Biden, McCarthy meeting ends with no deal on debt ceiling

The Democratic president and the top congressional Republican have struggled to make a deal, as McCarthy pressures the White House to agree to spend cuts in the federal budget that Biden considers "extreme," and the president pushes new taxes that Republicans have rejected.

"We reiterated once again that default is off the table and the only way to move forward is in good faith toward a bipartisan agreement," Biden said in a statement after the meeting, which he called "productive."

McCarthy told reporters after over an hour of talks with Biden that negotiators are "going to get together, work through the night" to try to find common ground.

"I felt we had a productive discussion. We don't have an agreement yet," McCarthy said. "I believe we can still get there."

He said he expected to talk to Biden every day. But he was not willing to consider Biden's plan to cut the deficit by raising taxes on the wealthy and closing tax loopholes for the oil and pharmaceutical industries. McCarthy was focused on reducing spending in the 2024 federal budget.

Democrats and Republicans have just 10 days to reach a deal - until June 1 - to increase the government's self-borrowing limit or trigger an unprecedented debt default that economists warn could bring on a recession.

Biden said before the meeting started that he was "optimistic" they could make some progress. Both sides need a bipartisan agreement to "sell it" to their constituencies, he said, adding there may still be some disagreements.

Republican Representative Patrick Henry, who was in the White House meeting, said the tone in the Biden meeting was the most positive yet.

Any deal to raise the limit must pass both chambers of Congress and therefore hinges on bipartisan support. McCarthy's Republicans control the House 222-213, while Biden's Democrats hold the Senate 51-49.

A failure to lift the debt ceiling would trigger a default that would shake financial markets and drive interest rates higher on everything from car payments to credit cards.

Republicans want discretionary spending cuts, new work requirements for some programs for low-income Americans and a clawback of Covid-19 aid approved by Congress but not yet spent in exchange for a debt ceiling increase, which is needed to cover the costs of lawmakers' previously approved spending and tax cuts.

Democrats want to hold spending steady at this year's levels in 2024, while Republicans want to return to 2022 levels next year and cap spending growth in the years ahead. A plan passed by the House last month would cut a wide swath of government spending by 8% next year.

Both sides must also weigh any concessions with pressure from hardline factions within their own parties.

Some far-right House Freedom Caucus members have urged a halt to talks, demanding that the Senate adopt their House-passed legislation, which has been rejected by Democrats.

Liberal Democrats have pushed back against any cuts that would harm families and lower-income Americans. Hakeem Jeffries, the top House Democrat, accused Republicans of running a "hostage negotiation" with the talks and said he is seeking Republican votes for a discharge petition that could raise the debt ceiling on its own.

Reuters