Biden and McCarthy fail to reach a consensus as a possible default looms

President Biden and Chairman Kevin McCarthy emerged from a critical meeting at the White House on Tuesday with no consensus on how to end their impasse over the federal debt and spending, just weeks before the nation will default on its obligations for the first time .

With the economy on the line, the two leaders stuck to their opening positions, with Mr Biden demanding that Congress raise the debt ceiling unconditionally to avoid a default and Mr McCarthy insisting that such a move be accompanied by with severe spending constraints. But the two agreed to allow aides to meet later in the day and to meet again on Friday.

The session in the Oval Office, the first such meeting in three months between the Democratic president and the Republican speaker, was the opening act of a drama that is expected to play out in the coming weeks as the nation approaches a deadline around June 1 before the elections begin. not authorized to pay his debts. Neither side expected the meeting to lead to a breakthrough, and it did not. Instead, it was a chance for both camps to set markers for the make-or-break debate.

“I made it clear during our meeting that defaulting is not an option,” Biden said after the session in the Oval Office. “I repeated that over and over. America is not a dead end nation. We pay our bills and avoiding default is a basic duty of the United States Congress.”

But he added: “I’m willing to start a separate discussion about my budget and spending priorities, but not under the threat of default.”

Meeting with reporters as he left the White House, Mr. McCarthy that the two sides remained in conflict. “I didn’t see any new movement,” he said. He added that he had asked Mr Biden “several times” if there were places in the federal budget where they could find cuts. “They wouldn’t give me one,” he said.

As a possible sign of progress, the two sides agreed to have their staffs meet daily as early as Tuesday evening and for the rest of the week to discuss possible agreements on spending levels for next year’s bills to fund government operations – which could lead to the kind of broader tax deal that Mr Biden has said he will discuss.

But the Democratic leaders who attended the meeting, Senator Chuck Schumer and Representative Hakeem Jeffries of New York, insisted that such talks should not be tied to raising the debt ceiling, saying it was irresponsible to jeopardize fiscal health and the economy. endangering the nation’s economic well-being for tactical purposes. benefit.

“There are probably some places where we can agree, some places where we can compromise,” Schumer said of federal spending. But that must be done separately, not as part of debt ceiling negotiations, he said, maintaining the White House line.

The federal government has already reached its $31.4 trillion statutory debt ceiling, and the Treasury Department has said it may run out of funds to avoid breaching it by the end of the month. If it came to this without a congressional agreement, the country would default on its obligations to pay for previously approved spending, which analysts say could send an economic shock wave through the economy at home and abroad, potentially triggering a recession. can cause. and millions of unemployed.

Both the White House and Mr. McCarthy rejected the idea of ​​raising the debt ceiling in the short term to allow more time for discussions, but time is running out. The speaker told reporters at the Capitol that he believed congressional leaders and Mr. Biden should strike a deal next week to pass legislation raising the debt ceiling in early June.

Senator Mitch McConnell of Kentucky, the leader of the Republican minority in the Senate, accompanied Mr. McCarthy to the meeting and endorsed his position, urging the president to compromise with the Republican-held House. But he stressed in his opening remarks in the White House driveway that he was determined to avoid a default, signaling some unease as the debate progressed. “Let me make the point first: the United States will not default,” he said. “It never has and it never will.”

Democrats tried to use that comment to isolate Mr. McCarthy, suggesting he was the only one willing to risk default. But the speaker said he was the only one to actually exceed a debt ceiling increase, citing legislation that linked such an increase to spending caps and other measures.

He stressed that the president had refused to meet him for 97 days, alleging that Mr Biden acted irresponsibly by not agreeing to a compromise. “I hope the next two weeks will be different,” said Mr. McCarthy. “I hope that as the leader of this nation, this president understands that you can’t sit back and hold the country hostage. You can’t be so extreme in your views that you won’t negotiate. And to the American public, we have been very reasonable.”

Mr Biden blamed Mr McCarthy for not passing a bill to raise the limit until late April. The president left open the possibility that he might try to circumvent Congress and pay debts himself by exercising authority under a provision of the 14th Amendment that says “the validity of the national debt of the United States authorized by law” shall not be will be questioned.” He noted that Laurence H. Tribe, a longtime Harvard Law School professor, had changed his mind about whether a president has such power.

But he indicated that the solution may not work in the short term. “The problem is that it needs to be litigated and in the meantime, without an extension, it would end up in the same place,” he said. He added that he was thinking of testing the prospect several months after the resolution of the current crisis, to avoid future debt ceiling clashes.

Complicating the schedule, the president will fly to Japan next week to attend the summit of leaders of the Group of 7 industrialized countries before traveling on to a security summit in Australia. Speaking to reporters after the meeting, Mr Biden said it was “possible, not likely” that he would have to shorten or skip the trip because the debt ceiling debate is “the single most important thing on the agenda”.

The ongoing deadlock could continue to wobble financial markets in the coming days and weeks as investors grow more concerned that the federal government will default on its debts and miss payments to government employees, Social Security recipients and others.

While there was no agreement Tuesday evening, in nearly 20 minutes of comments and questions from reporters Tuesday evening, Mr Biden said he was “more” optimistic that they would find a way to avoid default, even though he indicated he was open for some Republican demands on fiscal policy.

Crucially, that openness included putting a Republican push for some unspent relief funds for the Covid-19 pandemic – after Congressional approval in 2021 – on the table. The recovery was a relatively small but symbolically important part of the Republican debt-cutting bill passed by the House last month. Mr Biden’s remarks marked the first time he even expressed the possibility that he could accept any of that bill.

Yet Mr. Biden spent most of his remarks criticizing the Republicans for their much bigger and more ambiguous cuts to their bill. And he defended himself and his team for claiming that the Republican law would cut popular items like veterans’ benefits, a claim that Mr. McCarthy complained bitterly was untrue.

“I don’t think they know exactly what they’re proposing,” the president said.