WASHINGTON, May 9 (Reuters) – President Joe Biden and top lawmakers failed to break a deadlock on Tuesday in face-to-face talks over raising the $31.4 trillion U.S. debt limit but vowed to meet again with just three weeks before the country may be forced into an unprecedented default.
After about an hour of talks in the Oval Office, Biden, a Democrat, and House of Representatives Speaker Kevin McCarthy, a Republican, showed no signs of softening their positions as a default looms as early as June 1. But talks among aides may continue as soon as Tuesday night on the federal budget.
Biden called the meeting “productive” and reported that McCarthy said during the meeting that the U.S. would not default on its debt. “Everyone in the meeting understood the risks of default,” Biden said.
McCarthy underscored a lack of progress. “I didn’t see any new movement,” McCarthy told reporters after the meeting, complaining that Biden didn’t agree to talks until time was running out. “That’s not a way to govern,” he said. The White House, he said “has no plan B.”
But he said the two sides agreed for their staff to get together this week, and for the principals to meet again on Friday to continue talking.
The two sides exchanged blame after the meeting.
Senate Majority Leader Chuck Schumer, a Democrat, faulted McCarthy for refusing to take default off the table. Top House Democrat Hakeem Jeffries said Republicans had waited for weeks to publish a budget. And Mitch McConnell, the Senate minority leader and a Republican, told reporters that Biden needed to get serious about negotiations.
Economists warn that a lengthy default could send the American economy into a deep recession with soaring unemployment while destabilizing a global financial system built on U.S. bonds. Investors are bracing for impact.
Biden is calling on lawmakers to raise the federal government’s self-imposed borrowing limit without conditions. McCarthy has said his chamber will not approve any deal that doesn’t cut spending to address a growing budget deficit and signaled that he doesn’t see a short-term fix.
Past debt ceiling fights have typically ended with a hastily arranged agreement in the final hours of negotiations, thus avoiding a default. In 2011, the scramble prompted a historic downgrade of the country’s top-notch credit rating. Veterans of that battle warn the current situation is riskier because political divides have widened.
Tuesday’s meeting was closely watched ahead of what is expected to be a fraught period in Washington with the approach of June, when the U.S. Treasury predicts the country could be forced to default on some debts.
McCarthy, whose party holds only a slim majority in the House, wants to tie a vote on the debt ceiling to broad spending cuts the White House considers draconian.
Biden’s meeting with the speaker was their first since Feb. 1.
Earlier Tuesday, McCarthy and the White House separately appeared to close the door to a short-term solution that’s been widely discussed on Capitol Hill: lifting the debt ceiling through September to allow more time for agreement.
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Neil Bradley, top policy official at the U.S. Chamber of Commerce, the nation’s largest business association, said it was positive that the two sides would continue meeting. “But we cannot stress enough that time is short, with each passing day increasing the risk for a misstep resulting in a default.”
Few countries in the world have debt ceiling laws, and Washington’s periodic lifting of the borrowing limit merely allows it to pay for spending Congress has already authorized.
Biden would agree to a separate discussion on the budget but not tied to the debt ceiling, the White House said.
The start of active talks could nonetheless soothe the nerves of investors who last week forced the federal government to pay its highest interest ever for a one-month debt issue.
Prices for short-term Treasury bills fell on Tuesday as investors sold off debt that could come due around the time the U.S. debt limit could be hit.
Biden’s foreign travel plans and House and Senate recesses mean there are just seven days when all three parties are scheduled to be in town before June 1.
Treasury Secretary Janet Yellen on Monday said a failure to raise the debt limit would hurt the U.S. economy and weaken the dollar as the world’s reserve currency. Treasury cash is dwindling…
Read More: Biden, McCarthy divided over debt ceiling but still talking