Despite a crucial White House meeting, President Biden and House Speaker McCarthy failed to raise the debt ceiling. However, they plan to continue discussions to prevent a historic default as the United States races toward the approaching deadline of failing to be able to meet its financial obligations.
McCarthy described the meeting as “productive” and noted that the tone of the discussions was better than in previous encounters. Both leaders had the opportunity to delve into the details of their respective positions. McCarthy expressed optimism that a deal could still be reached and said he expects daily conversations with Biden to continue.
The key focus of the negotiations revolves around determining the spending level for the upcoming year and deciding the duration of the debt ceiling increase before it needs to be raised again. The Treasury Department estimates that the U.S. may run out of funds by June 1 if no agreement is reached, resulting in a default. Treasury Secretary Janet Yellen reiterated this estimation.
At the beginning of their meeting, Biden expressed his optimism about making progress, acknowledging that there are still disagreements but emphasizing both leaders’ significant responsibility in resolving the issue.
Before the meeting, the negotiating teams of Biden and McCarthy held discussions on Capitol Hill. Spending remains a point of contention between the two sides; they are reportedly nearing agreement on secondary matters, such as reclaiming unused funds from COVID-19 response initiatives.
McCarthy emphasized that no agreements had been reached yet, and all topics were under discussion. Earlier on Monday, McCarthy emphasized the need for a deal this week to allow enough time for legislation to pass through Congress. He even mentioned the possibility of canceling the planned House recess if no deal is reached, reaffirming their commitment to fulfilling their responsibilities.
Once an agreement is reached, navigating through Congress will likely take several days. McCarthy intends to provide House lawmakers 72 hours to review the bill, per the rule established at the start of the current Congress. It is expected that House lawmakers would also propose amendments to the agreement.
The meeting on Monday followed a series of ups and downs in the negotiations, leading to increased tension between White House officials and House Republicans. Biden criticized House Republicans for adopting extreme positions and deeming their current proposal unacceptable. Republicans, on the other hand, criticized Biden for delaying negotiations until May and expressed dissatisfaction with the White House’s efforts to reduce spending.
Republicans have insisted on spending cuts as a precondition for raising the debt ceiling and passed a bill in April, which they consider their starting point for negotiations. They also aim to impose spending caps in future years. Democratic leaders believe the debt ceiling should be raised without any conditions attached and have refused to negotiate. As the deadline approached, the Democrats are now participating in talks after continuous delays.
While Biden expressed his desire to narrow the deficit through tax increases for wealthy individuals, McCarthy firmly stated that tax increases were not up for discussion. Republicans also seek to attach changes to permitting regulations to expedite the process of constructing energy projects and to tighten work requirements for certain government benefit programs—an idea the White House has shown some openness to.
McCarthy stressed the need for lower spending in the upcoming fiscal year compared to the previous year. Meanwhile, Democrats aim to extend the debt ceiling until after the 2024 election, whereas the original Republican bill pushed the next debt-ceiling deadline to March 2024.
Failure to raise the debt limit promptly would force the government to suspend certain pension payments, reduce or withhold the salaries of soldiers and federal workers, or delay interest payments, resulting in a default scenario. With the negotiations still uncertain, lawmakers are scrambling to find emergency solutions to avoid such a situation.
To address the urgency, nearly all House Democrats have signed a discharge petition, a parliamentary maneuver requiring 218 signatures to force a vote on debt-ceiling legislation. However, since Republicans control the House by a slim margin of 222-213, Democrats would need at least five GOP lawmakers to support the petition for it to succeed.
Additionally, due to timing rules surrounding the maneuver, the petition would not be ready for implementation until after the June 1 deadline.
In the Senate and House, progressive lawmakers are urging Biden to utilize the 14th Amendment of the Constitution, allowing him to take unilateral action without congressional approval. This unprecedented approach has faced criticism from Republicans and would likely face legal challenges if pursued.
The 14th Amendment states that federal debt authorized by law “shall not be questioned.” While Biden has considered invoking this amendment to ensure the nation’s bills are paid, he has acknowledged that it remains a long shot.
Lawmakers also have the option to pursue a short-term increase in the debt ceiling, providing negotiators with more time to reach a comprehensive agreement. However, there was resistance to this approach from McCarthy and other Washington figures.
As the negotiations continue, a potential default looms over the country’s financial stability. To avoid a crisis, Democrats and Republicans must find common ground on spending levels and the debt ceiling. In the next few weeks, much will depend on the course of action and whether a bipartisan agreement can be reached.