In Washington, President Joe Biden and House Speaker Kevin McCarthy held a meeting on Monday (May 22) but were unable to reach an agreement on raising the US government’s debt ceiling, which currently stands at $31.4 trillion (S$42 trillion).
With only 10 days remaining before a potential default that could have severe consequences for the US economy, the two leaders pledged to continue their discussions.
The challenge lies in finding common ground, as McCarthy is pushing for spending cuts in the federal budget that Biden views as “extreme,” while the president advocates for new taxes that Republicans have rejected.
Despite these differences, both parties emphasized the importance of reaching a bipartisan agreement to prevent a default, and they expressed their intention to maintain regular communication in the days ahead.
According to a source familiar with the situation, White House negotiators are returning to Capitol Hill on Monday night to resume talks on the debt ceiling. President Biden described the meeting with Kevin McCarthy as “productive” and reiterated that default is not an option, emphasizing the need for a bipartisan agreement. McCarthy expressed his willingness to continue working towards a solution, although he remains opposed to raising taxes and is focused on reducing spending in the 2024 federal budget.
The deadline for increasing the debt ceiling is June 1, and failure to do so could result in a debt default with potential economic repercussions. Treasury Secretary Janet Yellen warned that if the debt ceiling is not raised, the Treasury may not be able to meet all government obligations by early June. Republican Representative Patrick McHenry, who attended the meeting, ruled out a partial budget agreement and stated that a finalized deal is necessary.
Passing any debt ceiling increase requires bipartisan support in both chambers of Congress. Markets showed optimism on Monday as investors awaited updates on the negotiations. However, the process of moving legislation through Congress will take several days once an agreement is reached. McCarthy emphasized the urgency of reaching a deal this week to avoid default.
Republicans are seeking discretionary spending cuts, work requirements for certain low-income programs, and a clawback of unspent Covid-19 aid as part of the debt ceiling increase. Democrats aim to maintain spending at current levels in 2024, while Republicans prefer to return to 2022 levels and implement spending caps in the future.
Biden has indicated a willingness to consider spending cuts alongside tax adjustments but has deemed the Republicans’ latest offer as unacceptable. He expressed concerns about subsidies for “Big Oil” and tax loopholes for the wealthy, highlighting the potential risks to healthcare and food assistance for millions of Americans.
In addition to the challenges of reaching a bipartisan agreement, both parties must navigate the pressures from hardline factions within their own ranks. Certain far-right members of the House Freedom Caucus have called for an end to the talks, insisting that the Senate adopt the legislation passed by the House, which has been rejected by Democrats.
House Speaker Kevin McCarthy, who made concessions to right-wing hardliners to secure his position, risks potential backlash from his own party if they are dissatisfied with the deal he negotiates. Former President Donald Trump, who is seeking re-election, has encouraged Republicans to push for a default if all their goals are not met, downplaying the potential economic consequences.
On the Democratic side, liberal members have strongly opposed any cuts that would negatively impact families and lower-income Americans. Hakeem Jeffries, the top House Democrat, accused Republicans of engaging in a “hostage negotiation” during the talks and indicated that he is seeking Republican support for a discharge petition that could independently raise the debt ceiling.
Biden has proposed freezing spending at current levels, according to Jeffries, but this offer has been rejected by Republicans.
Source: Reuters