The Congressional Budget Office, Treasury Secretary Janet Yellen and House Speaker Kevin McCarthy have all warned President Joe Biden that the federal government needs to raise the $31.4 trillion borrowing cap in order to avoid running out of money within the next month — something that would have a dire impact on the U.S. economy.
Biden is finally set to meet with McCarthy on Tuesday, after his decision to postpone Friday’s meeting. But the deadline looming, the very next day he’ll jet to the Indo-Pacific region for eight days.
The Biden administration is defending the president’s decision to leave the country for eight days at a critical time. They argue that Biden needs to visit our Indo-Pacific allies in order to rebuild our nation’s reputation amid a possible default on the federal deficit.
“It sends a horrible message to nations like Russia and China, who would love nothing more than to be able to point at this and say, ’See the United States is not a reliable partner. The United States is not a stable leader of peace and security around the world,” said White House National Security Council spokesman John Kirby.
Even if that were true, Biden would still be doing things in the wrong order.
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While Biden has remained upbeat that “we’ll be able to do this,” McCarthy is prodding the president to move faster. The Republican speaker says they need an agreement soon to avoid default. Expectations are low that a deal will come on Tuesday. It appears more likely that staff talks will continue while the president is overseas.
Yet, Biden was optimistic, saying over the weekend, “There’s a desire on their part as well as ours to reach an agreement.”
It’s the second time in a week that Biden has met with McCarthy of California and other congressional leaders at the White House. Biden is confronting a politically divided Congress for the first time on the debt ceiling, a test for both the president and McCarthy, the new speaker, as they work to stave off an economic crisis that could come from a federal default. The meeting will also include Senate Majority Leader Chuck Schumer of New York, Senate Republican leader Mitch McConnell of Kentucky and House Democratic leader Hakeem Jeffries of New York.
“We’ve got 16 more days to go, I don’t think I’d spend eight days out of the country,” McCarthy said.
The Congressional Budget Office said on Friday that there was a “significant risk” that the federal government could run out of cash sometime in the first two weeks of June unless Congress agrees to raise the $31.4 trillion borrowing cap.
Treasury Secretary Janet Yellen said Monday that agency estimates are unchanged on the possible X-date when the U.S. could run out of cash — perhaps as early as June 1.
But Yellen, in a letter to the House and Senate, left some opening for a possible time extension on a national default, stating that “the actual date Treasury exhausts extraordinary measures could be a number of days or weeks later than these estimates.”
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“It is essential that Congress act as soon as possible,” Yellen said Tuesday in remarks before the Independent Community Bankers of America.
“In my assessment – and that of economists across the board – a U.S. default would generate an economic and financial catastrophe,” she said.
Time is dwindling. Congress has just a few days when both the House and Senate are in session to pass legislation.
Even as the Democratic president and the Republican speaker box around the politics of the issue — with Biden insisting he’s not negotiating over the debt ceiling and McCarthy working to extract spending cuts — various areas of possible agreement appear to be emerging.
Talks have been under way at the Capitol for much of the past week, closed-door discussions where White House and congressional staff are discussing what it would take to craft a budget deal that would unlock a separate vote to lift the nation’s borrowing capacity to avoid a devastating default.
Among the items on the table: clawing back some $30 billion in untapped COVID-19 money, imposing future budget caps, changing permit regulations to ease energy development and putting bolstered work requirements on recipients of government aid, according to those familiar with the talks.
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McCarthy has complained the talks are slow-going, saying he first met with Biden more than 100 days ago.
Biden responded said it took McCarthy all this time to put forward his own proposal.
Of course, the GOP-led House has already passed the Limit, Save, and Grow Act to raise the limit. However, the Democrat-led Senate has passed no such bill.
Biden has insisted Republicans must rule out default and consider budget issues separate from the need to raise the nation’s debt limit.
The debt limit has already been lifted countless times throughout U.S. history. Lifting the limit allows for continued borrowing to pay already-accrued bills.
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The Horn editorial team and the Associated Press contributed to this article.