President Joe Biden and Republican House Speaker Kevin McCarthy failed to reach a fiscal agreement Monday night to prevent a US debt default. However, talks should continue, suggesting that an agreement could be within reach.
The two men met at the White House for a round of talks on an agreement seen as crucial to the fate of the US and the global economic outlook and financial markets.
“I think the tone tonight was better than any other time we’ve had conversations. . . We’ll still have some philosophical differences, but I felt it was productive,” McCarthy told reporters at the White House after the meeting. “We know the deadline. I think the President and I will talk every day. . . until we’ve done that.”
Biden later issued his own statement with a similar assessment. “I just wrapped a productive meeting with Speaker McCarthy on the need to avoid a default and avoid catastrophe for our economy,” Biden said. “We reiterated that default is off the table and the only way to move forward is to reach a good faith bipartisan agreement.”
Earlier in the afternoon Treasury Secretary Janet Yellen had warned that it was “highly likely” that the US would not be able to pay all of its bills by early June and possibly as early as June 1, which was ten days away.
Although Biden and McCarthy failed to reach a final agreement by the end of the assembly, they instructed staffers to ramp up negotiations to reach an agreement that could pass both houses of Congress and be signed by the president before the deadline.
McCarthy has refused to raise the US’s $31.4 trillion statutory borrowing limit unless the White House and Democrats agree to deep spending cuts and new restrictions on eligibility for Social Security programs.
The standoff has dragged on for months, but just this month Biden and the Republican leader in the House of Representatives began negotiations on a financial deal that could resolve the crisis. The President was forced to cut short his trip to Asia to return to Washington and continue talks.
The urgency of reaching an agreement has become even clearer after Yellen repeatedly warned that time was running out before the Treasury ran out of money.
“It is highly likely that unless Congress takes action to raise or suspend the debt limit by early June, and possibly as soon as June 1, the Treasury Department will be unable to meet all of the government’s obligations,” Yellen wrote on Monday afternoon. the latest in a series of letters to Congress on the subject.
Both sides have continued to blame each other for the standoff in recent days. The White House accused Republicans of making “extreme” demands that remain unacceptable, and McCarthy accused Biden of backtracking on his positions.
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While McCarthy is being pressured by his party’s right flank not to make any further concessions to the White House, some Democrats are urging Biden not to give in to Republicans. Several Democrats have urged the White House to invoke the 14th Amendment, which says the “validity” of the US national debt must not be “challenged,” and to continue borrowing beyond the limit.
Although Biden said Sunday he believes he has the “authority” to do so, he said it will not be a solution in the short term.
Private economists continue to argue that the government has a little more leeway compared to Yellen’s projections. Oxford Economics on Monday estimated that the Treasury could “hold out” until June 14.
However, it warned that there was “no margin for error” and estimates of incoming revenue, cash holdings and other exceptional measures could be subject to change.
Meanwhile, economists at Goldman Sachs are forecasting that the Treasury Department’s cash balance will fall below $30 billion by June 8 or 9. “At this point, we believe it is even likely that the Treasury Department will have completely exhausted its funds by this point,” they wrote in a note Friday.