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Biden, McCarthy divided over debt ceiling but talks continue

Published May 09, 2023 06:07AM ET Updated May 10, 2023 12:46AM ET
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2/2 © Reuters. FILE PHOTO: A cyclist passes by the U.S. Capitol building, on the morning of the first day of the 118th Congress in Washington, DC, U.S., January 3, 2023. REUTERS/Jon Cherry/File Photo 2/2

By Steve Holland

WASHINGTON (Reuters) - President Joe Biden and top lawmakers agreed on Tuesday to further talks aimed at breaking a deadlock over raising the $31.4 trillion U.S. debt limit, 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, committed their aides to daily discussions about areas of possible agreement as a default looms as soon as June 1.

Biden, McCarthy and the three other top congressional leaders were set to meet again on Friday.

Biden called the talks "productive" and appeared to offer Republicans some possible compromises, including taking a "hard look" for the first time at clawing back unspent coronavirus relief funds to reduce government spending.

But he repeated that Republicans must take the threat of default off the table. And he did not rule out eventually invoking the 14th amendment to the U.S. Constitution, an untested approach that would seek to declare the debt limit unconstitutional. Doing so would require litigation, he said, but is an option he may study in the future.

"There's a lot of politics and posturing, and that's going to continue for a while," Biden said, but political leaders are "getting to work."

"Everyone in the meeting understood the risk of default," Biden said.

McCarthy emphasized a lack of progress after the meeting. "I didn't see any new movement," McCarthy told reporters, complaining that Biden didn't agree to talks until time was running out. "That's not a way to govern," he said.

But he did say Biden indicated that he was open to discussing reforms to the permitting process for new energy projects as part of the talks.

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, whose party has a slim majority in the House, has said his chamber will not approve any deal that doesn't dramatically 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 the first between Biden and McCarthy since Feb 1. It 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.

Earlier Tuesday, McCarthy 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. Biden specifically said after the meeting that he was not ruling out such a short-term arrangement.

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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. [MKTS/GLOB]

Graphic: World markets hunker down as US debt ceiling looms - https://www.reuters.com/graphics/USA-DEBT/xmpjkyowovr/graphic.jpg

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 as the extraordinary measures it is taking are exhausted.

Graphic: Cash at the Treasury gets depleted as the 'X-date' looms - https://www.reuters.com/graphics/USA-DEBT/movakordova/graphic.jpg

Biden, McCarthy divided over debt ceiling but talks continue
 

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Comments (9)
Jason Patcher
Jason Patcher May 09, 2023 7:28PM ET
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no deal without new taxes!
Mark Jannetty
Mark Jannetty May 09, 2023 7:28PM ET
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sounds good, so no deal ever. either way spending stops
Peter Andersen
Peter Andersen May 09, 2023 7:28PM ET
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Yes i think there will be new taxes McCarthy will woke up and see the light
First Last
First Last May 09, 2023 7:28PM ET
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Mark Jannetty   For "spending stops", debt ceiling would have to be lowered to zero.
jason xx
jason xx May 09, 2023 7:11PM ET
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rapist trumps Republicucks just wont be happy until the dollar loses its status as the worlds reserve currency and they see what a loss of privilege really means. Most of them couldn't survive a day under any type of hardship whatsoever.
Mark Jannetty
Mark Jannetty May 09, 2023 7:11PM ET
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we have the guns, we will survive
Ac Tektrader
Ac Tektrader May 09, 2023 7:11PM ET
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mark has the mistaken brief that a gun will keep him safe......the difference between a far right gun owner and a leftist gun owner is the far right gun owner brags about owning a gun.....
First Last
First Last May 09, 2023 7:11PM ET
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Mark Jannetty   Red states have guns and will survive, so they should stop getting subsidies from the blue states.
Dave Jones
Dave Jones May 09, 2023 5:14PM ET
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Gosh you woke ones are a lot of silly Billy's
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jason xx
jason xx May 09, 2023 5:14PM ET
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Davey your post sounds to woke. Your name is woke. What did you have for dinner? I bet it was something woke? You probably have a woke job too and drive there in a woke car thats due for a woke oil change?
jason xx
jason xx May 09, 2023 5:14PM ET
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you are the 🍿 🍿 🍿
Mark Jannetty
Mark Jannetty May 09, 2023 5:14PM ET
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Jason, why are you calling him a Democrat?
Peter Andersen
Peter Andersen May 09, 2023 5:14PM ET
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Mark Jannetty we are all democrats and republicans
First Last
First Last May 09, 2023 5:14PM ET
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Mark Jannetty   You can't detect sarcasm?
Ac Tektrader
Ac Tektrader May 09, 2023 3:25PM ET
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what's irresponsible and hypocritical, is the previous Republican Administration (Trump) blowing hole in the budget (over +25% in 4 years), then blaming the democrats when it comes time to pay the bills.
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Ac Tektrader
Ac Tektrader May 09, 2023 3:25PM ET
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first and last, it was part of the 2 Santa Claus theory formulated in the1980s when it was formulated by the right wing conseratives in then Republican party. it was designed to cripple the attempts by the democratic party to create a reasonable safety net for the average american and strengthen the power of of the far right wing of the Republican party.....
Mark Jannetty
Mark Jannetty May 09, 2023 3:25PM ET
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yesterday is gone, deal with today's problem
Ac Tektrader
Ac Tektrader May 09, 2023 3:25PM ET
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this is very current and is today's problem, Mark.... this program developed to undermine the middle class goes hand in hand with the support of sedition and attempts to overthrow American democracy jan6 2021....
First Last
First Last May 09, 2023 3:25PM ET
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Ac Tektrader   Cool.  I wasn't aware of this “Two Santa Clauses Theory” from 1974.
Ac Tektrader
Ac Tektrader May 09, 2023 3:25PM ET
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First Last first last, I became aware of this theory in an interview of a prominent right wing activest in the early 80s......
peter neal
peter neal May 09, 2023 2:12PM ET
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It's over. Buy Gold.
First Last
First Last May 09, 2023 12:42PM ET
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"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."  Since it's "spending Congress has already authorized", we should consider that Congress has already implicitly authorized lifting the debt limit to accommodate the spending it authorized so as to not violate the 14th Amendment.
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First Last
First Last May 09, 2023 12:42PM ET
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Mark Jannetty  Raising the debt ceiling doesn't "stop the increase of debt".  It allows payment on debt already incurred.  "stop the increase of debt" requires future cuts in spending and/or increases in taxes.
Ac Tektrader
Ac Tektrader May 09, 2023 12:42PM ET
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mark jannetty, history has proven unregulated capitalism becomes corrupt and can't be trusted with social and economic policy, it will in the end produce fascism..... oh and by the way, militaries are organized as socialist entities.
Mark Jannetty
Mark Jannetty May 09, 2023 12:42PM ET
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please take a math class. do you ask your credit card company to raise your credit limit, in order to pay your bills?
First Last
First Last May 09, 2023 12:42PM ET
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Mark Jannetty   The US gov't is not as similar to a credit card company as you think.
Mark Jannetty
Mark Jannetty May 09, 2023 12:42PM ET
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First Last same math turd
Joseph Levins
Joseph Levins May 09, 2023 9:29AM ET
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Down on the Ground Floor ........ Saw a lady with bags of diapers in a shopping cart walk out of Albertsons Food store yesterday without paying. Wait until this migrant surge starts and the city and county governments won't or can't help them. They will help themselves .... That is when the anarchy will begin. Market Impact? It's all in the details. Maybe AI Has a solution. Right.
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First Last
First Last May 09, 2023 9:29AM ET
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Mark Jannetty   "some crimes are not as bad as others" is a controversial position for you?  smh.
Mark Jannetty
Mark Jannetty May 09, 2023 9:29AM ET
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yes, a crime is a crime. punishment is a different topic. you don't say it was only stealing what she needs. an alcoholic needs that bottle
Ac Tektrader
Ac Tektrader May 09, 2023 9:29AM ET
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Mark Jannetty Giuliani is a crook.....and the law is catching up on him....
EL LA
EL LA May 09, 2023 9:29AM ET
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Good point! Maybe they should add a shoplifting cart to the welcome wagon down on the border.
First Last
First Last May 09, 2023 9:29AM ET
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Mark Jannetty   Not sure why you're repeating "crime is crime" when no one is disputing that.
jason xx
jason xx May 09, 2023 6:42AM ET
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Neraly 25% of the entire deficit is from traitor trumps spending and Republicans have the nerve to threaten to stiff the entire globe
Mark Jannetty
Mark Jannetty May 09, 2023 6:42AM ET
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Democrats have control to prioritize what cuts to make. Republicans already put their efforts on the table. Democrats are the ones threatening default
First Last
First Last May 09, 2023 6:42AM ET
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Mark Jannetty   Default of financial obligations made in the past and cutting spending/raising taxes in the future are two separate issues.  Threatening to cause chaos in the 1st issue to get one's way w/out compromising in the future issue is a terrorist tactic.
Mark Jannetty
Mark Jannetty May 09, 2023 6:42AM ET
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we don't need to raise the debt ceiling to pay our financial obligations, if you cut spending. not rocket science. 5th grade math
First Last
First Last May 09, 2023 6:42AM ET
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Mark Jannetty   US is already at/near the debt ceiling.  That's why it needs to be raised pronto.  Cut spending in the future and the future debt ceiling can be lowered or not raised.  The US can't "cut spending" on what's already spent/ordered.
jason xx
jason xx May 09, 2023 6:39AM ET
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Can you imagine the entire global financial system is literally built on US bonds but Americans still have the nerve to think we shouldn't get anything from other countries and stay isolated
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First Last
First Last May 09, 2023 6:39AM ET
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Mark Jannetty   If "it's about fair trade", then it IS about trade.
Mark Jannetty
Mark Jannetty May 09, 2023 6:39AM ET
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First Last what grade level did you drop out at?
First Last
First Last May 09, 2023 6:39AM ET
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Mark Jannetty   "Fair trade" is a kind of trade.
First Last
First Last May 09, 2023 6:39AM ET
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Mark Jannetty   If you don't get simple logic, I should ask you your grade.
Mark Jannetty
Mark Jannetty May 09, 2023 6:39AM ET
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First Last you are pathetic first
 
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