President Joe Biden and House Speaker Kevin McCarthy just wrapped up a White House meeting to discuss action to avert an unprecedented default on the nation’s debt. Here’s the latest.
Biden and McCarthy Have ‘Productive’ Debt Limit Meeting
With less than 10 days until the U.S. government could roil the global economy by defaulting on its debt, House Speaker Kevin McCarthy emerged from a White House meeting with President Joe Biden Monday evening saying that the discussion was productive and that staff-level talks will continue.
“I felt we had a productive discussion. We don’t have an agreement yet,” McCarthy told reporters after the meeting. He later said that “the tone tonight was better than any other time we’ve had discussions.”
McCarthy said he now expects to talk to Biden daily to try to reach a resolution.
Monday’s meeting comes after bipartisan talks on a budget and debt deal were halted late last week when Republicans walked out of a negotiating session. Biden and McCarthy spoke by phone Sunday to try to reset the stalled discussions. Negotiators then met on Sunday night and convened again on Monday at the Capitol before the two leaders got together at the White House.
Earlier Monday, McCarthy told reporters that he still believes a default can be avoided if a deal can be reached this week.
Major differences on spending and revenues: The two sides reportedly have agreed to limit discretionary spending for at least the next two years, but they remain far apart on the details and whether new revenues should be part of the discussion or not.
“The ongoing disconnect is that House Republicans want to rein in spending by making major spending cuts, which have no hope of passing the Democratic-controlled Senate and are opposed by Biden,” Politico reports.
Republicans are looking to cut discretionary spending to fiscal year 2022 levels, with spending on defense and veterans protected from the axe, forcing steeper cuts to other programs. McCarthy said that cuts to the Pentagon budget were “off the table,” as are tax hikes. He and his team reportedly want new spending caps to last six years, down from an initial demand of 10 years. “What we have to do here is get the spending addiction to stop,” McCarthy told reporters. “We’re going to spend less than we did last year.”
Republican Rep. Patrick McHenry of North Carolina, who attended the White House meeting, laid out the core issue in the talks: “A directive to cut spending year over year is the toughest thing to do in Washington, but that is the speaker’s directive to his negotiating team,” he told reporters.
Democrats have reportedly offered to freeze both defense and non-defense outlays at current levels — which, in Washington accounting terms, would amount to a $90 billion cut relative to expected spending for 2024 and a $1 trillion savings over 10 years.
Biden told reporters Sunday that he had done his part to make some progress in the talks. “We put forward a proposal that cuts spending by more than a trillion dollars, and on top of the nearly $3 trillion in deficit reduction that I previously proposed through the combination of spending cuts and new revenues,” he said at a news conference following the G7 summit in Hiroshima, Japan. “Now it’s time for the other side to move from their extreme positions, because much of what they’ve already proposed is simply, quite frankly, unacceptable.”
Biden insisted that new revenues should be on the table and said he would not agree to a deal that would preserve a $30 billion tax break for the oil industry and risk the Medicaid coverage and food assistance used by millions of Americans. “It’s time for Republicans to accept that there is no bipartisan deal to be made solely, solely on their partisan terms,” he said. “They have to move as well.”
A Republican proposal for stricter work requirements on federal benefit programs reportedly remains a stumbling block as well. Republican negotiators have pushed for work requirements on Medicaid and reportedly also proposed stricter limits on food aid, including a new proposal Friday to limit the ability of states to waive work requirements at times when unemployment spikes.
Biden has rejected work requirements that might cost people their health coverage, but he has indicated that he might be open to new rules for the Temporary Assistance for Needy Families welfare program.
Is the 14th Amendment an option? Each leader faces pressure from their own party. Progressives have urged Biden to invoke the 14th Amendment, which says in part that the validity of the public debt “shall not be questioned.” Biden has indicated that he’s not comfortable with that solution, at least for now, given the legal complexities and court challenges it would likely involve.
He said Sunday that, while he believes he has the authority to invoke the 14th Amendment, it’s not clear whether it could be done in time. “We have not come up with a unilateral action that could succeed in a matter of two weeks or three weeks,” he said, later adding, “But my hope and intention is: When we resolve this problem, I’d find a rationale to take it to the courts to see whether or not the 14th Amendment is, in fact, something that would be able to stop it.”
The bottom line: There’s still no deal.
Yellen Now Says US ‘Highly Likely’ to Run Out of Cash in Early June
Treasury Secretary Janet Yellen on Monday added a new level of urgency to her warning to lawmakers that the U.S. could run out of cash in early June.
“I am writing to note that we estimate that it is highly likely that Treasury will no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1,” Yellen said in a letter to congressional leaders. Her previous letter dated May 15 use the term “likely” rather than “highly likely.”
On Sunday, Yellen told Chuck Todd of NBC’s “Meet the Press” that she views June 1 as a “hard deadline” for Congress to address the debt ceiling. “We expect to be unable to pay all of our bills in early June, and possibly as soon as June 1st,” she said. “The odds of reaching June 15th while being able to pay all of our bills is quite low.”
Last week, analysts at Goldman Sachs estimated that the cash balance at the Treasury could drop below $30 billion on June 8 or 9. While there is no official minimum balance, it’s generally believed that the Treasury seeks to maintain at least $25 billion to $30 billion in its general account to ensure that a default does not occur.
As of the close of business on Friday, the Treasury’s cash balance stood at roughly $60 billion.
Number of the Day: 1.4 Billion
The federal government makes about 1.4 billion payments every year. That eye-opening number is found in a profile written by The Washington Post’s Jeff Stein of David Lebryk, the fiscal assistant secretary of the Treasury Department. Lebryk’s job is to track those payments — worth more than $6 trillion a year — on a color-coded dashboard and ensure they are executed smoothly.
With the Treasury potentially running out of cash in a matter of days, Lebryk has been in high demand, Stein reports. His quarterly meetings with Treasury Secretary Janet Yellen have turned into daily updates.
“He runs the nation’s checkbook,” Mark Mazur, a former assistant secretary for tax policy at the Treasury, told Stein. “He is not quite the CFO of the country, but he is pretty close. His job is basically trying to keep the system running as long as possible, to push off the day of reckoning as long as possible.”
If lawmakers fail to act in time and the day of default arrives, Lebryk is expected to play a key role in how the Treasury manages the shock to the world’s largest payment system. Although department officials have remained silent about their plans, it’s expected that Lebryk and his team would prepare a list of options from which Yellen could choose which payments to make and which to skip.
- McCarthy Says Debt Deal Must Happen This Week to Avoid Default – Bloomberg
- Debt Limit Negotiators Debate Spending Caps to Break Standoff – New York Times
- Yellen Warns Again That the U.S. Could Default as Soon as June 1 – New York Times
- McCarthy Has Little Room to Maneuver in Debt Ceiling Talks – The Hill
- Goldman Says Treasury Will Drop Under Its Cash Minimum June 8-9 – Bloomberg
- Janet Yellen’s Treasury Braces for ‘Hard Choices’ if Debt-Limit Talks Fail – Politico
- How California’s Wild Weather Brought the Debt-Ceiling ‘X Date’ Closer – Washington Post
- These Are the Biggest Sticking Points in the Debt Ceiling Fight – The Hill
- Biden Gets Low Ratings on Economy, Guns, Immigration in AP-NORC Poll – Associated Press
- White House Threatens to Veto GOP Measure Blocking Student Loan Debt Relief Program – The Hill
- More Americans Are Struggling Financially, as Inflation Takes a Toll – New York Times
- North Carolina Governor Says GOP Teacher Pay, Voucher Plans a Public Education ‘Disaster’ – Associated Press
- Weapons Contractors Hitting Department of Defense With Inflated Prices for Planes, Submarines, Missiles – 60 Minutes
- The Pandemic-Era Tax Break Keeping the IRS Up at Night – Wall Street Journal
Views and Analysis
- Missing in This Year’s Debt-Ceiling Talks: Democratic Demands for New Taxes – Paul Kane, Washington Post
- Liberals Are Persuading Themselves of a Debt Ceiling Plan That Won’t Work – Ezra Klein, New York Times
- Why We May Need a Stock Market Plunge to Solve the Debt Ceiling Crisis – Matt Egan, CNN
- How a 12-Year-Old Playbook Is Shaping the Battle Over the Debt Limit – Victoria Guida and Zachary Warmbrodt, Politico
- The Welfare Debate Stalling the Debt Talks – Peter Coy, New Republic
- The Democrats Have Already Lost the Debt Ceiling Fight – Alex Shephard, New Republic
- The Poor Are Being Held Hostage in the Debt Ceiling Standoff – E.J. Dionne Jr., Washington Post
- The President Is Already in Litigation Over the Debt Ceiling – David Dayen, American Prospect
- The Debt Ceiling Is Unconstitutional—but Not for the Reason You Think – Anna Gelpern, Adam J. Levitin and Stephen Lubben, American Prospect
- 14th Amendment, Debt Ceiling & Perpetual Bonds: The Treasury Department Is Hiding Political Failure In Technocratic Excuses – Skanda Amarnath and Arnab Datta, Employ America
- What It Would Mean for the Global Economy if the US Defaults on Its Debt – Paul Wiseman, Associated Press
- How the Debt Ceiling Stare-Down Could End – John Lawrence, Domeocracy