Joe Biden and opposition Republican leaders on Tuesday offered hope of a deal that could avoid a catastrophic US debt default, although the president was forced to shorten an upcoming Asia tour for further crisis talks.
After the latest negotiations ended without a breakthrough, Republican House speaker Kevin McCarthy told reporters there was still “a lot of work to do” to break the high-stakes standoff with Democrat Biden over the borrowing limit.
But while stark differences remained, the White House said Biden was “optimistic that there is a path to a responsible, bipartisan budget agreement if both sides negotiate in good faith.”
And McCarthy likewise indicated he ultimately expected a deal, even if so far “nothing has been resolved.”
“America is the number one economy in the world. And when we get done with these negotiations, America’s economy is going to be stronger,” he said.
The US president — who flies to Japan on Wednesday for a G7 summit — scrapped subsequent stops in Papua New Guinea and Australia, instead returning to Washington on Sunday.
The Treasury has warned of grim consequences if the country runs out of cash to pay its bills, which would leave it unable to pay federal workers and trigger a likely surge in interest rates with knock-on effects for businesses, mortgages — and global markets.
The United States could begin defaulting on its debts “potentially as early as June 1,” Treasury Secretary Janet Yellen said Monday, while the nonpartisan Congressional Budget Office has forecast June 15.
The White House said Biden had directed his staff “to continue to meet daily on outstanding issues,” and that he would confer with Republican leaders on his return from the G7 meetings.
Republicans have continued to insist Biden agree to significant spending cuts in exchange for their support to raise the debt ceiling, ignoring Democratic calls for a “clean” increase of the borrowing limit with no strings attached.
Democrats have accused Republicans of using extreme tactics to push their agenda ahead of the so-called “X-date” at which the United States starts defaulting on its debts.
In a sign of growing nervousness over what would be the first ever US debt default, more than 140 top US chief executives sent a letter to Biden and congressional leaders stressing the need for an agreement.
“We strongly urge that an accord be reached quickly so that the country can avert this potentially devastating scenario,” the letter signed by the CEOs from Pfizer and Morgan Stanley, among others, said.
Breaking the stalemate
Republicans, who regained control of the House in the 2022 midterm elections, are using their newfound clout to demand cuts of $130 billion from federal agencies and programs in exchange for support for lifting the debt ceiling.
This would limit spending in the 2024 fiscal year to 2022 levels.
They also want to expedite domestic energy production projects, simplify the process for obtaining permits for pipelines and refineries and claw back unspent Covid relief funding.
There are now only three days remaining when the House and Senate are both in session before June 1 — the day the Treasury predicts the United States could run out of money.
Some senators have acknowledged that they may have to cancel the Memorial Day recess beginning Thursday to get a deal finalized.
As the X-date draws closer, Democrats in Congress have begun considering a range of alternatives, including using an arcane congressional procedure to bypass McCarthy.
They’ve also contemplated asking Biden to invoke the 14th Amendment to raise the debt ceiling unilaterally, which some legal scholars believe would allow the Treasury to simply ignore the debt limit.
But Biden has cautioned that such a move could be challenged in court, and has continued to call publicly for Republicans to support a clean increase to the debt ceiling.