Joe Biden and Kevin McCarthy hold ‘productive’ debt ceiling talks, but deal remains elusive

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President Joe Biden and Republican House Speaker Kevin McCarthy failed Monday night to reach a budget deal to avoid a US debt default, but talks were expected to continue, suggesting a agreement could be at hand.

The two men met at the White House for a round of negotiations toward a deal seen as critical to the fate of the United States and the outlook for the world’s economy and financial markets.

“I think the tone tonight was better than any other time we’ve had discussions…we’ll still have some philosophical differences, but I found it to be productive,” said McCarthy to reporters at the White House after the meeting, “We know the deadline. I think the president and I are going to talk every day . . . until we’re done.”

Biden then released his own statement with a similar assessment. “I have just concluded a productive meeting with President McCarthy on the need to prevent defaults and avert catastrophe for our economy,” Biden said. “We reiterated once again that the default is not on the table and the only way forward is in good faith towards a bipartisan agreement.”

Earlier in the afternoon, Janet Yellen, the Treasury Secretary, had warned that it was “very likely” that the United States would not be able to pay all of its bills by the start of June, and potentially as early as June 1. June, i.e. in 10 days.

Although Biden and McCarthy did not reach a final agreement at the end of the rally, they asked staff to intensify negotiations in a bid to seal a deal that could pass both houses of Congress and be signed by the president. before the deadline.

McCarthy has refused to increase the US borrowing limit of $31.4 billion, which is set by law, unless the White House and Democrats agree to major spending cuts and no accept new eligibility restrictions for social safety net programs.

The stalemate has been going on for months, but Biden and the Republican House leader only this month launched negotiations on a budget deal that could resolve the crisis. The president was forced to cut short a trip to Asia to return to Washington to continue the talks.

The urgency of a deal became even clearer after repeated warnings from Yellen that time was running out before the Treasury ran out of money.

“It is highly likely that the Treasury will no longer be able to meet all government obligations if Congress has not acted to raise or suspend the debt ceiling by early June, and potentially as early as June 1. “Yellen wrote 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 has accused Republicans of doing “extreme” requirements that remained unacceptable, and McCarthy blamed Biden for backtracking on his positions.

As McCarthy faces pressure from his party’s right flank not to make further concessions at the White House, some Democrats are urging Biden not to cave in to Republicans. Several Democrats have called on the White House to invoke the 14th Amendment to the constitution, which states that the “validity” of US public debt should not be “questioned”, and to continue borrowing beyond the limit.

Although Biden said Sunday he believed he had the “power” to do so, he said it would not be a short-term solution.

Private economists continue to argue that the government has a little more leeway compared to Yellen’s projections. Oxford Economics estimated on Monday that the Treasury would be able to “cringe its teeth” until June 14.

However, he warned that there was “no margin for error” and that estimates for incoming revenue, cash balances and other extraordinary measures were subject to change.

Economists at Goldman Sachs, meanwhile, predict that Treasury liquidity will fall below the $30 billion mark by June 8 or 9. “At this point, we believe there is even a chance that the Treasury will entirely deplete its funds at this time,” they wrote in a note on Friday.