WASHINGTON: To negotiate an agreement to raise the United States $31.4 trillion debt ceiling and prevent a catastrophic default, negotiators for Democratic President Joe Biden and senior legislative Republican Kevin McCarthy held talks on Wednesday.
After a four-hour White House meeting, US House Speaker McCarthy said negotiations had improved and would resume in the evening. He hoped the two sides would agree, though many issues remain unaddressed.
McCarthy told reporters, “We’ve made some progress working down there, and that’s very positive. I want to ensure to get the right agreement. I can see that we’re making progress towards that.”
Karine Jean-Pierre, the spokesperson for the White House, said the talks were fruitful. She noted at a briefing during the discussions, “If it kept going in good faith, we could reach an agreement here.”
However, congressional Democrats and the White House also blamed Republicans for taking the economy hostage to promote an agenda they could not pass otherwise. They noted that Republicans need to make more concessions as they will need Democratic votes to pass any agreement.
The White House spokesperson said, “Just listen to members of The House Freedom Caucus, who are now loudly referring to the full faith and credit of the United States as a hostage.”
Rating firms have taken note of the standoff caused by McCarthy’s insistence on spending cuts and Biden’s desire to maintain current spending levels.
If politicians suggest a default is anticipated, Moody’s, another rating agency, may modify its evaluation of U.S. debt. Moody’s now has an excellent “AAA” rating for U.S. debt, but rival rating agency S&P Global downgraded its rating in the wake of a 2011 debt-ceiling standoff. A lower grade could raise the cost of borrowing.
It will take several days for legislation to pass through the closely divided Congress, and the Treasury Department has cautioned that the federal government may be unable to pay all of its debts by June 1 – just eight days away.
According to Punchbowl News, House Republican leaders said they would call legislators back if necessary for any votes before Thursday’s scheduled week-long Memorial Day vacation recess. According to McCarthy, any agreement must not increase taxes and must reduce discretionary spending, not maintain it, as suggested by Biden.
Biden’s Democrats control the Senate by a 51-49 edge, and McCarthy’s Republicans possess a 222-213 House majority, so whatever accord they come to will have difficulty getting through the divided Congress.
Concerns that Congress might unintentionally start a catastrophe by acting too slowly have grown due to the lack of movement. Shai Akabas of the think group Bipartisan Policy Centre said, “We’re definitely getting to a place that’s too close for comfort.”
