunday Morning Futures.
Biden told reporters Sunday in Japan that he proposed to cut spending and that the onus is now on Republicans to shift their demands. The president insisted he wouldn’t agree to a deal that protects tax breaks for the wealthy and the fossil-fuel and pharmaceutical industries while cutting health-care and education funding.
“Now it’s time for the other side to move from their extreme positions because much of what they’ve already proposed is simply, quite frankly, unacceptable,” Biden said.
Republicans have lowered their demands on spending caps from 10 years to six years, according to two people familiar with the talks, but the White House still wants the deal to last two years.
One of the people said the GOP is still seeking a large increase to defense spending next year, something that would deepen cuts to social services. Democrats have demanded that defense, which is about half of all federal discretionary spending, not be fenced off from cuts.
McCarthy and his spokesman didn’t reply when asked about the GOP spending cap offer.
Yellen underscored the urgency of the situation, telling NBC the US is unlikely to reach mid-June and still be able to pay its bills. While tax payments are expected in mid-June, getting to that date is the problem, she said.
McCarthy said there’s some talk of extending the debt ceiling until 2025, but he said he’s demanding cuts to federal spending in exchange for GOP votes to do so. Biden, he said, is resisting.
“The president keeps changing positions every time Bernie Sanders has a press conference,” he said.
McCarthy said Biden is demanding tax increases after earlier agreeing to keep them off the table. He also said Republicans have made compromises but didn’t specify them.
Republican Representative Patrick McHenry, one of McCarthy’s top lieutenants, said he was pessimistic about the status of talks. There are no plans for White House and GOP negotiating teams to meet, he said.
Investors are bracing for currency volatility this week and losses in equities as US lawmakers struggle to clinch a debt-limit deal.
Treasury bills that mature after early June have traded with significant yield premiums because of the default risk, and the cost of insuring US debt against non-payment has soared in recent weeks.
A first-ever US payments default would cause massive pain for the global economy, with forecasts of job losses and higher borrowing costs. That put the standoff in Washington on the minds of Biden’s counterparts at the Group of Seven summit in Japan over the last several days.
“It is definitely a subject of interest here at the G-7,” US National Security Advisor Jake Sullivan told reporters on Saturday. “Countries want to have a sense of how these negotiations are going to play out.”
(Updates with detail in eighth and ninth paragraphs)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.