President Joe Biden and top lawmakers agreed Tuesday to continue talks aimed at breaking a deadlock on raising the $31.4 trillion US debt limit, with just three weeks before the country could be forced into a default. without precedents.
After about an hour of talks in the Oval Office, Biden, a Democrat, and House Speaker Kevin McCarthy, a Republican, delegated their aides to hold daily discussions on areas of possible agreement as the looming default on June 1.
Biden, McCarthy and three other top congressional leaders were scheduled to meet again on Friday.
Biden called the talks “productive” and appeared to offer Republicans some potential compromises, including a “tough look” for the first time to recoup unspent coronavirus relief funds to cut public spending.
But he repeated that Republicans need to take the threat of default off the table. And he did not rule out eventually invoking the 14th Amendment to the US Constitution, an untested approach that would seek to declare the debt limit unconstitutional. Doing so would require litigation, he said, but it’s an option he might explore in the future.
“There is a lot of politics and posturing, and that will continue for a while,” Biden said, but political leaders are “getting down to business.”
“Everyone in the meeting understood the risk of default,” Biden said.
McCarthy emphasized the lack of progress after the meeting. “I didn’t see any new movement,” McCarthy told reporters, complaining that Biden didn’t agree to the talks until time was up. “That’s not a way to govern,” he said.
But he did say that Biden indicated he was open to discussing reforms to the permitting process for new energy projects as part of the talks.
Economists warn that a prolonged default could send the US economy into a deep recession with rising unemployment and destabilize a global financial system based on US bonds. Investors brace for shock.
Biden is asking lawmakers to raise the federal government’s self-imposed borrowing limit with no strings attached. McCarthy, whose party has a slim majority in the House, has said his chamber will not pass any deal that does not slash spending to address the growing budget deficit, saying he sees no solution anytime soon.
In the past, debt ceiling fights have often ended with a hastily hammered out deal in the final hours of negotiations, thus avoiding a default. In 2011, the fight led to a historic downgrade of the country’s top-tier credit rating. Veterans of that battle warn that the current situation is riskier because political divisions have widened.
Tuesday’s meeting was the first between Biden and McCarthy since February 1. It was closely watched ahead of what is expected to be a tense period in Washington with the approach of June, when the US Treasury predicts the country could be forced to default on some debts.
Earlier Tuesday, McCarthy appeared to close the door on a short-term solution that has been widely discussed on Capitol Hill: raising the debt ceiling through September to allow more time for a deal. Biden specifically said after the meeting that he was not ruling out a short-term deal.
Neil Bradley, a senior policy official at the US Chamber of Commerce, the country’s largest business association, said it was good that the two sides were still meeting. “But we cannot stress enough that time is short, and with each passing day the risk that one misstep will result in a default increases.”
Few countries in the world have debt ceiling laws, and Washington’s periodic lifting of the debt limit simply allows it to pay for spending that Congress has already authorized.
Biden would agree to a separate discussion on the budget, but not linked to the debt ceiling, the White House said.
Treasury Secretary Janet Yellen said Monday that not raising the debt limit would hurt the US economy and weaken the dollar as the world’s reserve currency.