Biden, McCarthy divided on debt ceiling but keep talking

WASHINGTON, May 9 (Reuters) – President Joe Biden and top lawmakers failed to break a Deadpoint on Tuesday in face-to-face talks on raising the US debt limit to $31.4 trillion, but vowed to meet again just three weeks before the country is forced into an unprecedented situation. default.

After about an hour of talks in the Oval Office, Biden, a Democrat, and House Speaker Kevin McCarthy, a Republican, showed no sign of softening their positions as a default looms on Feb. 1. of June. But the talks between the advisers can continue. as early as Tuesday night in the federal budget.

Biden called the meeting “productive” and reported that McCarthy said during the meeting that the United States would not default on its debt. “Everyone in the meeting understood the risks of default,” Biden said.

McCarthy highlighted the lack of progress. “I didn’t see any new movement,” McCarthy told reporters after the meeting, complaining that Biden didn’t agree to the talks until time was up. “That’s not a way to govern,” he said. The White House, he said, “doesn’t have a plan B.”

But he said the two sides have agreed that their staff will meet this week and that the directors will meet again on Friday to continue talking.

The two sides traded blame after the meeting.

Senate Majority Leader Chuck Schumer, a Democrat, criticized McCarthy for refusing to clear the default. The House’s top Democrat, Hakeem Jeffries, said Republicans had waited weeks to release a budget. And Mitch McConnell, the Senate Minority Leader and a Republican, told reporters that Biden needed to get serious about negotiations.

Economists warn that a prolonged default could send the US economy into a deep recession with rising unemployment as destabilizing a global financial system based on US bonds. Investors brace for shock.

Biden is asking lawmakers to raise the federal government’s self-imposed borrowing limit without conditions. McCarthy has said her chamber will not pass any deal that does not cut spending to address the growing budget deficit, saying she does not see a short-term solution.

In the past, debt ceiling fights have often ended with a hastily hammered out deal in the final hours of negotiations, thus avoiding a default. In 2011, the fight led to a historic downgrade of the country’s top-tier credit rating. Veterans of that battle warn the current situation is riskier because political divisions have widened.

Tuesday’s meeting was closely watched ahead of what is expected to be a tense period in Washington with the approach of June, when the US Treasury predicts the country could be forced to default on some debts.

McCarthy, whose party has only a slim majority in the House, wants to tie a vote on the debt ceiling to sweeping spending cuts that the White House views as draconian.

Biden’s meeting with the speaker was his first since February 1.

Earlier Tuesday, McCarthy and the White House appeared to separately close the door on a short-term solution that has been widely discussed on Capitol Hill: raising the debt ceiling until September to allow more time for a deal.

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Neil Bradley, a senior policy official at the US Chamber of Commerce, the country’s largest business association, said it was good that the two sides were still meeting. “But we cannot stress enough that time is short, and with each passing day the risk that a misstep will result in a default increases.”

Few countries in the world have debt ceiling laws, and Washington’s periodic lifting of the debt limit simply allows it to pay for spending that Congress has already authorized.

Biden would agree to a separate discussion on the budget, but not linked to the debt ceiling, the White House said.

However, the initiation of active conversations could to calm the nerves of investors that last week forced the federal government to pay the highest interest in its history for a one-month debt issue.

Short-term Treasury bill prices fell on Tuesday as investors sold debt that could come due by the time the US debt limit is reached.

Biden’s foreign travel plans and House and Senate recesses mean there is only seven days when all three parts are scheduled to be in town by June 1.

Treasury Secretary Janet Yellen said Monday that she would not raise the debt limit hurt the US economy and weaken the dollar as the world’s reserve currency. Treasury cash is drying up as the extraordinary measures it is taking dry up.

White House officials have disputed whether Biden has the authority to lift the debt limit on his own by invoking the 14th Amendment to the US Constitution, but Biden he told MSNBC last week that he “hasn’t gotten there yet” on this argument.

The 14th amendment says that the validity of the public debt of the United States “shall not be questioned.” Invoking it could trigger a legal challenge.

Reporting by Steve Holland; Edited by Heather Timmons and Lincoln Feast

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