President Biden talks with House Speaker Kevin McCarthy of Calif., as they walk down the House steps as they leave after attending an annual St. Patrick’s Day luncheon gathering at the Capitol in Washington on March 17. Alex Brandon/Associated Press
President Biden and Kevin McCarthy have arrived at a crucial moment in their debt ceiling fight – a meeting that risks cementing their standoff rather than yielding a breakthrough in a crisis already unnerving markets.
The president will host the House speaker and other congressional leaders at the White House on Tuesday, with McCarthy seeking spending cuts as a condition of suspending or raising the debt limit and Biden pushing to separate the issues and calling for a debt limit increase.
The stakes are higher than just politics – a default would surely trigger a market selloff and the White House has said it could cost millions of jobs. Treasury bill markets last week revealed fresh apprehension about the potential for non-payment of US debts in early June. Yet expectations for the meeting are low.
Biden has said he plans to hold to his vow not to negotiate over the debt ceiling, arguing that doing so would set a dangerous precedent allowing Republicans to hold the nation’s economy hostage over their preferred policy outcomes.
McCarthy – whose tenuous hold over a slim House GOP majority depends on heeding conservative calls to impose spending cuts – maintains there is no other option. His position was bolstered over the weekend when 43 Senate Republicans, including Minority Leader Mitch McConnell, signed a letter saying they wouldn’t support a clean debt ceiling increase – enough to ensure Democrats could not overcome a filibuster if they offered a no-strings-attached hike.
The dramatic – and unblinking – game of political chicken playing out across Pennsylvania Avenue has also prompted a renewed examination of novel executive action, such as Biden invoking the 14th Amendment that says the validity of the nation’s public debt shall not be questioned.
But the White House, eager to both lay responsibility for the crisis at the feet of Congress and avoid ceding leverage, spent the weekend downplaying the possibility. When Biden was asked during an interview Friday with MSNBC if he was prepared to utilize the 14th Amendment, he said he had “not gotten there yet.”
Treasury Secretary Janet Yellen warned Sunday that such a maneuver could prompt a “constitutional crisis” and do little to avert unnecessary economic harm. Economic experts have warned that such untested legal maneuvering would not only risk a court overturning the effort and throwing the nation into immediate fiscal crisis, but also spook investors and raise borrowing costs for the government.
“We will have an economic and financial catastrophe that will be of our own making and there is no action that President Biden and the US Treasury can take to prevent that,” Yellen said in an interview with ABC News.
While both Biden and Yellen declined to fully rule out the move if negotiations failed, both emphasized their desire in Tuesday’s sit-down to strike an agreement establishing a separate negotiating mechanism for the federal budget.
Each side has sought leverage going back to January, when Treasury began employing so-called “extraordinary measures” to avoid breaching the $31.4 trillion debt limit.
Biden released his budget in March and urged McCarthy to do the same; instead, he passed a Republican-only-backed bill that increases the US debt ceiling by $1.5 trillion and calls for $4.8 trillion in budget cuts cumulatively over 10 years, but has no chance of passing the Senate.
Some Republicans don’t buy Yellen’s warning.
“I don’t believe June 1 is the ceiling. I think that’s a political ceiling set by Secretary Yellen to put pressure on people,” Senator John Kennedy, a Louisiana Republican, said in a statement. “I think the ceiling is more like the end of July or sometime in August.”
It’s difficult to predict how blurry political stances will become should markets show deeper tumult and if more moderate or temporary solutions might gain traction, such as a short-term extension – something the White House hinted last week that it would support. Moreover, it’s unclear whether Biden and McCarthy will see some party members break rank at any point.
A bipartisan group of House moderates has proposed a debt-ceiling extension until December, and House Democratic Leader Hakeem Jeffries has separately announced Democrats are pursuing a discharge petition – which, if signed by 218 House members, would force a vote on a clean debt ceiling increase. That would require the signatures of at least five House Republicans to force a vote and is procedurally difficult to execute, even with the votes.
A person familiar with the strategy of McCarthy and other House GOP leaders say they don’t want a vote on a short-term fix, because it means more votes. It gets harder from a vote-counting perspective every time that vote is taken, the person said.
New York swing-district freshman Republican Anthony D’Esposito sidestepped a definitive answer when pressed on Bloomberg Radio Thursday whether he would break party to support a short-term debt limit extension if a compromise isn’t reached.
He said voters are concerned and “understand the debt limit may need to be increased, but it’s got to be done in a responsible way.”
Representative Jared Golden, a Democrat who represents a Maine swing district and co-chairs the fiscally focused Blue Dog Coalition, has both criticized McCarthy for “holding the debt ceiling hostage” and also called on Biden to negotiate.
“He should drop his ‘no negotiations’ position and lead talks to deliver a responsible budget that invests in the country and reduces the deficit, without destabilizing an already shaky economy with unnecessary political brinkmanship,” Golden wrote.
Senator Kyrsten Sinema, the independent Arizona senator who caucuses with Democrats, in an interview Sunday with CBS News, said the only hope is for McCarthy and Biden to “get in the room and listen to what the other one needs.”
David Brat, a former House Republican from Virginia who is now dean of the Liberty University School of Business, said the sheer scale of the forecast debt – with service costs poised to surpass defense spending on an annual basis – gives McCarthy and conservatives leverage.
“If you cannot win that narrative, you are not trying hard enough,” Brat said.
Fred Upton, a former House Republican from Michigan, said lawmakers can’t allow the debt limit to be breached.
“At the end of the day, both have to save face and Kevin does not have a lot of rope to prevent a vacate-the-chair vote,” he said. “The job has to get done.”
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