As time is running out for an agreement on the debt ceiling, President Biden and congressmen will meet at the White House Tuesday for crucial in-person negotiations to avoid a default that economists say could lead to job losses and a recession.
The 3 p.m. session comes a day after Treasury Secretary Janet L. Yellen reiterated that the United States could run out of money to pay its bills by June 1 unless Congress raises or suspends the debt ceiling.
Republicans have said they want to cut federal spending before raising the debt ceiling. The President has insisted that raising the limit is the responsibility of Congress and should be unconditional to avoid economic disaster, although he has said he is open to separate negotiations on spending.
Over the weekend, the White House expressed cautious optimism about a possible deal, but spokesman Kevin McCarthy expressed doubts on Monday.
“I don’t think we’re doing well,” McCarthy said. “I know we don’t.”
However, some potential areas of compromise have surfaced in recent days. Mr. McCarthy said on Monday that he wanted to negotiate some of the key provisions of the debt-limit-raising bill passed by Republicans in the House of Representatives last month. These include spending caps, approving changes for domestic energy projects, work requirements for safety-net programs like food stamps, and recovering unspent funds allocated to pandemic relief programs. “All of that would be very positive in my opinion,” he said.
In addition to Mr. McCarthy, Senator Mitch McConnell, Kentucky Republican and minority leader; Senator Chuck Schumer, Democrat of New York and Majority Leader; and New York Rep. Hakeem Jeffries, the Democratic leader, will join Mr. Biden in the White House.
On Jan. 19, the government hit the $31.4 trillion debt ceiling and the Treasury used accounting maneuvers to keep paying its bills. Mr. Biden is also expected to travel to Japan on Wednesday to attend the Group of Seven meeting, adding to the sense of urgency to make progress on the debt ceiling.
While Mr. McCarthy downplayed the progress, Mr. Biden and his allies said the White House and congressional teams have had productive talks over the past few days.
“We welcome a bipartisan debate on our country’s financial future,” Schumer said Monday. “But we’ve made it clear to our Republican colleagues that defaulting is not an option. The consequences are too damaging, too serious. It must be taken off the table.”
Ms Yellen will warn on Tuesday that the debt ceiling standoff is already having an impact on financial markets and increasing the debt burden on American taxpayers. She will note that investors have become wary of holding on to government debt maturing in early June — when the government could run out of money.
“We are already seeing the effects of the risky move,” Ms. Yellen will say, according to excerpts of her prepared remarks at the Independent Community Bankers of America Summit.
Ms Yellen, who warned lawmakers on Monday that the Treasury Department could run out of cash as early as June 1, also lamented that households and businesses are now being forced to factor the possibility of a default into their budgets.
“Too many companies – including yours – have to spend their time planning for the potential risk of US bankruptcy instead of thinking about longer-term investments that will grow your business and boost the economy,” Ms Yellen will say.
Officials in the Biden administration have said they will not repeal any legislation signed by the President, particularly on climate change, and the House Republican bill is certain to be dead by the time it gets to the Democratic-led Senate.
The bill would require working-able adults without dependents who receive both federal food assistance and Medicaid benefits to be subject to employment requirements until age 55, an increase from 49 years. It would also fill a loophole Republicans say states are abusing. This allows officials to exempt food aid recipients from work requirements.
Asked if he was open to tougher work requirements for aid programs, Mr Biden said over the weekend that as a senator he voted for such measures.
On Monday evening, however, Mr Biden’s official Twitter account appeared to be closing the door on such a suggestion. “The Republican wish list in the House of Representatives would put one million older adults at risk of losing their food aid and going hungry,” Mr. Biden wrote on Twitter. “Rather than impoverish Americans, let’s reduce the deficit by making sure the rich and big corporations pay their fair share of taxes.”
Tightening labor requirements for programs like food stamps has long been anathema to congressional Democrats, and the proposal would face stiff opposition in the Senate.
“SNAP already has job requirements,” said Pennsylvania Democrat Senator John Fetterman, referring to the Supplemental Nutrition Assistance Program. “I didn’t come here to take food away from hungry kids, and that’s what this proposal would do.”
Alan Rappeport contributed to the coverage.
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