WASHINGTON − President Joe Biden and House Speaker Kevin McCarthy resume talks Tuesday on raising the debt ceiling as Treasury Secretary Janet Yellen warns “time is running out” to avert an economic crisis.
Expectations for the high-stakes White House meeting, which begins at 3 p.m., are modest but higher than last week’s gathering that failed to produce a breakthrough in talks.
Still McCarthy has been less optimistic than the White House about finalizing a deal, which the speaker said needs to happen by the end of the week for approval in Congress before June 1.
McCarthy took a shot at Biden’s planned trip Wednesday to Japan for the G7 Summit, which Biden has said he’s considering cancelling to focus on debt-ceiling talks.
“All I know is we’ve got 16 more days to go. I don’t think I’d spend eight days somewhere out of the country,” McCarthy said Tuesday. “I think the country wants an American President focused on solving American problems.”
How will debt-ceiling talks play out? Different scenarios to consider
Senate Majority Leader Chuck Schumer, Senate Republican Leader Mitch McConnell and House Democratic Leader Hakeem Jeffries will also attend the meeting.
Treasury Secretary Janet Yellen, in a letter to McCarthy Monday, stuck to her estimate that the U.S. is not track to run out of money by early June and default, perhaps as early as June 1, if Congress fails to take action to raise the debt ceiling to allow the U.S. to continue to borrow.
“Time is running out,” Yellen said Tuesday in remarks to the Independent Community Bankers of America. “Every single day that Congress does not act, we are experiencing increased economic costs that could slow down the U.S. economy.”
Potential scenarios to watch:
- Rattled markets, downgrade: Even if a deal is ultimately reached before June 1, markets could begin sliding earlier just by the threat of default. Yellen pointed to the “11th-hour brinksmanship” of the debt ceiling standoff in 2011 during the Obama administration that led to the first-ever downgrade of the U.S. credit rating in history and a 17% drop in the S&P 500 even though a default was averted.
- Biden possibly canceling Australian trip: Biden still plans to travel to Japan for the G7 Summit, but the White House signaled Tuesday he could cancel a subsequent swing to Australia as the White House works to get a deal done. White House spokesman John Kirby said officials are reevaluating the Australian leg of the trip. Biden is scheduled to depart the U.S. on Wednesday.
- Will White House give in to cuts? Any deal between Biden and McCarthy to raise the debt ceiling will likely have to include some level of spending cuts in parallel budget talks for Republicans in Congress to get on board. But Biden must also find a resolution that satisfies his fellow Democrats.
Work requirements emerge as key sticking point in talks
Debt-ceiling talks have centered on expanded work requirements for some welfare programs, permitting reform for oil and gas projects, possible caps on future discretionary spending and rescinding unspent COVID-19 rescue funds.
Biden indicated Sunday that he’s open to expanded work requirements for some some federal benefits including food stamps, but not Medicaid. Some Democrats in Congress oppose stricter requirements for federal aid, however.
“Have the Democrats become so progressive, so far to the left, that they’re changing their policies now?” McCarthy said, noting that Biden and other Democrats helped pass work requirements in the 1990s.
One priority of Republicans that appears off the table is rescinding Biden’s Inflation Reduction Act, which Democrats in Congress passed last year to provide historic climate funding and lower prescription drug prices. Biden has slammed Republicans for trying to strip the landmark law.
Republicans have demanded that spending cuts be a part of congressional action to raise the debt ceiling and avoid a default that would occur if the U.S. is unable to pay its bills.
Biden has said he won’t negotiate with Republicans about raising the debt ceiling, which he’s said should take place without conditions. But he’s left the door open to bargaining with Republicans by saying he’s willing to discuss budgets separately − not under the threat of default.
Reach Joey Garrison on Twitter @joeygarrison
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