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WASHINGTON: US President Joe Biden and House Speaker Kevin McCarthy met in the White House on Monday (May 22) about raising the US government’s US$31.4 trillion debt ceiling, with the US economy at risk of crashing if no deal is reached in 10 days.
The Democratic president and the top congressional Republican have struggled to make progress on a deal, as McCarthy pressures the White House to agree to spending cuts in the federal budget that Biden considers “extreme”, and the president pushes new taxes on the wealthy that Republicans reject.
They have just 10 days to reach a deal – until Jun 1 – to increase the government’s self-borrowing limit or trigger an unprecedented debt default that economists warn could bring on a recession.
The two leaders showed no sign that an agreement was imminent in remarks to reporters before they met.
Biden said he was “optimistic” they could make some progress. Both sides need a bipartisan agreement to “sell it” to their constituencies, he said, adding there may still be some disagreements.
McCarthy, seated beside Biden in the Oval Office, said, “I think at the end of the day we can find common ground” but that differences remained.
Treasury Secretary Janet Yellen on Monday offered a sobering reminder of how little time is left, saying the earliest estimated default date remains June 1 and that it is “highly likely” that Treasury will no longer be able to pay all government obligations by early June if the debt ceiling is not raised.
White House aides met with Republican negotiators on Capitol Hill for two hours on Monday, and early indications were that the talks had gone well.
Any deal to raise the limit must pass both chambers of Congress, and therefore hinges on bipartisan support. McCarthy’s Republicans control the House 222-213, while Biden’s Democrats hold the Senate 51-49.
A failure to lift the debt ceiling would trigger a default that would shake financial markets and drive interest rates higher on everything from car payments to credit cards.
US markets rose on Monday as investors awaited updates on the negotiations.
It will take several days to move legislation through Congress if and when Biden and McCarthy come to an agreement. McCarthy said that a deal must be reached this week for it to pass Congress and be signed into law by Biden in time to avoid default.
A White House official on Monday said that Republican negotiators had last week proposed additional cuts to programs providing food aid to low-income Americans, and emphasised no deal could pass Congress without support from both parties.
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