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    Biden Says He Is Confident America Will Not Default on Its Debts

    Speaking just moments before he left for a diplomatic trip overseas, President Biden said a default would be “catastrophic.”President Biden said a failure by the U.S. to pay its bills would be “catastrophic” for the economy.Tom Brenner for The New York TimesPresident Biden, just moments before he departed on Wednesday for a diplomatic trip to Asia, said he was confident “America will not default” as congressional leaders in both parties offered some signs of optimism about eventually reaching a deal to raise the nation’s borrowing limit.“Every leader in the room understands the consequences if we failed to pay our bills,” Mr. Biden said at the White House on Wednesday before leaving for Hiroshima, Japan, to attend the Group of 7 meeting there. “And it would be catastrophic for the American economy and the American people.”Mr. Biden described his face-to-face meeting with congressional negotiators the day before as productive, “civil and respectful” and said both Democrats and Republicans agreed that the United States cannot default.But his decision to get a final word in on the negotiations signaled that even as he departs for a summit on the global economy, the White House is focused on averting an economic crisis back home.Mr. Biden decided to cut the trip to Asia short to be back for what he called “final negotiations” over the ceiling, the statutory cap on how much the government can borrow to finance its obligations. He is scheduled to return to Washington on Sunday, skipping planned visits to Papua New Guinea and Australia.Mr. Biden echoed the optimism offered by both Democratic and Republican leaders after Tuesday’s meeting.He has designated his senior adviser, Steve Ricchetti, and Shalanda Young, the director of the Office of Management and Budget, to speak to a team of negotiators representing congressional Republicans. Speaker Kevin McCarthy had also commended the move as a sign of progress on Tuesday.“We narrowed the group to meet and hammer out our differences,” Mr. Biden said, adding that the negotiating teams met on Tuesday night and will meet again on Wednesday.Time is running out for the two sides to reach a consensus.The government reached the $31.4 trillion debt limit on Jan. 19, and the Treasury Department has been using a series of accounting maneuvers to keep paying its bills. Treasury Secretary Janet L. Yellen reiterated that the United States could run out of money to pay its bills by June 1 if Congress does not raise or suspend the debt limit, potentially causing a recession or the elimination of jobs.Republicans have said they want to cut federal spending before lifting the ceiling, while Mr. Biden has said negotiating over the cuts must not be a requirement for raising the debt limit. Even so, Democrats have increasingly appeared open to reaching a compromise with Republicans. Both Democratic leaders from New York, Senator Chuck Schumer, the majority leader, and Representative Hakeem Jeffries, the minority leader, told reporters that passing a bipartisan bill in both chambers was the only way forward.Mr. Biden signaled he was open to a potential agreement for tougher work requirements on federal aid programs over the weekend, when he reminded the press that he had voted for such measures — with the exception of Medicaid — as a senator.Asked on Wednesday if he was still considering work requirements, Mr. Biden said it is possible, “but not anything of any consequence.”“I’m not going to accept any work requirements that’s going to have an impact on the medical health needs of people,” Mr. Biden said.Mr. Biden added that he did not believe cutting his overseas trip short would help China gain influence in the region. The administration has sought to bolster partnerships in the region to to counter China’s economic presence. But the ongoing talks forced Mr. Biden to cut stops in Papua New Guinea and Australia.Mr. Biden said he made sure to call Prime Minister Anthony Albanese of Australia on Tuesday to let him know of his decision to cancel part of his trip. While officials in the administration were still deciding whether they would shorten the trip, they also discussed sending a replacement, including Vice President Kamala Harris or Antony J. Blinken, the secretary of state, according to an official familiar with the matter.As of Wednesday morning, there were no such plans to send a substitute. More

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    Biden and McCarthy Show Optimism on Debt Ceiling but Remain Far Apart

    President Biden and congressional leaders in both parties emerged from a White House meeting on Tuesday offering glimmers of hope about eventually reaching a deal to raise the nation’s borrowing limit, even as they conceded they were still far from averting a default that could come as soon as June 1.With time dwindling to strike a compromise that could make it through Congress in time to avoid an economic catastrophe, Mr. Biden said he would cut short a diplomatic trip to Asia to be on hand for a potential breakthrough. Speaker Kevin McCarthy, the California Republican, said it was possible that such a deal could materialize within days now that the president had agreed to dispatch his top advisers for stepped-up negotiations.“We just finished another good, productive meeting with our congressional leadership about a path forward to make sure that America does not default on its debt,” Mr. Biden said after the hourlong session in the Oval Office.Mr. McCarthy told reporters that he could see a deal reached “by the end of the week” — a marked change in tone after he had lamented the state of the talks just hours earlier. He exulted in a news release after the meeting that “negotiations are happening.”Still, he acknowledged that talks about spending cuts remained far apart and made it clear that the two sides had yet to agree on any policy proposals.Republicans and Democrats had both signaled that they saw the session on Tuesday as a make-or-break moment — much more significant than a similar gathering at the White House a week ago and more urgent with just 16 days before the country is projected to default on its debt.The meeting also appeared to wipe away any pretense by Democrats that they would accept only a clean debt limit increase without conditions from House Republicans. For weeks, Mr. Biden has maintained that negotiating over cuts must not be a condition for raising the limit and avoiding what could be a catastrophic default.But on Tuesday, both Democratic leaders from New York, Senator Chuck Schumer, the majority leader, and Representative Hakeem Jeffries, the minority leader, told reporters at the White House that passing a bipartisan bill in both chambers was the only way forward.“Hakeem and I are committed to getting that bipartisan bill done,” Mr. Schumer said. “We will not sacrifice our values,” he added. “They’ll probably not sacrifice their values. But we’ll have to come together on something that can avoid default. Default is a disaster.”The meeting came a day after Treasury Secretary Janet L. Yellen reiterated that the United States could run out of money to pay its bills by June 1 if Congress does not raise or suspend the debt limit, the statutory cap on how much the government can borrow to finance its obligations. Economists say that could eliminate jobs and cause a recession.The government reached the $31.4 trillion debt limit on Jan. 19, and the Treasury Department has been using a series of accounting maneuvers to keep paying its bills.Ms. Yellen warned on Tuesday that the United States faced “an economic and financial catastrophe” if it defaulted and said the standoff over the debt limit was already affecting financial markets and households.“We are already seeing the impacts of brinkmanship,” Ms. Yellen said in remarks at the Independent Community Bankers of America summit meeting.As Tuesday’s meeting started, Mr. Biden joked to reporters that “we’re having a wonderful time — everything’s going well.”But the session concluded without a breakthrough, even as broad areas of negotiation have emerged in recent days, including fixed caps on federal spending, reclaiming unspent funds designated for the Covid-19 emergency, stiffer work requirements for federal benefits and expedited permitting rules for energy projects.Mr. McCarthy commended Mr. Biden for designating two officials to negotiate directly with his office and with Representative Garret Graves of Louisiana, one of Mr. McCarthy’s top lieutenants. Mr. Biden picked his senior adviser, Steve Ricchetti, and Shalanda Young, the director of the Office of Management and Budget, according to people familiar with his choices.“The structure of how we negotiate has improved,” Mr. McCarthy said. “It now gives you a better opportunity, even though we only have a few days to get it done.”Mr. McCarthy also singled out the proposal to reclaim unspent Covid funds, which Republican officials believe could recoup $50 to $60 billion.“I think at the end of the day, it will be in the bill,” Mr. McCarthy said.He also told reporters on Tuesday that any deal must tighten work requirements for safety net programs like food stamps, a proposal in the bill the House G.O.P. passed that Mr. Biden showed some openness to over the weekend, but which progressives have declared unacceptable.“Remember what we’re talking about: able-bodied people with no dependents,” Mr. McCarthy said. “It helps people get into a job, and what does it mean when somebody gets a job? They get better pay.”Toughening work requirements for programs like food stamps has long been anathema to many Democrats, and the proposal would face fierce resistance in the Democratic-controlled Senate.“I cannot in good conscience support a debt ceiling proposal that pushes people into poverty,” Senator John Fetterman, Democrat of Pennsylvania, said in a statement on Tuesday. “We’re already addressing SNAP in a bipartisan way in the Farm Bill. But with default looming, jamming through harmful cuts to that program is reckless.”Karine Jean-Pierre, the White House press secretary, said on Tuesday that Mr. Biden “will not accept proposals that take away people’s health care, health coverage.”Administration officials have said they will not roll back any of the president’s signature legislation, particularly on climate change.As the talks appeared to gain some momentum, Mr. Biden said he would cut short an overseas diplomatic trip to Asia to be back in Washington for what he called “final negotiations” with congressional leaders. The president will still leave on Wednesday for Hiroshima, Japan, to attend the Group of 7 meeting there, but he will return Sunday, skipping planned visits to Papua New Guinea and Australia.Economists on Wall Street and in the White House have warned that a prolonged default could wipe out jobs and lead the country into a recession.Democrats said earlier in the day on Tuesday that they were awaiting the outcome of the meeting to determine how aggressively to push on an emergency plan they have been preparing for months to try to steer around opposition from Republican leaders and force a debt limit increase vote.Starting Tuesday, they have the opportunity to round up signatures for a special discharge petition that would automatically prompt such a vote if they won support from a majority of members of the House. Democrats would need at least five Republicans to join them to reach the necessary threshold of 218, and winning them over would be extremely difficult unless the crisis were at its peak.Lawmakers also said there was increasing talk of Mr. Biden invoking the 14th Amendment of the Constitution to raise the debt ceiling unilaterally, a move they acknowledged would draw a legal challenge — and which Ms. Yellen has questioned — but could still avert economic disaster.With so much uncertainty, Senate Democrats were also weighing whether they would be able to take a weeklong recess scheduled to begin on Monday, before the Memorial Day weekend.Alan Rappeport More

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    Biden Expresses Optimism on Debt Limit, but a Deal Remains Elusive

    President Biden and congressional leaders will resume face-to-face talks on Tuesday to raise the debt limit and avoid a default.President Biden and congressional leaders will resume face-to-face talks on Tuesday to avert a government default, with the White House expressing cautious optimism as the contours of a possible deal began to come into focus.With time running out to strike a deal to raise the debt limit, broad areas of negotiation have emerged, including fixed caps on federal spending, reclaiming unspent funds designated for the Covid-19 emergency, stiffer work requirements for federal benefits and expedited permitting rules for energy projects.“I remain optimistic because I’m a congenital optimist,” Mr. Biden told reporters on Sunday in Rehoboth Beach, Del. He added, “I really think there’s a desire on their part, as well as ours, to reach an agreement, and I think we’ll be able to do it.”Still, on Monday, Speaker Kevin McCarthy reiterated that he believed little progress had been made, telling reporters that the two sides remained “far apart” even with a potential default looming. “We have no agreements on anything. That’s why I’m so concerned,” he added.Treasury Secretary Janet L. Yellen reiterated on Monday that the United States could be unable to pay its bills by June 1 if it does not raise or suspend the debt limit, which caps how much money the country can borrow.That $31.4 trillion limit was hit on Jan. 19, and the Treasury Department has been using accounting maneuvers to keep paying the government’s bills. In a letter to lawmakers on Monday, Ms. Yellen cautioned that the actual date “could be a number of days or weeks later than these estimates” but she urged Congress to move quickly to prevent a default.The Treasury Department has been using accounting maneuvers known as extraordinary measures to keep paying the country’s bills without breaching the debt ceiling.Republicans have said they want to cut federal spending before lifting the ceiling, but Mr. Biden has maintained that negotiating over cuts must not be a condition for raising the limit and avoiding what could be a catastrophic default.Economists on Wall Street and in the White House say a prolonged default could obliterate jobs and lead the country into a recession.Mr. Biden, who is set to depart on Wednesday for Japan to attend the Group of 7 meeting, confirmed on Monday that he would meet with Mr. McCarthy on Tuesday. The meeting will be at 3 p.m., according to the White House.Senator Chuck Schumer of New York, the majority leader, was more optimistic than Mr. McCarthy on Monday, saying that the “parallel discussions” on federal spending and the debt ceiling were continuing in “a very serious way.”“We welcome a bipartisan debate about our nation’s fiscal future,” Mr. Schumer said. “But we’ve made it plain to our Republican colleagues that default is not an option. Its consequences are too damaging, too severe. It must be taken off the table.”The two sides had their first face-to-face meeting at the White House last Tuesday, but it ended without a deal. They had been set to meet again on Thursday, but that session was postponed to allow staff members more time to speak in detail.People familiar with the negotiations cast the decision to postpone that meeting as a positive development, one that would give staff members more time to make progress.“The conversations are constructive between all of the parties,” said Wally Adeyemo, the deputy Treasury secretary.“The United States has never defaulted on its debt, and we can’t,” Mr. Adeyemo said. “Because defaulting on our debt isn’t just about financial markets. It’s about paying our Social Security recipients. It’s about paying our troops. It’s about paying the men and women who are working the border today.”Biden administration officials have said they will not accept any deal that rolls back the president’s signature legislative achievements, particularly on climate change. They want Republicans to drop certain provisions in the debt limit bill that passed the House last month.That measure is dead on arrival in the Democratic-led Senate, but the details are a signal of the Republicans’ negotiating position with the White House.The bill would make able-bodied adults without dependents who receive both federal food assistance and Medicaid benefits subject to work requirements until they are 55 years old, an increase from 49. It also seeks to close a loophole that Republicans have claimed is abused by states, which allows officials to exempt food assistance recipients from work requirements.Asked if he was open to tougher work requirements for aid programs, Mr. Biden said over the weekend that had voted for such measures as a senator, “but for Medicaid it’s a different story.”Michael Kikukawa, a White House spokesman, said Mr. Biden “has been clear that he will not accept proposals that take away people’s health coverage.”“The president has been clear he will not accept policies that push Americans into poverty,” Mr. Kikukawa said.Conservatives had initially pushed to tighten those work requirements even further, but more mainstream Republicans in competitive districts balked.Alan Rappeport More

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    U.S. Faces ‘Significant Risk’ of Running Out of Cash in June, Budget Office Warns

    A default would cause financial distress, economic disruptions and rapid increases in borrowing rates, the nonpartisan Congressional Budget Office said.The Congressional Budget Office said on Friday that there was a “significant risk” that the federal government could run out of cash sometime in the first two weeks of June, setting the United States up for a default.The warning came as the White House and congressional leaders spent the week in negotiations over how to raise the $31.4 trillion borrowing cap. The Treasury Department has been using accounting maneuvers known as extraordinary measures to keep paying the country’s bills without breaching that debt ceiling, which was officially reached on Jan. 19. But the department has said those tools could be exhausted as soon as June 1.The nonpartisan budget office outlined the fiscal strain facing the government as the legislative standoff continues. It also noted that the timing and revenue coming into the government, as well as its expenditures, were hard to predict.“If the debt limit is not raised or suspended before the Treasury’s cash and extraordinary measures are exhausted, the government will have to delay making payments for some activities, default on its debt obligations, or both,” the Congressional Budget Office said in a report released on Friday.It predicted that a default would lead to “distress in credit markets, disruptions in economic activity and rapid increases in borrowing rates for the Treasury.”Treasury Secretary Janet L. Yellen warned this week that the consequences of a default would be dire.“A default would threaten the gains that we’ve worked so hard to make over the past few years in our pandemic recovery,” she said at a news conference in Japan on Thursday before a gathering of Group of 7 finance ministers. “And it would spark a global downturn that would set us back much further.”The day the United States runs out of cash — known as the X-date — could come later this summer. The budget office said that if the Treasury Department had sufficient funds to make it through June 15, an influx of quarterly tax receipts and additional extraordinary measures at its disposal would most likely allow the government to keep paying its bills through “at least the end of July.”President Biden and the four top congressional leaders, including Speaker Kevin McCarthy, were originally scheduled to meet again on Friday to discuss the debt limit after an initial face-to-face session on Tuesday produced no agreement. The second meeting is now expected to take place next week, before Mr. Biden departs on Wednesday for Japan to attend the G7 leaders’ meeting. In the interim, staff from both sides are continuing to try to reach some type of deal to avert a default.While the decision to delay the meeting was viewed as a positive development that could allow both sides to reach consensus, it remains unclear whether an agreement can be reached in time. Mr. McCarthy has insisted on deep spending cuts and a rollback of Mr. Biden’s clean energy agenda as a prerequisite to raising the debt limit. The president has insisted that Republicans raise the borrowing cap, arguing that it simply allows the United States to pay bills that Congress has already approved.Karine Jean-Pierre, the White House press secretary, said on Friday that the meeting was delayed so that the administration and congressional staff could continue their private discussions over a plan to raise the debt limit. While the White House continued to insist that raising it is not negotiable, she said, the president was willing to discuss other spending and budget matters with Republicans.“The meetings have been productive over the last few days,” Ms. Jean-Pierre said, adding that there was “a lot of urgency” to find a solution that prevents a default.The nation’s long-term fiscal outlook continues to be problematic and could only harden the Republican position that the government must rein in spending. In a separate report released on Friday, the Congressional Budget Office said it projected a federal budget deficit of $1.5 trillion this year — slightly higher than its forecast in February. Annual deficits are projected to nearly double over the next decade, totaling more than $20 trillion through 2033. More

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    Meeting Between Biden and Republicans Delayed as Sides Pursue Debt Limit Deal

    The decision to delay Friday’s expected meeting to next week was cast as a positive development, one that could allow officials to find agreement before the United States defaults on its debt.President Biden and top congressional leaders on Thursday postponed a second meeting on the debt limit crisis to give staff members more time to explore a budget deal before the two sides convened again.People familiar with the decision cast the move as a positive development. Preliminary budget talks among senior White House officials and congressional aides have been underway for two days, with both sides attempting to find a path to an agreement on lifting the government’s debt limit and avoiding a default.Mr. Biden and the four top congressional leaders, including Speaker Kevin McCarthy, were originally scheduled to meet again Friday after an initial face-to-face session on Tuesday produced no agreement. A new meeting is expected next week before Mr. Biden departs on Wednesday for Japan to attend the Group of 7 leaders meeting.The delay seems to suggest progress at a pivotal moment. Until now, both sides appeared dug in on their respective positions about what it would take to raise the nation’s debt limit, which caps how much money the United States can borrow. That $31.4 trillion limit was hit on Jan. 19, and the Treasury Department has been using accounting maneuvers to keep paying America’s bills without breaching that debt ceiling.Mr. McCarthy has insisted on deep spending cuts and a rollback of Mr. Biden’s clean energy agenda as a prerequisite to raising the debt limit. Mr. Biden has insisted that Republicans raise the borrowing cap, arguing it simply allows the United States to pay bills that Congress has already approved.House Republicans who have been pressing the White House and Senate Democrats to negotiate said on Thursday that the opening of discussions about spending limits and other proposals was spurring some optimism that an agreement could be reached before June 1.“The last 48 hours have given us some more reason for hope,” said Representative Dusty Johnson, Republican of South Dakota and the leader of the Main Street Caucus, an influential group of mainstream conservatives.Still, Mr. McCarthy downplayed the bargaining sessions, saying that with a June 1 deadline looming for a possible default, the pace was not fast enough.“We have a short time period,” Mr. McCarthy told reporters on Thursday. “If this were staff meetings happening on Feb. 1, I’d call them productive. When you are sitting here with a few, 15 days to go, it really seems to me that the president finally felt the pressure for 100 days of not having a meeting with me.”In the wake of Tuesday’s White House session, Biden administration representatives and congressional leadership offices have gathered in closed meetings on Capitol Hill to exchange ideas on a potential spending and policy deal.Congressional officials said it made sense to put off the higher-level meeting since Mr. Biden and congressional leaders would have little new to discuss so quickly after their last discussion. Among the concerns were that another meeting with little progress to report would sow doubts about Washington’s ability to prevent an economically devastating default.Both sides have continued to talk this week and people familiar with the discussion, which ran about two hours each on Wednesday and Thursday, said some broad areas of negotiation had emerged, including fixed caps on federal spending, reclaiming unspent funds designated for the Covid emergency, stiffer work requirements for federal benefits and expedited permitting rules for energy projects.The negotiations between Biden administration and congressional staff members, which Mr. Biden and Mr. McCarthy announced after the initial Tuesday meeting at the White House, represent a new frontier in the discussions over raising the debt limit. The talks are effectively an early version of annual budget discussions, which usually heat up in late summer. Given Mr. Biden’s pledge to not negotiate over an increase in the debt limit, administration officials have taken pains to describe them as the normal course of business.“That’s regular order,” White House spokeswoman Karine Jean-Pierre said Thursday, about the meetings. “That is something that has been done year after year to talk about appropriations.”But the timing of the discussions — and the fact that any agreement they produce would almost certainly be included in a bipartisan bill to raise the debt limit ahead of a potential default as soon as next month — suggests Mr. Biden is negotiating over the debt limit despite the insistence that the two issues are separate.The White House has sent staff members from the Office of Management and Budget and the National Economic Council to the talks, and the offices of the top two Democratic and Republican congressional leaders have dispatched aides with experience in fiscal policy and cutting major spending deals.As a starting point, administration officials have rejected any agreement with Mr. McCarthy that rolls back Mr. Biden’s signature legislative achievements, most notably on climate change. They are insisting Republicans drop significant provisions in the debt limit bill that passed the House last month, including the repeal of most of Mr. Biden’s new tax incentives for clean energy.On the narrower question of discretionary spending levels, administration officials are pushing for significantly smaller cuts than Republicans approved last month. They want shorter-term caps in spending than the decade-long caps in the Republican bill. And they want to base those caps off a higher spending level than Republicans do — the amount in this year’s government funding bill, which Mr. Biden signed in December. Republicans’ plan caps spending growth from the 2022 fiscal year.White House negotiators have also pushed to exclude consideration of Republican efforts to roll back funding for the Internal Revenue Service to crack down on tax cheats, as well as for work requirements for Medicaid and food stamp recipients.The duration of a debt limit increase is also emerging as a line in the sand, with the White House insisting on a higher increase than Republicans have floated. Both sides could agree to raise the limit for only a couple of months as they seek to finish budget negotiations. But Mr. Biden’s aides want to avoid such a short-term solution and do not want to conduct an entirely new round of negotiations next year. As a result, any larger budget deal would likely need to raise the limit for borrowing needs past the next presidential election, instead of into early next year, as the Republican bill did.Republicans acknowledge that the White House has laid down numerous red lines but say that the president will have to relent in some areas if an agreement is to be struck.“None of us, nobody in this room, thinks Joe Biden will get everything he wants in this deal,” said Mr. Johnson. “That means by definition he will have to accept a number of things he says he refuses to accept.”“We’re not going to negotiate with ourselves,” said Representative Garret Graves, a Louisiana Republican deputized by Mr. McCarthy to shepherd Republicans through the debt ceiling showdown. “We’re going to have substantial savings moving forward.”Biden administration officials are also open to striking a deal with Republicans on accelerating permitting for a wide range of energy projects, including wind, oil, gas and solar — a top priority of Senator Joe Manchin III, Democrat of West Virginia.Any final agreement would need the endorsement of both Mr. Biden, Mr. McCarthy and Senate Democrats, and final approval would most likely need to be bipartisan since many of the hard-right House conservatives who voted for the House debt limit increase said they would not support anything less than what the House passed.Officials also hope a final agreement could win approval from business groups, adding pressure on Republicans. Such concerns prompted U.S. Chamber of Commerce officials this month to outline potential paths to a debt limit deal. More

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    Yellen Calls Invoking 14th Amendment to Raise Debt Limit ‘Legally Questionable’

    The Treasury secretary warned that a default would lead to a “very substantial downturn.”Treasury Secretary Janet L. Yellen on Thursday downplayed the possibility that President Biden could essentially ignore the debt limit by invoking the 14th Amendment, calling the idea “legally questionable.”Her comments come as lawmakers and the Biden administration remain locked in a standoff over whether and how to raise the debt ceiling, which caps how much money the federal government can borrow. Ms. Yellen warned lawmakers last week that the United States could run out of money to pay its bills on time by June 1.Mr. Biden is scheduled to meet with top congressional leaders again on Friday, after an initial meeting on Tuesday failed to elicit an agreement.The brinkmanship has raised questions about whether the Biden administration can act on its own to raise the $31.4 trillion borrowing cap by relying on a clause in the 14th Amendment stating that “the validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”The strategy would effectively be a constitutional challenge to the debt limit. Under the theory, the government would be required by the 14th Amendment to continue issuing new debt to pay bondholders, Social Security recipients, government employees and others, even if Congress fails to lift the limit before the so-called X-date.Ms. Yellen, however, continued to dismiss that notion.“There would clearly be litigation around that; it’s not a short-run solution,” Ms. Yellen said at a news conference in Japan before a meeting of finance ministers from the Group of 7 nations. “It’s legally questionable whether or not that’s a viable strategy.”Biden administration officials have studied the idea, but the president also voiced similar skepticism this week after meeting with Speaker Kevin McCarthy and predicted that unilateral action to raise the debt limit without Congress would spur litigation.As she prepared to meet with her international counterparts, Ms. Yellen warned that failing to lift the debt limit would have dire consequences for the United States and the world economy. She noted the significant uncertainty associated with a default but predicted that a sharp decline in government spending combined with the expected turmoil in financial markets would lead to a “very substantial downturn.”“A default would threaten the gains that we’ve worked so hard to make over the past few years in our pandemic recovery,” Ms. Yellen said. “And it would spark a global downturn that would set us back much further.”She added: “It would also risk undermining U.S. global economic leadership and raise questions about our ability to defend our national security interests.” More

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    Biden Woos Republican Moderates in Debt Ceiling Standoff

    A day after an unproductive meeting on the debt limit with Speaker McCarthy, the president assailed “extreme” Republicans who he said had “taken control of the House.”President Biden sought to drive a wedge among Republicans in their escalating dispute over spending and debt on Wednesday, effectively reaching out to moderates in hopes of convincing them to break away from Speaker Kevin McCarthy rather than risk triggering a national default that could throw the economy into a tailspin.Appearing in a competitive suburb with a vulnerable House Republican in his sights, Mr. Biden accused Mr. McCarthy of pursuing a radical strategy at the behest of the “extreme” wing of his party loyal to former President Donald J. Trump, putting the country in economic jeopardy in a way that he said reasonable Republicans of his own era in the Senate would not have done.“They’ve taken control of the House,” Mr. Biden said of this wing to a friendly audience at SUNY Westchester Community College in New York’s Hudson Valley. “They have a speaker who has his job because he yielded to the, quote, MAGA element of the party,” he added.Those hard-right Republicans, Mr. Biden said, are “literally, not figuratively, holding the economy hostage by threatening to default on our nation’s debt, debt we’ve already incurred, we’ve already incurred over the last couple hundred years, unless we give into their threats and demands.”The trip seemed aimed at least in part at peeling off even a few House Republicans to force the speaker’s hand. Legislation that Mr. McCarthy pushed through the House last month linking an increase in the debt ceiling to significant spending restraints passed with just one vote to spare, so even a relatively small mutiny would complicate Mr. McCarthy’s position.Mr. Biden singled out Representative Mike Lawler, a local Republican congressman sitting in the front row in the audience on Wednesday, praising him as a more rational member of his party. “Mike’s on the other team,” Mr. Biden said, “but you know what? Mike is the kind of guy that when I was in the Congress, there was a kind of Republican I was used to dealing with. He’s not one of these MAGA Republicans.”Gov. Kathy Hochul of New York, a fellow Democrat, greeted Mr. Biden in Westchester. The trip seemed aimed at least in part at peeling off even a few House Republicans to force Speaker Kevin McCarthy’s hand. Sarah Silbiger for The New York TimesThe president’s trip came a day after he hosted Mr. McCarthy and other congressional leaders at the White House to discuss the crisis. The session produced no breakthroughs, but the leaders agreed to have their staffs meet every day and to reconvene themselves on Friday.The federal government has reached the $31.4 trillion debt ceiling set by law and the Treasury Department estimates that it will run out of ways to avoid default as soon as June 1. Unless Congress acts by then, the nation will fail to pay its obligations for the first time in history, with potentially devastating consequences for an already fragile economy. Mr. McCarthy insists that any debt ceiling increase be tied to spending cuts, while Mr. Biden rejects linking the two; he has agreed to negotiate deficit controls separately.The annual deficit reached $1.375 trillion last year, up from $983 billion in 2019, the last year before the Covid-19 pandemic prompted vast relief spending, and is projected to double in the next decade. Even aside from the linkage with the debt ceiling, the two sides are drastically apart on how to address the red ink. Mr. Biden has proposed a budget that would reduce projected deficits by nearly $3 trillion over 10 years by increasing taxes on corporations and the wealthy, while Mr. McCarthy’s plan would scale back deficits by $4.8 trillion over a decade largely through cuts in discretionary programs.In speaking to a swing-voting New York suburb, Mr. Biden seemed to have two audiences — voters outside the capital who may not be paying as much attention to the debate and Mr. Lawler. A 36-year-old former political operative and first-term Republican, Mr. Lawler is an obvious target for the White House to try to sway. He ousted Representative Sean Patrick Maloney, then the chairman of House Democrats’ campaign operation, in a district that Mr. Biden won by 10 percentage points.In Washington, Mr. Lawler has positioned himself as a serious-minded moderate, breaking with his party on some cultural issues while supporting Mr. McCarthy’s debt ceiling and spending proposal. Both parties view him as one of the most vulnerable Republicans in 2024, and Democrats are already lining up millions of dollars and potential candidates to defeat him.For now, Mr. Lawler appears to be toeing a careful line between his party’s leaders and the president. When the White House reached out with an invitation to the event that many in the G.O.P. would have shunned, he promptly accepted. In media interviews before and after the speech, Mr. Lawler reiterated he would not support a default. But he also chastised Mr. Biden for not engaging with Mr. McCarthy sooner and insisted on broad spending cuts.Mr. Biden seemed to have two audiences: swing voters and Representative Mike Lawler, a first-term Republican, shown at left.Sarah Silbiger for The New York TimesAt this community college just a few hundred feet from his congressional district border, Mr. Lawler nodded politely when the president mentioned him while onstage on Wednesday. “I don’t want to get him in trouble by saying anything nice about him — or negative about him,” Mr. Biden said jokingly. “But thanks for coming, Mike. Thanks for being here. It’s the way we used to do it.”Speaking with reporters after the speech, Mr. Lawler said that he and Mr. Biden had a “very cordial” and “very frank” conversation backstage before the event. “He told me he wants me to know he wasn’t coming here to put pressure on me in any way,” said Mr. Lawler, who seemed to welcome the president’s remarks onstage about him not being a MAGA Republican. “You heard his comments today. I don’t think he put too much pressure on me.”Mr. Lawler reaffirmed his vote for Mr. McCarthy’s legislation. “We need to get our fiscal house in order,” he said. “And so yes, spending needs to be tied to the debt ceiling. And that is the message I conveyed to the president.” But he repeatedly called for a bipartisan solution.Local Democrats were frustrated that the president wooed Mr. Lawler rather than assail him. Mondaire Jones, a former congressman positioning himself to challenge Mr. Lawler next year, said after the speech that Mr. Lawler had done nothing to justify being described “as not being a MAGA Republican.” Mr. Jones added: “He has voted for everything Kevin McCarthy has asked him to vote for at the request of the MAGA extremists.”Indeed, Republicans seized on Mr. Biden’s comments to rebut the Democratic Congressional Campaign Committee’s attacks on the G.O.P. congressman. “Despite the D.C.C.C.’s repeated lies regarding Congressman Lawler’s positions,” the National Republican Congressional Committee said in a statement, “Lawler is a pragmatic member of Congress who is working to negotiate and avoid a government default.” More

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    How Past Debt Limit Crises Shaped Biden’s No-Negotiation Stance

    Battles in 2011 and 2013 taught President Biden not to lean on a House speaker who has little room to negotiate and to keep debt ceiling talks separate from the budget.As a debt limit crisis loomed in 2011, Vice President Joseph R. Biden Jr. described early negotiations with Republicans as civil, at one point suggesting that the process was about finding out who was willing to trade their side’s bicycle for the other side’s golf clubs.The genteel vibe came to a halt that summer, when Speaker John A. Boehner walked away from a deal because he was not able to wrangle the Republicans in his caucus. Months later, congressional leaders agreed to raise the debt ceiling and cut trillions in federal spending to avoid default.The bitter compromise convinced Mr. Biden of two things, according to a half-dozen current and former advisers: Do not negotiate with a speaker who cannot reach a deal — Mr. Boehner’s caucus was arguably less radical than the current bloc of House Republicans — and do not turn the process of avoiding government default into a discussion about budgeting.“That was kind of a terrifying transition, because all of the sudden you’re negotiating over whether or not you’re going to default,” Jacob J. Lew, the Treasury secretary under President Barack Obama, recalled of the 2011 saga.Mr. Lew added, “It left you with the real sense that this could just as easily have failed.”Twelve years later, the government is again at risk of defaulting on its debt for the first time, and Republicans in the House are again demanding spending cuts in exchange for agreeing to raise the debt limit.. Faced with the highest-stakes economic obstacle of his presidency and left with the searing memory of Obama-era fights, Mr. Biden has held firm that the discussion over raising the $31.4 trillion debt limit must take place separately from spending negotiations, advisers say.That has not always been the case. Republicans have pointed out in recent weeks that, as a senator, Mr. Biden railed against budget deficits during the Reagan presidency. In 1984, he presented a proposal to freeze federal spending for a year. He said his plan would “shock the living devil out of everyone in the U.S. Senate,” but it went nowhere.And as vice president, Mr. Biden tied the debt limit and budget issues in 2011, when he was negotiating for the Obama administration. In remarks to reporters on Tuesday, Mr. Biden suggested that he only did that because he had been instructed to get a deal done.“I got a call that morning at 6 o’clock saying that the Republican leader would only talk to me, and there was no time left,” he said. “And so I sat down, and I got instructions from the White House to settle it. And that was my job. But I had no notice.”In the spring of 2011, Mr. Biden and a bipartisan group of congressional leaders met frequently to hash out their differences. In early meetings, the group gathered at Blair House, where foreign dignitaries stay when they visit Washington. That summer, Mr. Boehner broke off negotiations, in large part because rank-and-file Republicans would not agree to raise taxes on the wealthy. A complex deal was reached weeks later, leaving Mr. Obama to explain to Democratic voters why he was not able to raise taxes and had agreed to at least $2.4 trillion in spending cuts.According to Mr. Biden’s aides, the scar tissue remains.The second debt ceiling battle of the Obama presidency, in 2013, was another test of a divided government: Mr. Obama flatly refused to negotiate, and Republicans, suffering from plunging poll numbers and the political toll of a downgrade in the country’s credit rating, eventually backed down.Mr. Biden has since argued that there should be no strings attached to raising the federal debt limit, which is the cap on the amount of money that the United States is authorized to borrow to fund the government and meet its financial obligations, including paying out social safety net programs and funding the salaries of the armed forces.Biden aides point out that the obvious: Relations between Republicans and Democrats have become even more fraught in the past decade. The last time a divided government threatened to take debt limit negotiations to the brink, Twitter was still nascent, and the idea of a President Donald J. Trump was little more than a sideshow.Now, in an era in which a large group of House Republicans remains loyal to Mr. Trump and would like to inflict pain on Mr. Biden as a matter of political principle, there is little compromise to be found on matters of substance, including the budget.“When your demand is keep the economy from falling off, and their demand is everything else, how do you meet the middle on that?” Dan Pfeiffer, a former senior adviser to Mr. Obama, said in an interview. “My recollection is that everyone believed that we would never go down that path again.”Republicans argue that, rather than taking the nation’s debt obligations hostage, they are responding to Democrats who have long been blind to the ballooning interest costs that accompany the debt. President Biden emphasized the consequences of a potential default with congressional leaders during a meeting at the White House on Tuesday, his advisers said.Doug Mills/The New York TimesIn a meeting with Speaker Kevin McCarthy on Tuesday, several advisers said, the president tried to emphasize the consequences of default and to get leaders to agree that it must be avoided at all costs. But Biden administration officials acknowledge that even if everyone agrees default must be avoided, working back from there will be the painful part.“There’s a very big gap between where the president is and where the Republicans are,” Treasury Secretary Janet L. Yellen, who has warned that the United States could default as soon as June 1, said on Monday.Mr. Biden said that he had asked the group to meet again on Friday, and that staff members would meet throughout the week. Two advisers said they expected similar meetings would take place regularly. Still, officials on both sides are not overly optimistic that a painless agreement will be reached in the short term.On Tuesday, Mr. McCarthy said that he “didn’t find progress” in the meeting and criticized the president’s suggestion that he may look at invoking a clause in the 14th Amendment that would compel the federal government to continue issuing new debt should the government run out of cash.“I would think you’re kind of a failure in working with people across the sides of the aisle or working with your own party to get something done,” Mr. McCarthy said.Mr. Biden and Senator Mitch McConnell of Kentucky, the minority leader, stay in regular contact, aides say, but the president’s advisers are reluctant to pin hopes on Mr. McConnell finding a way out of the debt ceiling morass.The president also has an untested Democratic ally in Representative Hakeem Jeffries of New York, the House minority leader, who would need to marshal the votes necessary to deliver on any compromise. (Mr. Pfeiffer pointed out that during past debates, Mr. McConnell has swooped in at the last minute, “when he has the most leverage,” reaching an agreement “that is basically enough for him, it passes, then he leaves town.”)On Tuesday, Speaker Kevin McCarthy said he was not interested in reaching any sort of short-term deal that would avert default.Doug Mills/The New York TimesThere will be little common ground over the budget. Mr. Biden wants to expand federal spending and reduce future debt by taxing corporations and high earners, a plan his administration argues could reduce the growth in the deficit by some $3 trillion over the next decade. Republicans want to extend the tax cuts approved by Mr. Trump, which would expire at the end of 2025.Late last month, Mr. McCarthy pushed a spending bill through that would cut deep into the president’s domestic agenda and slash discretionary spending, though Republicans have not outlined what might be cut and why. Since then, the Biden White House has been happy to fill the void, accusing Republicans of wanting to cut everything from veterans’ health care spending to Social Security. (Mr. McCarthy has called this a “lie.”)Ahead of the next meeting, the president’s advisers said they did not expect Mr. Biden’s message to change but suggested that both sides would have to make concessions. Mr. Biden’s comment on Tuesday that he might be willing to support rescinding unspent coronavirus relief funds — and fulfilling a Republican demand — could be the sort of compromise that would prevent talks from calcifying.But Mr. Biden’s aides also expect him to stress the political stakes for Republicans over the next few weeks should they refuse to budge on the debt limit. He will do so not just from the White House but from congressional districts.On Wednesday, the president was in the Hudson Valley region of New York, where Representative Marc Molinaro, a Republican whose district includes parts of the area, has accused him of playing a “game of chicken.” More