Biden, McCarthy divided over debt ceiling but talks continue

After about an hour of talks in the Oval Office, Biden, a Democrat, and House of Representatives Speaker Kevin McCarthy, a Republican, showed no signs of softening their positions as default looms as early as June 1. But talks among aides may continue as soon as Tuesday night on the federal budget.

Biden called the meeting “productive” and reported that McCarthy said during the meeting that the US would not default on its debt. “Everyone in the meeting understood the risks of default,” Biden said.

McCarthy underscored a lack of progress. "I didn't see any new movement," McCarthy told reporters after the meeting, complaining that Biden didn't agree to talks until time was running out. "That's not a way to govern," he said. The White House, he said "has no plan B."

But he said the two sides agreed for their staff to get together this week, and for the principals to meet again on Friday to continue talking.

The two sides exchanged blame after the meeting.

Senate Majority Leader Chuck Schumer, a Democrat, faulted McCarthy for refusing to take default off the table. Top House Democrat Hakeem Jeffries said Republicans had waited for weeks to publish a budget. And Mitch McConnell, the Senate minority leader and a Republican, told reporters that Biden needed to get serious about negotiations.

Economists warn that a lengthy default could send the American economy into a deep recession with soaring unemployment while destabilizing a global financial system built on US bonds. Investors are bracing for impact.

Biden is calling on lawmakers to raise the federal government's self-imposed borrowing limit without conditions. McCarthy has said his chamber will not approve any deal that doesn't cut spending to address a growing budget deficit and signalled that he doesn't see a short-term fix.

McCarthy, whose party holds only a slim majority in the House, wants to tie a vote on the debt ceiling to broad spending cuts the White House considers draconian.

Biden, McCarthy and the three other top congressional leaders were set to meet again on Friday.

Biden called the talks "productive" and appeared to offer Republicans some possible compromises, including taking a "hard look" for the first time at clawing back unspent coronavirus relief funds to reduce government spending.

But he repeated that Republicans must take the threat of default off the table. And he did not rule out eventually invoking the 14th amendment to the US Constitution, an untested approach that would seek to declare the debt limit unconstitutional. Doing so would require litigation, he said but is an option he may study in the future.

But McCarthy did say Biden indicated that he was open to discussing reforms to the permitting process for new energy projects as part of the talks.

Earlier Tuesday, McCarthy appeared to close the door to a short-term solution that's been widely discussed on Capitol Hill: lifting the debt ceiling through September to allow more time for an agreement.

Biden specifically said after the meeting that he was not ruling out such a short-term arrangement.

Reuters