As deadline approaches, White House Republicans seek debt-ceiling solution. With a week until a possible economic disaster, the White House and congressional Republicans are scheduled to resume talks on raising the $31.4 trillion debt ceiling on Thursday.
President Joe Biden and House Speaker Kevin McCarthy disagree on spending, taxes, and anti-poverty program work requirements. But, after hours of constructive negotiations on Wednesday, both sides believe they can reach a compromise.
“We’ll continue to work through this, try to get a solution,” McCarthy, the top Republican in Congress, told reporters after his negotiators returned from a four-hour White House meeting on Wednesday.
Limited time. If the debt ceiling is not lifted by June 1, the Treasury Department predicts the U.S. could run out of money to pay its debts. Moreover, a U.S. default may destabilize financial markets and cause a recession.
On Wednesday, Fitch put the U.S.’ “AAA” credit rating on negative watch due to political conflicts over the debt limit. Fitch last placed the U.S. on negative watch in October 2013.
“The brinkmanship over the debt ceiling, failure of the U.S. authorities to meaningfully tackle medium-term fiscal challenges… and a growing debt burden signal downside risks to U.S. creditworthiness,” Fitch warned Wednesday.
The months-long deadlock has scared Wall Street, lowering U.S. stocks and raising borrowing costs.
The Republican-controlled House and Democratic-controlled Senate will take days to approve any accord. Lawmakers repeatedly raise the self-imposed debt limit to pay for expenditure and tax cuts.
The second-ranking House Republican, Steve Scalise, said legislators would have three days to consider any debt-ceiling bill before voting. After that, any senator can stall for days.
Scalise advised legislators to be ready for a vote before the House left Washington on Thursday for a week-long Memorial Day holiday recess.
McCarthy insists that any compromise must decrease discretionary spending next year and curb spending growth in the future to slow the increase of the U.S. debt, currently equivalent to the economy’s production.
Biden has proposed multiple tax increases to reduce debt and limit spending next year.
If Congress can’t agree, Moody’s may downgrade the U.S. government’s top rating. S&P Global downgraded after a 2011 debt-ceiling impasse.
Both parties’ lawmakers resist compromise. Hardline House Republicans say Biden must accept last month’s substantial spending cuts. Democrats accuse Republicans of holding the economy hostage to push a failed agenda.
“They are looking to waste time, play games and make sure we default because they think that somehow that is going to be a political advantage,” Democratic Representative Ilhan Omar said at a Wednesday news conference.
Biden reversed direction and began debt ceiling negotiations with McCarthy in the last few weeks after months of insisting he would not.
In 2011, a Democratic president, Senate majority, and Republican-controlled House brought the federal government near to default.