Expectations are extremely low for tomorrow’s big meeting between President Joe Biden, House Speaker Kevin McCarthy and the three other top congressional leaders. With as little as three weeks to go before the Treasury runs out of cash to pay its bills, potentially unleashing an economic catastrophe, Biden and Republicans have yet to budge from their positions or offer any indication that they might find a way to break their stalemate.
“The meeting is not expected to produce anything close to final agreement on a fiscal plan that could include raising the debt limit. But even small points of consensus could be hard to come by,” Jim Tankersley of The New York Times writes. “While both sides say they want to reduce the nation’s future debt burden, there is almost no overlap in how they aim to achieve that outcome. The only point of agreement so far is on the one thing Mr. Biden and Mr. McCarthy consider off limits in budget talks: Social Security and Medicare, the primary sources of projected federal spending growth in the decades to come.”
One option that keeps coming up: a short-term extension of the debt limit that would buy both sides more time and could effectively tie the debt limit and budget issues together, potentially allowing each side a way to save face.
That’s not happening tomorrow. “One way to tell nobody is expecting a quick breakthrough?” Semafor’s Jordan Weissmann writes. “The White House has already said Biden is planning a trip to New York on Wednesday — where several of the most vulnerable Republican House members reside — where he’s planning a speech trashing the debt ceiling bill Republicans recently passed through the house.”
What Democrats are saying: Biden reportedly remains steadfast in his refusal to negotiate over raising the debt limit, insisting that any discussion of spending cuts should happen in the context of budget talks, where the full faith and credit of the United States would not be at risk.
House Minority Leader Hakeem Jeffries (D-NY) insisted in an interview with NBC’s “Meet the Press” yesterday that a “clean” debt limit increase — one with no strings attached — was the responsible way to avert a crisis. “Everyday Americans understand this principle: If you have a bill, you need to pay it,” he said. “If you fail to pay it, it’s going to adversely impact your credit rating, your credit score will drop. If your credit score drops, your costs are going to go up and if America defaults on our bills, that’s exactly what is going to happen. And everyone is going to pay the price.”
Jeffries said that a short-term extension would not be the responsible solution, but he did not rule out the possibility. The White House similarly told NBC News that a short-term extension is “not our plan.”
What Republicans are saying: GOP lawmakers insist that a clean debt limit increase simply won’t happen. Forty-three Republican senators sent a letter Saturday to Senate Majority Leader Chuck Schumer saying that they stand with House Republicans in opposing a debt limit increase without “substantive spending and budget reforms.” Senate Minority Leader Mitch McConnell and other party leaders were among those signing the letter, an effort led by Sen. Mike Lee of Utah.
Given the continued absence of Democratic Sen. Dianne Feinstein, Democrats would need 10 Republicans to join them in raising the ceiling, but only six GOP senators did not sign the letter.
Even as GOP lawmakers publicly stick to their hard line, Politico reports that some senior party members have been working to tamp down expectations for any deal, pushing the idea that Republicans should see it as a victory if they only get a portion of what they included in the package that passed the House.
“The key challenge McCarthy and his deputies face is to figure out a way to placate conservatives who have been pressing them to adopt a position that they privately believe is unrealistic,” Politico’s Playbook crew reports. Some House conservatives have insisted that anything short of their bill would be unacceptable, but there’s no chance that a negotiated deal would include everything in the GOP plan. “If a win is getting everything you ask for all the time, then it’s going to be very hard to win,” one senior GOP aide told Politico. “If you get permitting reform or work requirements — and you don’t get everything else — you can legitimately say that is a win.”
The 14th Amendment option: The White House has reportedly been evaluating the possibility of having the Treasury borrow continue to borrow by invoking the 14th Amendment, which says that the “validity of the public debt of the United States … shall not be questioned.”
Legal scholar Laurence H. Tribe wrote in favor of that option in a New York Times essay on Sunday. And the National Association of Government Employees, a union representing nearly 75,000 federal workers, filed a lawsuit Monday in U.S. District Court in Boston challenging the constitutionality of the debt limit. “The Fourteenth Amendment requires the President to meet obligations to the holders of federal debt,” the complaint says. “To do so, he must either borrow or find the necessary funds to do so from cancelling, suspending, or refusing to carry out spending already approved by Congress.”
But the White House reportedly is wary of taking unilateral action. The Washington Post’s Jeff Stein reports that advisers “view the options as risky choices that could cause lasting economic damage.” Biden on Friday kinda, sorta dismissed the idea for now at least, telling MSNBC, “I’ve not gotten there yet.”
The bottom line: Tuesday’s meeting isn’t likely to resolve the impasse, and investors are getting more jittery. “Markets are beginning to aggressively price in a potential default,” RSM Chief Economist Joe Brusuelas wrote Monday. “Not only have three- and five-year U.S. credit default swaps soared to multiyear highs, but distortions are also emerging at the front end of the Treasury curve.”