President Joe Biden met with Republican Speaker of the House Kevin McCarthy and other congressional lawmakers on Tuesday to discuss the ongoing debt ceiling crisis. Unfortunately, there was minimal progress towards reaching an agreement.[0] Despite this, McCarthy remains hopeful that a deal can be reached by the end of the week.[0] However, it is unclear if this agreement will include compromises, such as spending cuts on Democratic priorities.
In order to address the debt limit, any deal reached between Biden and McCarthy will need support from all factions within the House Republican Conference.[1] Additionally, some Democratic votes will be required.[2] Previously, McCarthy's offer only passed by one vote due to the intervention of Rep. George Santos, who is currently facing federal indictment.[2]
Biden recently held a meeting with McCarthy, House Democratic Leader Hakeem Jeffries, Senate Majority Leader Chuck Schumer, and Senate Minority Leader Mitch McConnell to discuss potential solutions. While they were unable to reach a deal, staff-level talks are ongoing in an effort to avoid default.[3]
House Republicans have demanded that any increase in the debt ceiling be accompanied by significant spending cuts at non-defense federal agencies. They passed a bill last month reflecting this demand.[4] On the other hand, Biden and congressional Democrats have refused to negotiate and have called for a “clean” debt limit increase without any conditions.[4] The Senate is not expected to take up the House's bill, and the White House has stated that Biden would veto it.[4] The Biden administration has warned that the Republican plan would result in furloughs and layoffs of federal workers.[4]
Raising the debt ceiling is crucial for the government to cover spending commitments already approved by Congress and the president and to prevent default.[5] It does not authorize new spending.[5] However, House Republicans have stated that they will not raise the limit unless there are agreed-upon spending cuts in the future.[6]
In April, Republicans passed a bill in the House that would raise the debt ceiling by $1.5 trillion but also mandated $4.8 trillion in spending cuts over a decade. Democrats have argued that spending cuts should be addressed during budget negotiations, not in relation to the debt ceiling.[7]
The Biden administration has expressed concerns about using the 14th amendment to address the debt ceiling, as it could lead to litigation.[8] Biden had previously considered this option but emphasized that it would need to be litigated.
The United States risks running out of money to pay its bills if an agreement on the debt ceiling is not reached.[9] Treasury Secretary Janet Yellen has warned that this could happen as soon as June 1, with potentially dire consequences for Americans, including those who receive benefit payments, run small businesses, or are trying to buy a home.[9]
Time is running out to find a solution.[7] Without raising the debt limit, the US government would default on its bills for the first time in history, which could have catastrophic consequences.[7] Federal workers would be furloughed, global stock markets would crash, and the US economy would likely enter a recession.[6]
Biden has canceled a planned visit to Australia and Papua New Guinea to focus on debt limit talks.[10] He has shortened his trip to the G7 summit in Japan to prioritize reaching a debt ceiling agreement.[11] The White House has announced that Biden is cutting short his trip due to the standoff.
Congress has the authority to set the debt limit, which currently stands at $31.4 trillion.[6] The debt ceiling has been raised 78 times since 1960 under both Democratic and Republican presidents.[3] There have been instances where the ceiling was briefly suspended and then reinstated at a higher limit.[7]
Failure to suspend or raise the debt limit could harm business and consumer confidence, increase borrowing costs, and negatively impact the credit rating of the United States, according to Treasury Secretary Janet Yellen.[12]
Biden's willingness to consider GOP work requirement proposals has sparked concern among Democratic lawmakers and progressive groups. Democrats worry that Biden may give in to Republican demands for stricter work rules, which many House Republicans have indicated as a red line. Biden downplayed the significance of adding more work requirements and emphasized that any new measures would not have significant consequences.[13] However, his remarks faced backlash within his own party, as Democrats opposed harsher restrictions on low-income Americans.[13]
Despite the challenges, both sides recognize the urgency of reaching a debt ceiling agreement. The Treasury Department has warned that the US will be unable to pay its bills as soon as June 1 without an increase to the borrowing limit.[13] House Speaker Kevin McCarthy has suggested that a deal needs to be clinched by the end of the week to ensure timely legislation.[13]
The clock is ticking, and the stakes are high.[12] The US economy could face disaster if the debt ceiling issue remains unresolved. Both Republicans and Democrats must find common ground to prevent a default and ensure the stability of the nation's finances.
0. “Debt ceiling solution: Biden has ‘legal requirement' to pay Social Security, Raskin says” Business Insider, 17 May. 2023, https://www.businessinsider.com/debt-ceiling-solution-14th-amendment-social-security-medicare-jamie-raskin-2023-5
1. “McCarthy rebrands looming debt ceiling breach: ‘Biden default'” Fox News, 17 May. 2023, https://www.foxnews.com/politics/mccarthy-rebrands-looming-debt-ceiling-deadline-biden-default
2. “The debt ceiling could come down to a small group of House Republicans” Vox.com, 16 May. 2023, https://www.vox.com/politics/2023/5/16/23724602/debt-ceiling-negotiations-house-republicans
3. “Nine questions you may have about the debt ceiling” NPR, 15 May. 2023, https://www.npr.org/2023/05/15/1175733139/debt-ceiling
4. “With Just Weeks Until Potential Furloughs, Biden and McCarthy Hold ‘Productive' Debt Talks” GovExec.com, 16 May. 2023, https://www.govexec.com/management/2023/05/potential-furloughs-biden-and-mccarthy-productive-debt-talks/386446/
5. “Biden, McCarthy say U.S. won't default as debt talks inch forward” CNBC, 17 May. 2023, https://www.cnbc.com/2023/05/17/debt-ceiling-talks-progress.html
6. “McCarthy Says Debt Ceiling Deal Could Be Imminent—Here’s What Might Hold It Up” Forbes, 16 May. 2023, https://www.forbes.com/sites/nicholasreimann/2023/05/16/mccarthy-says-debt-ceiling-deal-could-be-imminent-heres-what-might-hold-it-up/
7. “What is the US debt ceiling and what will happen if it is not raised?” The Guardian, 30 Apr. 2023, https://www.theguardian.com/business/2023/may/16/what-is-debt-ceiling-limit-explainer
8. “Senate Dems to Biden: Bypass GOP, get rid of the debt ceiling forever” Business Insider, 17 May. 2023, https://www.businessinsider.com/senate-democrats-push-14th-amendment-solve-debt-ceiling-biden-gop-2023-5
9. “Are you worried about the US defaulting on its debt?” CNN, 17 May. 2023, https://www.cnn.com/2023/05/17/economy/debt-ceiling-callout/index.html
10. “Biden, top Republican say confident debt default will be averted” Al Jazeera English, 17 May. 2023, https://www.aljazeera.com/economy/2023/5/17/biden-top-republican-say-confident-debt-default-will-be-averted
11. “Biden ‘confident’ of reaching deal with McCarthy to avoid US debt default” The Guardian US, 17 May. 2023, https://www.theguardian.com/us-news/2023/may/17/biden-us-debt-ceiling-g7-summit
12. “How the debt ceiling battle may affect your 401(k)” USA TODAY, 17 May. 2023, https://www.usatoday.com/in-depth/graphics/2023/05/17/debt-ceiling-battle-how-affects-401k/70213550007
13. “Biden gives clearest indication to date he's willing to make a critical debt ceiling compromise” POLITICO, 17 May. 2023, https://www.politico.com/news/2023/05/17/biden-debt-ceiling-compromise-00097388
