Kevin McCarthy, the Speaker of the House and President Biden met at the White House for a crucial meeting on Tuesday. They did not reach a consensus about how to resolve their impasse on the federal debt or spending. This is just weeks before America defaults on its obligations.
The economy was in the balance and the two leaders remained firm with their initial positions. Mr. Biden demanded that Congress raises the debt ceiling unconditionally, to avoid a possible default, while Mr. McCarthy insisted such a move would be accompanied by severe spending restrictions. The two leaders agreed that aides would meet later today and reconvene on Friday.
The Oval Office session, the first meeting between the Democratic President and Republican Speaker in three months, was just the beginning of a drama that will unfold over the coming weeks, as the country races towards a June 1 deadline before it runs out of money to pay its debts. The meeting did not produce any breakthroughs, as neither side had expected. It was an opportunity for both sides to set the stage for a debate that could make or break their careers.
After the meeting in the Oval Office, Mr. Biden stated that he had made it clear to the group that default was not an option. I repeated it time and time again. America is not a nation of deadbeats. The United States Congress has a duty to avoid default and pay all our bills.
He added that he was willing to have a separate conversation about his budget and his spending priorities, but not with the threat of default.
McCarthy told reporters that the two sides were still at odds as he left White House. He said, 'I did not see any new movements'. He said that he asked Mr. Biden "numerous" times if they could make cuts in the federal budget. He said, 'They refused to give me any'.
One sign that there may be progress is the agreement by the two sides to meet their staffs as early as Tuesday evening and every day for the remainder of the week in order to discuss possible spending agreements on next year's bills. This could lead to the type of fiscal agreement Mr. Biden said he was willing to discuss.
The Democratic leaders present at the meeting, Senator Chuck Schumer of New York and Representative Hakeem Jeffreys from New York, insist that such discussions should not be linked to raising the debt ceiling. They say it is irresponsible for the country's economic and fiscal well-being to risk this.
Schumer stated that there are likely some areas where we can reach an agreement, and some areas where we can compromise. He said that this must be done separately and not in conjunction with debt ceiling talks, a position he maintains.
Treasury Department says it may run out of money by the end this month to avoid a breach of the federal government's debt ceiling of $31.4 trillion. Without an agreement from Congress, the country would not be able to pay its obligations for previously approved expenditures. Analysts have warned that this could trigger a recession at home and around the world and put millions of people out of work.
McCarthy and the White House both rejected the idea of raising the debt ceiling in the short term to give more time for discussion. However, time is running out. The Speaker told reporters at the Capitol that Mr. Biden and congressional leaders would have to reach a deal next week to raise the debt ceiling legislation by early June.
Mitch McConnell, Republican Minority Leader in the Senate and Senator from Kentucky, accompanied McCarthy to the meeting. He endorsed McCarthy's stance insisting that President Obama had to compromise with the Republican controlled House. In his opening remarks on the White House driveway, he stressed that he is committed to avoiding default and hinted at some unease about the debate. He said: 'Let's be clear about one thing. The United States will not default.' It never has, and it will never.
Democrats tried to use this comment to isolate McCarthy by suggesting that he is the only person willing to risk a default. The speaker claimed that he is the only person who has passed legislation to raise the debt ceiling. He was referring to laws that linked such an increase to spending caps, among other measures.
He said that President Obama had refused to meet with him for 97 consecutive days and that Mr. Biden acted irresponsibly in refusing to accept a compromise. McCarthy said, 'I hope that the next couple of weeks will be different'. I hope that this president will understand as leader of the nation, you cannot sit back and keep the country hostage. You cannot be so extreme that you refuse to negotiate. We've shown the American public that we are very reasonable.
Mr. Biden attributed Mr. McCarthy's failure to pass a bill raising the limit in late April. The president did not rule out the possibility of bypassing Congress to pay debts by himself, citing a 14th Amendment provision that states that the 'validity of the public debt authorized by law''shall never be questioned'. It is not clear whether the president can exercise such powers.
He did say that this solution may not be feasible in the near future. He said that the problem was that it would need to be litigated, and without an extension it would still end up at the same spot. He said he would test the idea a few months after the current crisis is resolved, in order to avoid any future conflicts over the debt limit.
Next week, the president will fly to Japan to attend a leaders' summit of the Group of 7 Industrialized Nations before continuing on to an Australian security summit. Biden told reporters that it was "possible but not likely" that he might have to cancel or curtail the trip due to the'most important' issue on the agenda, the Debt Ceiling.
Investors will become more worried about the continued impasse in the coming days and weeks, as they grow increasingly concerned that the federal debt will be defaulted on and payments will begin to fall behind for government workers, Social Security beneficiaries and others.
Biden, in almost 20 minutes of remarks Tuesday evening and answering questions from journalists, said that he was "more" optimistic about finding a way to prevent default. He also indicated an openness towards some Republican demands regarding fiscal policy.
This openness was crucial in that it included saying that the Republican proposal to rescind funds approved by Congress for Covid-19 pandemic aid that had not been spent, but were still available after 2021, was 'on table'. The clawback, while a small part, was symbolically important in the Republican debt limit bill passed by the House last week. Biden's remarks were the first time that he had even suggested that he might accept something from the bill.
Biden's comments were largely aimed at criticizing Republicans over their larger and more ambiguous spending cuts. He defended his team and himself for claiming that the Republican bill was going to cut popular items such as veterans' benefits. Mr. McCarthy vehemently denied this claim.
The president stated, "I don't believe they are sure what exactly they propose."