Biden and McCarthy set to resume debt limit talks

Biden and McCarthy set to resume debt limit talks

President Biden and spokesman Kevin McCarthy agreed on Sunday to meet on Monday afternoon to try to start talks aimed at averting a default on the country’s debt, ending a tumultuous period of talks that faltered at the end of week, when the two sides clashed over the Republican decision. demands spending cuts in exchange for raising the debt limit.

McCarthy announced the meeting – his third with Biden this month, set for after the president’s return from the Group of 7 summit in Hiroshima, Japan – after completing a call with the president on Sunday, sounding more upbeat than before on the issue. . prospects for an agreement.

The speaker said GOP and White House negotiators will continue talks on Capitol Hill on Sunday to lay the groundwork. White House negotiators left Capitol Hill on Sunday night after a two-and-a-half-hour negotiating session with their Republican counterparts, but said they intended to continue working ahead of Monday’s session.

Mr. Biden “has looked into some of the things he’s still looking at, he’s hearing from members of his; I walked through the things I’m looking at,” McCarthy said. “I thought that part was productive. But see – there is no agreement. We are still apart.”

Negotiators are working against a punishing clock. The debt ceiling, the statutory limit on the government’s power to borrow to pay its obligations, must be reached on June 1.

Biden and McCarthy are negotiating a tax package that would raise the cap, which Republicans have refused to do without spending cuts. They remain aloof on key issues, including limits on federal spending, new work requirements for some recipients of federal anti-poverty assistance and funding intended to help the IRS crack down on high earners and corporations that evade taxes.

Biden said on Sunday that he believed he had the power to challenge the constitutionality of the country’s debt limit, but that he did not believe such a challenge could succeed in time to prevent a federal debt default if lawmakers did not raise the limit. brief.

“I think we have authority,” Biden said at a news conference in Hiroshima. “The question is whether it can be done and invoked in time.”

Biden added that after the current crisis is resolved, he hopes to “find a case and take it to the courts” to decide whether the debt limit violates a provision of the 14th Amendment that stipulates that the United States must pay its debts. He also said that, when meeting world leaders, he was unable to assure them that the United States would not default on its debt – an event that economists say could trigger a financial crisis that would sweep the world.

“I can’t guarantee they won’t force a default by doing something outrageous,” Biden said, referring to Republican congressmen who insisted on deep cuts in federal spending in exchange for raising the borrowing limit.

“Numbers are key here,” Representative Garrett Graves, a Louisiana Republican and one of McCarthy’s top negotiators, said on Sunday. “The speaker was very clear: a red line is spending less money, and unless and until we get there, the rest is really irrelevant.”

Treasury Department officials estimate that it is about two weeks before the government loses its ability to pay its bills on time, forcing a default. Both Biden and McCarthy expressed growing optimism last week that they could reach a deal that would clear the way for Congress to raise the borrowing limit while reducing some federal spending.

But on Friday, Republicans abruptly halted talks, leading to a weekend of choppy talks that left things in limbo and McCarthy insisting that Biden reinsert himself.

Treasury Secretary Janet L. Yellen is expected to provide another update to Congress on the government’s cash balance this week. On Sunday, Yellen indicated that her projections that the United States might be unable to pay all its bills on time as of June 1 had not changed.

“I certainly haven’t changed my assessment, so I think it’s a tough deadline,” Yellen said on NBC’s “Meet the Press.”

Mrs. Yellen noted that the government expected to receive substantial tax payments on June 15, which could extend the so-called X date into the summer. But she warned that the chances of making it that far were “pretty low”.

The Treasury secretary, who warned last week that a default “would generate an economic-financial catastrophe,” said she was not exaggerating the gravity of the looming crisis.

“There will be tough choices to be made if the debt ceiling is not raised,” Yellen said, explaining that if the United States ran out of money to pay all its bills, some would have to go unpaid.

Hopes had dimmed at least a little in the last few days. Biden’s aides accused Republicans of backtracking on key areas of the deal, and Republicans accused the White House of refusing to compromise on conservatives’ top priorities.

Biden criticized Republicans on Sunday for not considering raising additional tax revenue to reduce future budget deficits as part of negotiations. He said he proposed a discretionary spending cap that would save $1 trillion over a decade compared with baseline projections.

“It’s time for Republicans to accept that there is no budget deal to be made on just their partisan terms,” ​​he said.

Rep. Jodey C. Arrington, a Texas Republican and chairman of the Budget Committee, categorically ruled out on Sunday that Republicans would accept any tax increases as part of a debt limit deal.

“It’s not on the table for discussion,” Arrington said on ABC’s “This Week.” “This is not the time to put a tax on our economy or working families.”

Some of the barbs that were negotiated by the parties seemed to be aimed at bolstering their bases. Hardline spender hawks in the House urged McCarthy to demand much bigger concessions from Biden. Some progressive Democrats pressured Biden to break off talks and instead move unilaterally to challenge the debt limit on constitutional grounds.

A clause of the 14th Amendment, adopted after the Civil War, stipulates that “the validity of public debt” issued by the US government “shall not be called into question.” Some jurists say the limit is constitutional. But others say the clause requires the government to keep issuing new debt to pay bondholders, effectively overriding the country’s statutory debt limit, which is controlled by Congress.

The two sides reached some agreement in talks last week, including the recovery of some unspent funds from previously passed Covid relief legislation. They also broadly agreed to some sort of cap on discretionary federal spending for at least the next two years. But they’re stuck on the details of those limits, including how much to spend in the next fiscal year on discretionary programs — and how to split that spending between the military and other programs.

The latest White House offer would keep military and other spending — which includes education, scientific research and environmental protection — constant from the current fiscal year to the next fiscal year, according to a person familiar with the proposals from both sides. That measure would not reduce nominal spending before adjusting for inflation, which Republicans are pushing hard to do. Questioned by a reporter on Sunday, Biden said the spending cuts he had proposed would not cause a recession.

A bill Republicans passed last month that combined spending cuts with an increase in the debt limit would bring net savings of about $5 trillion over a decade compared to current projections.

The Republicans’ latest proposal includes a nominal drop in total discretionary spending next year. But that cut isn’t evenly distributed; in his plan, military spending would continue to grow, while other programs would face deeper cuts.

Biden’s offer would set spending caps for two years. Republicans would define them for six years.

Republicans also proposed several money-saving efforts that White House officials opposed. They include new work requirements for Medicaid and Temporary Assistance for Needy Families beneficiaries. They would also make it more difficult for states to seek exemptions from work requirements for certain federal food assistance recipients who live in areas of sustained high unemployment — a proposal that was not on the Republican debt limit bill passed in the House.

Republicans also continue to seek a reduction in execution funding for the IRS, a move the Congressional Budget Office estimates would increase the budget deficit by decreasing future federal tax revenue. And they sought to include some provisions of a stringent immigration bill that was recently passed by the House, according to a person familiar with the proposal.

“We are all concerned about deficits and fiscal responsibility, but deficits can be addressed as much through changes in spending as through changes in revenue,” Yellen said, adding that she was “very concerned” about Republican proposals to cut funding. from the IRS.

Biden insisted on Sunday that he was willing to cut spending. He also suggested that some Republicans were trying to break the economy by not raising the borrowing limit in order to hurt Biden’s re-election hopes.

If the nation defaulted, Biden said, “I wouldn’t be at fault” on the merits — meaning it would be the Republicans’ fault. But, he said, “in the politics of it, no one would be innocent.”

“I think there are some MAGA Republicans in the House who know the damage this would do to the economy, and since I am the president and the president is responsible for everything, Biden would take the blame,” he said.

Alan Rappeport, Carl Hulse It is Chris Cameron contributed reports.


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