Close Close
ThinkAdvisor
U.S. Capitol in front of money

Regulation and Compliance > Legislation

White House, McCarthy Disavow Short-Term Debt-Limit Extension

By Erik Wasson

X
Your article was successfully shared with the contacts you provided.

What You Need to Know

  • Treasury Secretary Janet Yellen has warned the U.S. could exhaust its ability to meet its payment obligations by June 1, leaving little time for a bipartisan deal.
  • The House last month passed a bill that would raise the debt ceiling by $1.5 trillion in exchange for $4.8 trillion in budget deficit cuts over 10 years.
  • The White House has said it will only accept a “clean” no-strings-attached debt ceiling increase, although Biden is open to separate talks on the budget levels for fiscal 2024.

President Joe Biden and House Speaker Kevin McCarthy agree on one thing heading into a crucial Tuesday meeting: they don’t want a short-term debt-limit extension.

But the two men at the center of the high-stakes talks are showing no signs of willingness to compromise, risking a first-ever U.S. default as a June 1 deadline looms.

“Why continue to kick the can down the road?” McCarthy told reporters Tuesday at the Capitol, rejecting any deal that merely buys time until Sept. 30. “Let’s solve it now.”

White House Press Secretary Karine Jean-Pierre likewise said a short-term extension isn’t Biden’s “plan” but took a dig at the speaker, who has demanded deep domestic spending cuts in exchange for Republican votes to raise the nation’s borrowing limit.

“This can be easily resolved,” Jean-Pierre said. “This is a man-made crisis that the speaker is leading.”

Treasury Secretary Janet Yellen has warned the nation could exhaust its ability to meet all payment obligations by June 1 without action, leaving little time for a broad bipartisan deal.

Despite the comments, a short-term increase remains likely given the short window to strike a deal.

U.S. stocks slumped Tuesday as the debt ceiling impasse dragged on investor sentiment, with the benchmark S&P 500 down 0.4% at mid-day and 0.2% at 2 pm in New York.

The speaker said he is focused on getting Biden to agree to budget negotiations and has no interest in reducing the pressure he’s applying on the president.

“It’s the same message I gave him 97 days ago. Why don’t we sit down and work this all out? He said he would meet with us and he ignored us for 97 days,” McCarthy said.

Biden and McCarthy last met on Feb. 1 and have since been in a war of words as the market begins to show signs of strain.

Next Steps

The two leaders will sit down along with Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell and House Minority Leader Hakeem Jeffries at 4 pm at the White House.

McCarthy demands budget cuts in exchange for raising the debt ceiling. Biden has refused to link budget and debt talks.

If both sides maintain their stances after the meeting, it will be a sign to markets that the risks of a US credit downgrade or payment default are rising. Any comments indicating progress in coming to a budget agreement would be a sign that these risks are diminishing.

The House last month passed a bill that would raise the debt ceiling by $1.5 trillion in exchange for $4.8 trillion in budget deficit cuts over 10 years. It contains a litany of conservative priorities, including canceling green energy subsidies and tax enforcement spending from Biden’s signature legislation enacted last year.

McCarthy has called the House bill an opening offer that he is willing to use to strike a deal with Biden.

The White House has said it will only accept a “clean” no-strings-attached debt ceiling increase, although Biden is open to separate talks on the budget levels for fiscal 2024.

But the administration opposes the $130 billion cut that McCarthy has proposed for next year, saying it would devastate a range of domestic programs from housing to cancer research.

Biden plans to make his case against the GOP proposal in the district of swing-district New York Republican Mike Lawler later this week. McCarthy blasted the president for doing that in comments to reporters.

“They play politics,” he said. “They ought to spend that time here and solve it.”

Jean-Pierre countered that the consequences of the cuts Republicans are demanding shouldn’t be ignored.

“The president’s going to drive home the impact of these current discussions that we’re having, the economy, how it affects real hard-working Americans,” she said.

–With assistance from Justin Sink and Josh Wingrove.

 

Copyright 2023 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.