Biden-McCarthy meeting yields no debt ceiling deal, but speaker says markets should be encouraged

WASHINGTON – House Speaker Kevin McCarthy said he had a “very good discussion” with President Joe Biden at the White House on Wednesday about the rising debt deadline and federal spending.

“We have different visions. But we both have some vision of where we want to go. And I believe, after laying those two out, I can see where we can share, McCarthy told reporters. White House after meeting

The Democratic president and California Republicans spoke for more than an hour, and while there was “no agreement” and “no promises”, McCarthy said they would continue their talks. The White House readout of the meeting reflected McCarthy’s sentiments, adding that the two had a “frank and direct conversation” as part of ongoing talks.

The Biden administration reiterated a familiar phrase that the president “looks forward to continuing to work across the corridor in good faith,” but stressed that he does not intend to negotiate raising the debt ceiling.

“It is their shared duty not to allow an unprecedented and economically devastating default,” the White House statement said. “The United States Constitution is clear about this obligation, and the American people expect Congress to fulfill it just as all its predecessors have. It is not negotiable or conditional.”

The House Speaker later stated that the meeting had exceeded his expectations. McCarthy said he believes investors should be encouraged about the prospect of a deal to avoid a first-ever default on US debt.

“Based on the meeting that happened today, I would feel better if I were the market,” he said, according to Punchbowl News.

The Treasury Department has initiated a series of extraordinary steps to ensure the government continues to pay its bills, and it expects these measures to be enough to avoid a default until at least early June. But if Congress doesn’t raise or suspend the debt ceiling by then, it could wreak economic havoc around the world.

McCarthy has taken the position that both sides need to agree to cut spending before the debt ceiling can be raised. The White House said the president agrees that addressing the national debt is a priority, but that it should be a separate conversation.

“The President welcomes a separate discussion with leaders in Congress on how to reduce the deficit and control the national debt while keeping the economy going. This conversation will focus on a record $1.7 trillion in deficit reduction in the first two years of the presidency.” should be led by giving.in office,” the administration statement said.

However, for House Republicans, it’s a non-starter. They see a vote to increase the government’s borrowing power and their demands to cut government spending as inextricably linked.

“If you have a kid, and you give them a credit card and they spend it up to the limit, you’re responsible for paying off that credit card. How you’re spending,” McCarthy said.

This comparison has become a familiar line of the speaker, the implication being that while House Republicans do not intend for the United States to default on its debt, they will stress how much money the government spends.

But what those changes will be remains a mystery, and an area of ​​contention within the House Republican caucus.

Asked by reporters at the White House whether he was seeking spending cuts, McCarthy replied, “I’m not going to talk about it to the press.”

In the coming months, McCarthy’s task is to build consensus within his caucus on what he should do to cut spending during the debt ceiling negotiations.

This is further complicated by the fact that not all members of his GOP caucus share the belief that the government must raise the debt ceiling.

several fiscal hardliners The House has already made it clear that they are willing to default on the national debt if they do not make massive spending cuts in return for it passing.

The problem with these demands is that any debt ceiling bill approved by the House must be able to win 60 votes to pass the Democratic-controlled Senate before the president can sign it into law.

In the Senate, the draconian spending cuts sought by some far-right House Republicans will have no chance of passing.

On Wednesday, Democratic Senate Majority Leader Chuck Schumer of New York reminded the House speaker of his challenge.

“For days, Speaker McCarthy has started this meeting as some kind of major victory in his debt ceiling negotiations,” Schumer said on the Senate floor. “Speaker McCarthy, if you don’t have a plan, you seriously can’t pretend you’re having a real conversation.”

In any case, McCarthy will have an uphill task of unifying his fractious caucus behind a plan. But it’s all the more challenging because his majority in the House is so small.

If the speaker attempts to pass the House debt ceiling bill with only Republican votes, he could risk losing only four members of his caucus and still reach the 218-vote majority needed to pass the legislation. Are.

He could also attempt to craft a debt ceiling bill that would pass with votes from more moderate Republicans and a larger bloc of Democrats.

It would be risky to bet on members of the opposition party to rescue him. But not as dangerous as failing to fully meet the debt ceiling.

For both Democrats and Republicans, however, the worst-case scenario remains an unprecedented US government default on its debt, which could halt daily operations within the federal government and spread rapidly through equity markets and the broader economy. Is.

Last year, a Moody’s Analytics report said that a default on Treasury bonds could make the US economy as bad as the Great Depression. Moody’s estimated that if the US defaulted, GDP would decline by 4% and 6 million workers would lose their jobs.