Negotiations over the debt ceiling between House Republicans, Democrats, and President Joe Biden are facing challenges, according to House Speaker Kevin McCarthy (R-CA). McCarthy emphasized that the talks were “not in a good place” and criticized Biden for delaying negotiations for 100 days. McCarthy highlighted the urgency of the situation, expressing his disappointment in the lack of progress and accusing the president of disregarding the problem, similar to how he handled the border crisis.
To address the impasse, McCarthy and Biden are scheduled to meet on Tuesday afternoon. However, the situation is further complicated by Biden’s planned trip to Japan on Wednesday for the Group of Seven meetings. McCarthy asserted that Democrats need to show seriousness in negotiating and have a clear plan for the way forward.
McCarthy has been utilizing the threat of defaulting on the nation’s debts as leverage to pressure Democrats into reining in their spending. He emphasized the importance of saving and growing the economy as part of the GOP’s economic strategy. Time is of the essence, McCarthy stressed, and he argued that the government cannot sustain its current spending levels.
It is crucial to note that raising the debt limit does not authorize new federal spending but rather allows for borrowing to cover policies and legislation that Congress has already approved.
On Monday, Treasury Secretary Janet Yellen echoed McCarthy’s warning, emphasizing that time is running out to prevent an economic catastrophe. Yellen warned that defaulting on the debt could lead to financial market disruptions, triggering margin calls, bank runs, and fire sales worldwide. She highlighted the impacts of the ongoing impasse, with investors already becoming hesitant to hold government debt maturing in early June. Yellen reiterated her concerns about the increased debt burden on American taxpayers.
Yellen issued a letter to congressional leaders, reiterating the Treasury’s risk of running out of cash to fulfill federal obligations as early as June 1. In her remarks to the Independent Community Bankers of America Capital Summit, she emphasized that the livelihoods of millions of Americans are at stake. Yellen stressed that each day Congress fails to act, the economic costs rise, potentially slowing down the US economy.
Since January, Biden and McCarthy have been deadlocked over raising the government’s $31.4 trillion borrowing limit. Economists have cautioned that a US default could trigger a market downturn, higher borrowing costs, and a global economic blow comparable to the 2008 financial crisis.
During the negotiations, the White House has sought to exclude elements of a bill passed by House Republicans, including Biden’s student-loan forgiveness program and several legislative accomplishments. Republicans, on the other hand, have rejected a Democratic proposal that aims to raise revenue by modifying a dozen provisions of the tax code. This proposal includes closing a cryptocurrency loophole and eliminating a loophole that enables large real estate investors to receive interest-free government financing.
Representative Dusty Johnson (R-SD) outlined three red lines for the GOP: no clean debt increase, no tax increase, and a requirement for the bill to reduce the deficit.