- Oval Office talks are underway
- Leaders were dug in ahead of the high-level meeting
- Both sides are downplaying the chances of a short-term deal
WASHINGTON, May 9 (Reuters) – President Joe Biden and top lawmakers faced off on Tuesday as an impasse over raising the $31.4 trillion U.S. debt ceiling threatened to push the country into an unprecedented default by Congress in three weeks. Does not work.
Democratic Biden, House Speaker Kevin McCarthy, Republican Kevin McCarthy and three congressional leaders met at the White House, with neither side agreeing on concessions to avoid default before June 1.
Economists warn that a prolonged default could send the U.S. economy into a deep recession while destabilizing a global financial system built on U.S. bonds. Investors are looking forward to the impact.
Biden has called on lawmakers to raise the federal government’s self-imposed debt ceiling without conditions. McCarthy said his chamber would not approve any deal that did not cut spending to address the growing budget deficit and signaled he did not see a short-term solution.
Past debt ceiling fights have typically ended with a deal hastily arranged in the final hours of negotiations, thus avoiding a default. In 2011, the crisis prompted a historic downgrade of the country’s top credit rating. Heroines in that battle warning The current situation is dangerous as political divisions have widened.
Tuesday’s meeting is likely to be more closely watched than what is expected to be an increasingly tense period ahead of June 1 in Washington.
McCarthy, whose party has only a narrow majority, wants to vote on the debt ceiling along with sweeping spending cuts that the White House considers drastic.
Biden’s meeting with the speaker will be their first since February 1. They were joined by Senate Majority Leader Chuck Schumer, a Democrat, and Senate Republican Leader Mitch McConnell, as well as top House Democrat Hakeem Jeffries.
Earlier Tuesday, McCarthy and the White House separately closed the door on a short-term solution suggested by analysts: raising the debt ceiling until September to allow more time for a deal.
Investors, CEOs get a closer look at the crowd
The U.S. Chamber of Commerce, America’s largest trade association, on Tuesday urged a “swift” bipartisan deal on the debt ceiling, including an agreement on energy program permit reform and discretionary spending limits.
Few countries in the world have debt ceiling laws, and Washington’s occasional raising of the debt ceiling allows Congress to pay for spending already authorized.
The White House said Biden would agree to a separate debate on the budget but would not be bound by the debt ceiling.
The start of active talks has eased investor nerves, forcing the central government to pay the highest interest rate ever on a one-month debt issue last week.
Prices for short-term Treasury bills fell on Tuesday as investors sold debt that could come in time for the U.S. debt ceiling to be hit.
Biden’s foreign travel plans and House and Senate recesses leave just seven days before June 1 when all three parties are scheduled to be in town.
On Tuesday, Biden added a stop in Papua New Guinea to his May 22 itinerary that includes Japan and Australia, but he is not expected to extend his trip to Asia.
Treasury Secretary Janet Yellen said on Monday that failure to raise the debt ceiling would have a major impact on the US economy and weaken the dollar as the world’s reserve currency. Treasury money is running low as extraordinary measures run out ahead of June 1.
White House officials have debated whether Biden has the authority to raise the debt ceiling by invoking the 14th Amendment to the U.S. Constitution, but Biden told MSNBC last week that “I’m not there yet.”
The 14th Amendment states that the validity of the United States’ public debt “shall not be questioned.” Invoking it could trigger a legal challenge.
Steve Holland reports; Editing by Heather Timmons and Lincoln Feast
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