Negotiators representing President Joe Biden and top congressional Republican Kevin McCarthy engaged in productive talks on Wednesday to find a solution for raising the United States’ $31.4 trillion debt ceiling and avoiding a disastrous default.
Following a four-hour meeting at the White House, U.S. House Speaker McCarthy expressed optimism, highlighting the improvement in negotiations and their continuation in the evening. Although several issues still need resolution, McCarthy confidently predicted the reaching of an agreement.
“We have made notable progress during our discussions. This is a positive development,” McCarthy stated to reporters. “I am committed to ensuring that we arrive at the right agreement, and it seems we are moving in that direction.”
Amid ongoing discussions, White House spokesperson Karine Jean-Pierre expressed satisfaction with the productive nature of the talks.
“If it keeps going in good faith, we can get to an agreement here,” she said at a briefing while discussions were taking place.
The White House and congressional Democrats criticized Republicans, alleging that they are using the economy as leverage to push forward an agenda that would struggle to gain support otherwise. They emphasized the need for Republicans to make additional concessions since Democratic votes will be essential to pass any potential agreement. The accusation emerged during discussions concerning the debt ceiling issue.
“Just listen to members of The House Freedom Caucus… now openly referring to the full faith and credit of the United States as a hostage,” Jean-Pierre, the White House spokesperson, said
The impasse between McCarthy and Biden regarding spending has garnered attention from ratings agencies. McCarthy is advocating for spending cuts, while Biden aims to maintain current spending levels. This difference in approach has become a focal point of discussions surrounding the issue.
Fitch put the United States’ “AAA” ratings on negative watch on Wednesday. The agency stated its belief that “risks have increased” regarding the raising of the debt ceiling before the so-called X-date, the point at which the Treasury exhausts its funds. The agency further noted that “heightened political partisanship… is impeding the achievement of a resolution.”
A White House spokesperson said the Fitch rating is “one more piece of evidence that default is not an option and all responsible lawmakers understand that. It reinforces the need for Congress to quickly pass a reasonable, bipartisan agreement to prevent default.”
Moody’s, another rating agency, might change its assessment of U.S. debt if lawmakers indicate a default is expected. Moody’s currently has a top-notch “AAA” rating for U.S. debt, while rival rating agency S&P Global lowered its rating following a 2011 debt-ceiling showdown. A lower rating could push up borrowing costs.
Time is running short, as the Treasury Department has warned the federal government could be unable to pay all its bills by as soon as June 1 – just eight days away – and it will take several days to pass legislation through the narrowly divided Congress.
House Republican leaders said they would adjourn on Thursday for a week-long Memorial Day holiday recess scheduled, but would call lawmakers back if needed for any votes, Punchbowl News reported.
McCarthy has insisted that any deal must not raise taxes and must cut discretionary spending, not hold it steady as Biden has proposed.
Any deal that Biden and McCarthy reach will have a narrow path for passage through the divided Congress, where McCarthy’s Republicans hold a 222-213 House majority and Biden’s Democrats control the Senate by a 51-49 margin.
The lack of progress has heightened concerns that Congress could inadvertently trigger a crisis by failing to act in time.
“We’re certainly getting to a place that’s too close for comfort,” said Shai Akabas of the Bipartisan Policy Center, a think tank.