Biden, McCarthy launch high-stakes U.S. debt ceiling talks as clock ticks to default

WASHINGTON (Reuters) – President Joe Biden and top lawmakers will not act after a face-to-face meeting on Tuesday.

Democrat Biden told reporters in the Oval Office after Republican House Speaker Kevin McCarthy suggested the two sides would not agree to any concessions to avoid a debt default on June 1 at the earliest. He told reporters he would not comment because of the

“We’re going to start and solve all the problems in the world,” Biden joked, declining the question.

Leaders are grouped along party lines, with McCarthy sitting on the same sofa with Republican Senate Majority Leader Mitch McConnell and Democratic Top Leader Hakeem Jeffries sitting on the same couch, with the same Democratic Senate Majority Leader on the other side of the couch. was joined by Chuck Schumer. Biden sat in a chair between them.

The White House said that in addition to Mr. Biden, five senior advisers will attend the meeting, including Chief of Staff Jeff Zientz, Budget Director Shalanda Young and longtime adviser Steve Ricketty. Each leader of Congress had an aide he brought with him.

Economists warn that a prolonged default could destabilize the global financial system built on U.S. Treasuries and plunge the U.S. economy into a deep recession that drives unemployment soaring. Investors are preparing for the impact.

Mr. Biden is calling on lawmakers to unconditionally increase the federal government’s voluntary borrowing limit. McCarthy said he would not approve any deal that did not cut spending to address the growing deficit, suggesting there was no short-term solution.

Past debt ceiling battles have typically ended in hastily-arranged agreements in the final hours of negotiations to avert defaults. I was. Veterans of that battle warn that the current situation is more dangerous as political divisions widen.

Tuesday’s meeting was cautious ahead of what is expected to be an increasingly difficult time in Washington ahead of June 1, when the U.S. Treasury Department predicts the country could be forced to default. likely to be watched.

Mr. McCarthy, who has only a Democratic majority in the House, wants the vote on the debt ceiling to lead to broader spending cuts the White House sees as draconian.

It was the first meeting between Mr. Biden and the chairman since February 1.

Earlier Tuesday, McCarthy and the White House separately closed the door on short-term solutions proposed by analysts.

Investors, CEOs keep a close eye on meetings

The US Chamber of Commerce, the nation’s largest chamber, on Tuesday called for a “quick” bipartisan deal on the debt ceiling. This includes agreements on energy projects and discretionary spending caps that allow reform.

Few countries in the world have debt ceiling laws, and Washington regularly raises borrowing limits only to allow payments for spending already approved by Congress.

The White House said Mr. Biden agreed to separate discussions on the budget, but not on the debt ceiling.

The start of active negotiations could ease the nerves of investors who last week forced the federal government to pay a record interest rate on a month-long debt issuance.

Prices of short-term Treasury bills fell on Tuesday as investors sold debt that could come due around the time the U.S. debt ceiling could be hit.

With Biden’s overseas travel plans and the House and Senate recesses, all three parties have just seven days before June 1 when they plan to be in town.

Mr. Biden on Tuesday added a stopover in Papua, New Guinea on May 22 to his itinerary that included Japan and Australia, but the addition was not expected to lengthen his trip to Asia.

U.S. Treasury Secretary Janet Yellen said on Monday that failure to raise the debt ceiling would hurt the U.S. economy and undermine the dollar as the world’s reserve currency. Cash in the state treasury is dwindling as temporary measures run out before June 1.

White House officials debate whether Biden has the power to lift the debt ceiling on his own by invoking the 14th Amendment to the U.S. Constitution, but Biden told MSNBC last week that “We’re not quite there yet,” he said of the debate.

The 14th Amendment states that the validity of US public debt “should not be questioned.” Invoking it may result in a legal challenge.

Reporting by Steve Holland.Editing by Heather Timmons and Lincoln Feast

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