WASHINGTON — President Joe Biden will meet with congressional leaders Tuesday as Washington scrambles to lift the debt ceiling with less than a month before the federal government is set to run out of money.
Biden last met with House Speaker Kevin McCarthy — the California Republican whose support he will need to hike the borrowing limit in the House — in February. The stakes now are far higher than they were during their last huddle. This time, the other three top congressional leaders will attend: Senate Majority Leader Chuck Schumer, D-N.Y.; Senate Minority Leader Mitch McConnell, R-Ky.; and House Minority Leader Hakeem Jeffries, D-N.Y.
Lifting the debt ceiling is necessary for the government to cover spending commitments already approved by Congress and the president and prevent default. Doing so does not authorize new spending. But House Republicans have said they will not lift the limit if Biden and lawmakers do not agree to future spending cuts.
The White House has stressed that while it is open to discuss spending cuts, it will not negotiate with Republicans on the debt ceiling. The Biden administration has said the GOP has a constitutional responsibility to raise the borrowing limit.
“Those two are totally unrelated. Whether you pay the debt or not, doesn’t have a damn thing to do with what your budget is,” Biden said Friday. “They’re two separate issues — two. Let’s get it straight.”
The Treasury Department has started to take extraordinary steps to keep paying the government’s bills, and expects to be able to avoid a first-ever default at least until early June. Treasury Secretary Janet Yellen warned Monday that failure to hike the debt ceiling would cause an “economic catastrophe.”
Defaulting on sovereign debt would wreak havoc on the economy and roil markets around the world. A Moody’s report last year said a default on Treasury bonds could throw the U.S. economy into a tailspin as bad as the Great Recession.
If the U.S. were to default, gross domestic product would drop 4% and 6 million workers would lose their jobs, Moody’s projected. Even a brief default would lead to the loss of 2 million jobs, according to the data.
In that scenario, U.S. bond ratings would be classified as “restricted default,” according to Fitch Ratings, and Treasurys would have a D rating until the U.S. could once again borrow. The Brookings Institution noted a default could lead to $750 billion in higher federal borrowing costs over the next decade — a twist given that Republican concerns about spending and debt have helped to fuel the borrowing-limit stalemate.
What’s more, a default would shake the U.S. position on the world stage. U.S. Director of National Intelligence Avril Haines told the Senate Intelligence Committee last week that Russia and China will take advantage of the U.S. potentially defaulting on its debt. Haines warned the two nations would attempt to highlight “the chaos within the United States, that we’re not capable of functioning as a democracy.”
With tight margins in both chambers of Congress, gridlock is nothing new. But when it comes to default ultimatums, the president has pleaded with lawmakers to engage in “normal arguments” instead.
“As I’ve said all along, we can debate where to cut, how much to spend, how to finally overhaul the tax system to where everybody has to pay their fair share or continue the route their on, but not under the threat of default,” Biden said on Friday. “Let’s remove the threat of default. Let’s have normal arguments. That’s why we have a budget process to debate in the open so you all can see it.”
But congressional Republicans are united in their refusal to vote to raise the limit without concessions. They view Tuesday’s meeting as a long-awaited face-to-face negotiation with the president.
If the meeting is indeed a negotiation, then the bill House Republicans passed last month effectively serves as the GOP’s opening offer to the White House.
Dubbed the Limit, Save and Grow Act, the bill would impose sweeping cuts to federal discretionary spending, impose new work requirements for welfare recipients and expand mining and fossil fuels production, all in exchange for raising the debt limit for about a year.
But rather than provide a jumping off point for talks, the GOP bill has so far served only as a political cudgel, energizing Democrats’ opposition to Republican demands.
In the Senate, Schumer has attacked the bill on a near-daily basis ever since it was introduced.
The White House also has pointed to some of the the bill’s most conservative proposals and cuts as evidence that Republicans are willing to let the nation default in order to slash spending from key programs.
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