President Joe Biden and House Speaker Kevin McCarthy (R-CA) each said on Tuesday that they made progress on debt ceiling negotiations, indicating thaws in an impasse as the nation faces a possible debt default in two weeks.
The debt ceiling, a statute that prevents the federal government from spending beyond a predetermined national debt limit of $31.4 trillion, exceeded the key threshold earlier this year. Treasury Secretary Janet Yellen said in a Monday letter that her agency expects to default on obligations as early as June 1 unless the debt limit is either suspended or increased.
Biden and McCarthy met on Tuesday with other congressional leaders to continue discussions on possible mechanisms for addressing the debt limit. A statement from the White House characterized the discussion as “productive and direct,” revealing that the officials discussed “the need to ensure America does not default on its debt for the first time in our history” and “a budget agreement that can reach” the Oval Office.
“The President emphasized that while more work remains on a range of difficult issues, he’s optimistic that there is a path to a responsible, bipartisan budget agreement if both sides negotiate in good faith and recognize that neither side will get everything it wants,” the statement continued. “The President directed staff to continue to meet daily on outstanding issues. He said that he would like to check in with leaders later this week by phone, and meet with them upon his return from overseas.”
McCarthy, who had told reporters last week that the two sides were still considerably far apart, expressed a somewhat more optimistic tone after the most recent discussion. “It is possible to get a deal by the end of the week,” he said in a statement. “It’s not that difficult to get to an agreement. I am willing to meet again this afternoon and every day until we get this done.”
McCarthy also said that Biden administration officials had delayed talks regarding budget reforms and the debt limit for more than three months after the first meeting in early February.
Members of the House Freedom Caucus, a bloc of conservatives without which McCarthy is unable to pass legislation, have said they would vote to raise the debt ceiling in exchange for a framework that returns expenditures to fiscal year 2022 levels, increases the debt limit only for the next year, and caps annual spending growth at 1% over the next decade. The budget proposal recently unveiled by McCarthy mirrored the framework and successfully passed through the House last month alongside a one-year increase in the debt ceiling.
A default would likely cause a recession as the federal government, a major borrower of funds that investors across the world broadly consider to be reliable, fails to repay obligations. The national debt, which now surpasses $31.7 trillion, is meanwhile a source of persistent financial risk for the United States and a damper on long-term economic growth. Elevated interest rates on the national debt have recently weighed on the budget as lawmakers are forced to devote more tax revenues toward servicing the obligations rather than funding programs.
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The Congressional Budget Office announced in a report last week that the “extent to which the Treasury will be able to fund the government’s ongoing operations will remain uncertain throughout May.” The document added that the “extraordinary measures” officials have used to fund operations could expire “at some point in the first two weeks of June.”