Joe Biden and Kevin McCarthy have arrived at a crucial moment in their debt ceiling fight — a meeting that risks cementing their standoff rather than yielding a breakthrough in a crisis already unnerving markets.
The president will host the House speaker and other congressional leaders at the White House on Tuesday, with McCarthy seeking spending cuts as a condition of suspending or raising the debt limit and Biden pushing to separate the issues and calling for a debt limit increase.
The stakes are higher than just politics — a default would surely trigger a market selloff and the White House has said it could cost millions of jobs. Treasury bill markets last week revealed fresh apprehension about the potential for non-payment of US debts in early June. Yet expectations for the meeting are low.
Biden says he plans to hold to his vow not to negotiate over the debt ceiling, arguing that doing so would set a dangerous precedent allowing Republicans to hold the nation’s economy hostage over their preferred policy outcomes.
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McCarthy — whose tenuous hold over a slim House GOP majority depends on heeding conservative calls to impose spending cuts — maintains there is no other option.
Over the weekend 43 Senate Republicans, including Minority Leader Mitch McConnell, signed a letter saying they wouldn’t support a clean debt ceiling increase — enough to ensure Democrats could not overcome a filibuster if they offered a no-strings-attached hike.
The game of political chicken playing out across Pennsylvania Avenue also prompted a renewed examination of novel executive action, such as Biden invoking the 14th Amendment that says the validity of the nation’s public debt shall not be questioned.
The White House, eager to both lay responsibility for the crisis at the feet of Congress and avoid ceding leverage, spent the weekend downplaying the possibility. When Biden was asked during an interview Friday with MSNBC if he was prepared to utilize the 14th Amendment, he said he had “not gotten there yet.”
Treasury Secretary Janet Yellen warned Sunday that such a maneuver could prompt a “constitutional crisis” and do little to avert unnecessary economic harm. Economic experts warn that such untested legal maneuvering would not only risk a court overturning the effort and throwing the nation into immediate fiscal crisis, but also spook investors and raise borrowing costs for the government.
“We will have an economic and financial catastrophe that will be of our own making and there is no action that President Biden and the U.S. Treasury can take to prevent that,” Yellen said in an interview with ABC News.
While both Biden and Yellen declined to fully rule out the move if negotiations failed, both emphasized their desire in Tuesday’s sit-down to strike an agreement establishing a separate negotiating mechanism for the federal budget.
Each side has sought leverage going back to January, when Treasury began employing so-called “extraordinary measures” to avoid breaching the $31.4 trillion debt limit.
Biden released his budget in March and urged McCarthy to do the same; instead, he passed a Republican-only-backed bill that increases the US debt ceiling by $1.5 trillion and calls for $4.8 trillion in budget cuts cumulatively over 10 years, but has no chance of passing the Senate.
It’s difficult to predict how blurry political stances will become should markets show deeper tumult and if more moderate or temporary solutions might gain traction, such as a short-term extension — something the White House hinted last week that it would support. Moreover, it’s unclear whether Biden and McCarthy will see some party members break rank at any point.
A bipartisan group of House moderates proposed a debt-ceiling extension until December, and House Democratic Leader Hakeem Jeffries separately announced Democrats are pursuing a discharge petition — which, if signed by 218 House members, would force a vote on a clean debt ceiling increase. That would require the signatures of at least five House Republicans to force a vote and is procedurally difficult to execute, even with the votes.
A person familiar with the strategy of McCarthy and other House GOP leaders say they don’t want a vote on a short-term fix, because it means more votes. It gets harder from a vote-counting perspective every time that vote is taken, the person said.
Fred Upton, a former House Republican from Michigan, said lawmakers can’t allow the debt limit to be breached.
“At the end of the day, both have to save face and Kevin does not have a lot of rope to prevent a vacate-the-chair vote,” he said. “The job has to get done.”
