Biden and McCarthy begin debt ceiling talks with default looming

US President Joe Biden and Republican leaders in Congress to state their positions face-to-face Tuesday on raising the $31.4 trillion debt ceiling, with an unprecedented default looming in three weeks if Congress doesn’t act .

Prior to the 4pm (5pm GMT) meeting in the Oval Office, there were no signs that either side would immediately agree to concessions that would have avoided a default as early as June 1st.

Economists warn that a prolonged default could plunge the US economy into a deep recession with rising unemployment, while destabilizing the global financial system built on US bonds. Investors are already bracing for the impact.

The Democratic president is urging lawmakers to unconditionally increase the federal government’s self-imposed lending limit. House Speaker Kevin McCarthy said his House would not pass a deal that doesn’t cut spending to address the growing budget deficit.

Previous debt ceiling disputes have generally resulted in a hastily agreed deal in the final hours of negotiations, thus avoiding a default. In 2011, the controversy led to a downgrade to the country’s top-notch credit rating, and veterans of that battle warn the current situation is even riskier as political divisions have widened.

Tuesday’s meeting risks being the beginning of an increasingly tense period of uncertainty about the final outcome.

White House Press Secretary Karine Jean-Pierre told reporters on Monday that Biden intended to say during the meeting, “It is the constitutional duty of Congress to take action, to avoid default. The president will be very clear about that.”

McCarthy, whose party holds only a narrow majority in the House, wants to tie the debt ceiling vote to sweeping spending cuts that the White House considers draconian.

Source: Terra

Rose

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