Debt impasse ongoing
The White House and House Republicans are working to reach a budget compromise before June 1, when Treasury Secretary Janet Yellen has said the country could run out of cash to pay the nation’s bills. A debt default would be potentially devastating for the U.S. and global economy, depending on how long the standoff drags on.
White House estimates say a prolonged default could cause 8.3 million job losses and a world-shaking recession, while a brief default could lead to 500,000 fewer jobs. Moody’s Analytics has estimated that a default of no longer than a week would lead to the loss of 1.5 million jobs.
President Joe Biden and House Speaker Kevin McCarthy met Monday after a weekend of on again, off again negotiations. While both sides said it was a “productive” session, by Wednesday, McCarthy said he was sending his negotiating team to the White House warning they were still “far apart.”
McCarthy and Republicans are insisting on spending cuts in exchange for raising the debt limit. Biden has come to the negotiating table after balking for months but says the GOP lawmakers will have to back off their “extreme positions.”
Once a routine act by Congress, the vote to raise the debt ceiling allows the Treasury Department to continue borrowing money to pay the nation’s already incurred bills.
The vote in more recent times has been used as a political leverage point, a must-pass bill that can be loaded up with other priorities.
House Republicans, newly empowered in the majority this Congress, are refusing to raise the debt limit unless Biden and the Democrats impose federal spending cuts and restrictions on future spending.
The Republicans say the nation’s debt, now at $31 trillion, is unsustainable. They also want to attach other priorities, including stiffer work requirements on recipients of government cash aid, food stamps and the Medicaid health care program. Many Democrats oppose those requirements.
Biden had insisted on approving the debt ceiling with no strings attached, saying the U.S. always pays its bills and defaulting on debt is non-negotiable.
But facing the prospect of the government running out of money to cover all its bills, Biden launched negotiations with Republicans.
The talks have been a weeks long see-saw of positive signs and rocky moments — a grind.
They are at odds over how to trim annual budget deficits. Republicans are determined to cut spending while Biden’s team offered to hold spending levels flat.
Biden wants to increase some taxes on the wealthiest Americans and some big companies, but McCarthy said early on that that is out of the question.
But reaching an agreement is only part of the challenge. Any deal would also have to pass the Repulican-led House and Democratic-majority Senate with significant bipartisan support. In the end, leaders from both parties will need to muscle it over the finish line.
Republicans have dropped their demand to roll back spending to 2022 levels but say spending next year 2024 must be less than it is today. They also want to cap spending for the next decade.
Democrats aren’t willing to go that far to actually cut federal spending. The White House has instead proposed freezing spending at the current 2023 levels.
There are also policy priorities under consideration, including steps that could help speed the construction and development of energy projects that both Republicans and some Democrats want.