President Joe Biden and Republican House Speaker Kevin McCarthy failed Monday night to reach a fiscal agreement to avoid defaulting on US debt, but talks were poised to continue, suggesting a deal could be within reach.
The two men met at the White House for a round of negotiations to reach an agreement seen as crucial to the fate of the United States, the global economic outlook and financial markets.
“I think the tone tonight was better than any other time we’ve had discussions . . . We still had some philosophical differences, but I felt it was productive,” McCarthy told reporters at the White House after the meeting. “We know the deadline. I think the president and I will talk every day. . . Until we finish it.”
Biden later issued his own statement of a similar assessment. “I just concluded a productive meeting with Speaker McCarthy on the need to prevent default and avert disaster for our economy,” Biden said. “We have confirmed once again that default is no longer on the table, and that the only way to move forward is in good faith toward a bipartisan agreement.”
Earlier in the afternoon, Janet Yellen, the Treasury secretary, warned that it was “very likely” that the US would not be able to pay all of its bills by early June, possibly as soon as June 1, 10 days later.
While Biden and McCarthy did not reach a final agreement by the end of the meeting, they directed staffers to escalate negotiations in an effort to strike a deal that could pass both houses of Congress and be signed by the president before the deadline.
McCarthy refused to increase the $31.4 trillion US borrowing limit, which is set by law, unless the White House and Democrats agree to deep spending cuts and accept new eligibility limits for social safety net programs.
The standoff dragged on for months, but only this month Biden and the Republican House leader began negotiations on a financial deal that could resolve the crisis. The president had to cut short his trip to Asia to return to Washington to continue the talks.
The urgency of a deal became more apparent after repeated warnings from Yellen that time was running out before the Treasury ran out of money.
“It is very likely that the Treasury Department will no longer be able to meet all of the government’s obligations if Congress does not take action to raise or suspend the debt limit by early June, possibly as early as June 1,” Yellen wrote Monday afternoon. The latest in a series of letters to Congress on the subject.
The two sides have continued to blame each other for the standoff in recent days. The White House accused Republicans of making “extreme” demands that remained unacceptable, and McCarthy blamed Biden for backing down.
As McCarthy faces pressure from the right wing of his party not to make additional concessions to the White House, some Democrats are urging Biden not to bow to the Republicans. Many Democrats have called on the White House to invoke the Fourteenth Amendment to the Constitution, which states that it “does not question” the “validity” of the US public debt, and to continue borrowing above the permissible limit.
Although Biden said Sunday he believes he has the “authority” to do so, he said it wouldn’t be a solution in the short term.
Private economists continue to say that the government has a bit more room compared to Yellen’s expectations. Oxford Economics estimated on Monday that the Treasury will be able to “squeak” until June 14.
However, he cautioned that there was “no margin for error,” and that estimates for incoming receipts, cash balances and other extraordinary measures are subject to change.
Meanwhile, economists at Goldman Sachs expected Treasury cash to drop below $30 billion by June 8 or 9. Note on Friday.
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