White House Republicans will discuss the US debt ceiling as default nears. On Wednesday morning, Democratic President Joe Biden and senior legislative Republican Kevin McCarthy were scheduled to resume negotiations to increase the $31.4 trillion debt ceiling and avoid a catastrophic default.
The Treasury Department has warned that the federal government may be unable to pay all its debts by June 1, eight days away, and it will take several days to get legislation through Congress.
The U.S. bond giant PIMCO said negotiators needed to reach a compromise by midweek to meet that deadline.
Biden and House Speaker McCarthy are sharply divided on how to proceed. McCarthy told reporters on Wednesday that he and Biden had not spoken since a Monday White House meeting but that their negotiating teams have been “productive.”
“We’ll get together this morning,” McCarthy said of the negotiations.
Democrats want to maintain spending unchanged and use new taxes to reduce the debt, while Republicans want major spending cutbacks.
The months-long deadlock has scared Wall Street, lowering U.S. stocks and raising borrowing costs. On Wednesday, U.S. equities were projected to fall.
Biden and McCarthy’s staff reported no progress following a two-hour Capitol meeting on Tuesday.
“The biggest gap we have is the funding issue,” said McCarthy’s lead negotiator, Representative Garret Graves, after Tuesday’s meetings. Republicans want to slash spending for the 2024 fiscal year from October to 2022, while Democrats want to keep it at this year’s level.
White House spokesperson Karine Jean-Pierre termed the talks “incredibly tough.”
“Both sides have to understand that they’re not going to get everything they want,” Jean-Pierre said at a briefing.
Republicans’ proposals to impose additional work requirements on low-income Americans’ assistance programs, loosen energy licensing restrictions, and reclaim some unspent COVID-19 monies are dividing negotiators.
A White House source said Biden is “willing to meet the Speaker halfway” and has proposed a spending freeze, rescinding significant unspent COVID relief funds, and a two-year spending cap in line with previous bipartisan budget agreements.
According to the source, McCarthy “claims he wants to negotiate, but today he said the only concession he is willing to make is to prevent default—a basic Constitutional responsibility of his job.”
Congress regularly raises the debt limit to pay for expenditures and tax cuts. It happened three times during Republican Donald Trump’s four years in office without a standoff.
In 2011, a Democratic president, Senate majority, and Republican-controlled House brought the federal government near to default.
The talks are also opposed by conservative Republicans who want the dramatic expenditure cuts they passed in a House bill last month and progressive Democrats who reject spending cutbacks or new job requirements.
Biden reversed direction and began debt ceiling negotiations with McCarthy in the last few weeks after months of insisting he would not.