WASHINGTON (Reuters) – President Joe Biden and top U.S. congressional Republican Kevin McCarthy said on Wednesday they would push ahead on talks to raise the nation’s $31.4 trillion debt ceiling and avoid an economically catastrophic default.
After a monthslong standoff, the Democratic president and the speaker of the House of Representatives on Tuesday agreed to negotiate directly on a deal, which needs to be reached and passed by both chambers of Congress before the federal government runs out of money to pay its bills, as soon as June 1.
“We’re going to come together because there’s no alternative,” Biden told reporters at the White House.
“To be clear, this negotiation is about the outlines of the budget, not about the whether or not we’re going to (pay our debts),” Biden said. “The leaders (of Congress) have all agreed: We will not default. Every leader has said that.”
Republicans, who control the House by a 222-213 majority, for months had been insisting that Democrats agree to spending cuts in exchange for a deal to raise Congress’s self-imposed debt limit, a move needed regularly since the government spends more than it takes in taxes.
In a CNBC interview, McCarthy vowed to avoid a default.
“I think at the end of the day, we do not have a debt default,” the congressman said. “Now we have a structure to find a way to come to a conclusion. The timeline is very tight. But we’re going to make sure we’re in the room and get this done.”
The two-way conversation streamlines the prior five-way format of the past week that included the three other top congressional leaders.
Biden leaves on Wednesday for the Group of Seven summit of world leaders Friday through Sunday in Japan, and said he will speak with top lawmakers by telephone while attending the meetings, and will meet with top lawmakers again on his return.
The comments came the day after Biden and McCarthy met for about an hour at the White House with Senate Majority Leader Chuck Schumer, Senate Republican leader Mitch McConnell and House Democratic leader Hakeem Jeffries.
Financial markets appeared to be buoyed by Tuesday’s discussions, with U.S. stocks higher on Wednesday, in part amid cautious optimism among investors as talks continued.
The U.S. Treasury has said it could start running out of funds as early as June 1 to pay the government’s bills — a move economists fear will trigger a recession.
Negotiators are aiming to hammer out an agreement before Biden’s scheduled return to Washington on Sunday. Congress would then have to act swiftly before Treasury’s June 1 deadline hits.
WORK REQUIREMENTS
Negotiations are continuing over the longevity of any deal, work requirements for aid programs for the poor, including food subsidies, and spending caps.
Asked on CNN if Biden wanted the debt limit agreement to last through 2025, White House spokesperson Karinne Jean-Pierre declined to answer.
She also did not give details on negotiations over expanding work requirements for the two programs that provide food and cash aid to low-income families, which Republicans want to see included as part of a deal.
In a statement, Jeffries said he was hopeful a bipartisan deal would be reached but that House Democrats would file a “discharge petition” in case it was needed to bypass regular chamber procedures to act on the debt limit and avoid a default.
McCarthy, whose fellow Republicans control the House, on CNBC defended conservatives’ call for work requirements, saying they would help the economy and boost the workforce, and vowed to exclude any discussion of taxes.
Raising taxes on the wealthy and companies to help pay for programs for other Americans is a key part of Biden’s 2024 budget, and the president on Tuesday said he was disappointed that Republicans will not consider ways to raise revenue.
(Reporting by Susan Heavey and Doina Chiacu, additional reporting by Andrea Shalal, Jarrett Renshaw and Richard Cowan; Editing by Scott Malone, Andrew Heavens and Jonathan Oatis)
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