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    Time Is Running Out for Congress to Raise the Debt Ceiling

    With a June 5 deadline looming, there is much to be done to prevent the default that leaders of both parties said would never happen.Senator Mitch McConnell had a message for Americans growing increasingly worried that the economy is going to crash if the federal debt ceiling is not raised: Just chill.“Look, I think everybody needs to relax,” Mr. McConnell, the Kentucky Republican and minority leader with deep experience in debt limit showdowns, told reporters back home earlier this week. “Regardless of what may be said about the talks on a day-to-day basis, the president and the speaker will reach an agreement. It will ultimately pass on a bipartisan vote in both the House and the Senate. The country will not default.”That may be a case of easier said than done. While Mr. McConnell, President Biden and Speaker Kevin McCarthy have repeatedly assured Americans that there will be no default, that guarantee is looking a little shakier with little more than a week to go before the U.S. Treasury is projected to run out of cash to pay its obligations.Even if negotiators agree to a deal soon — an outcome that appeared within reach but still had not materialized as talks continued on Friday — there is still much to be done, not the least of which is winning approval in the House and Senate. That outcome is nowhere near certain given rising uneasiness — and some outright opposition — on both the right and left. At this point, no one can be absolutely certain that the United States won’t tumble over the default cliff, even if no one involved wants that to happen. Time is short.President Biden said last weekend there was a chance a default could happen. “I can’t guarantee that they wouldn’t force a default by doing something outrageous,” he told reporters. “I can’t guarantee that.”Doug Mills/The New York Times“No one can guarantee there won’t be a default, if for no other reason than the clock is ticking down here pretty quickly,” said G. William Hoagland, a longtime Republican budget guru on Capitol Hill who is now a senior vice president at the Bipartisan Policy Center. “We are on thin ice in a big way.”Negotiators got some breathing room Friday afternoon with the Treasury secretary’s announcement that the default deadline had moved four days later, to June 5. But Congress will still be hard-pressed to act by then, and the brief extension might even be counterproductive, sapping some urgency to seal a deal.“We’re within the window of being able to perform this, and we have to come to some really tough terms in these closing hours,” said Representative Patrick T. McHenry, Republican of North Carolina and a lead negotiator for Mr. McCarthy. “We’re going back on final, important matters, and it’s just not resolved.”Since the beginning of the impasse, Mr. Biden and congressional leaders have sought to tamp down concern that a default would occur, essentially saying that it was unthinkable because Congress has narrowly avoided default before. After one of the high-level meetings at the White House, Senator Chuck Schumer, the New York Democrat and majority leader, cheered the fact that all four leaders had said default was off the table.Part of their motivation in offering these constant reassurances was to bolster their own forces, calm the public and keep the financial markets from cratering as the talks wore on.But President Biden changed his tune slightly during his visit to Japan last weekend, saying for the first time that if Republicans insisted on pushing the issue to the hilt, maybe default was an option after all.“I can’t guarantee that they wouldn’t force a default by doing something outrageous,” Mr. Biden told reporters. “I can’t guarantee that.”Representative Hakeem Jeffries, the top Democrat in the House, suggested some Republicans might want a default if they could benefit from it politically.Haiyun Jiang/The New York TimesRepresentative Hakeem Jeffries, Democratic of New York and the minority leader, expressed a similar sentiment when asked this week if he could still be certain the government would not default.“Not with this group,” he said, referring to Republicans, some of whom he suspects would not mind the financial chaos resulting from a default if they thought it could help them politically in 2024.Mr. McCarthy, the House leader and a California Republican, has also stated repeatedly that there would be no default and on Friday emphasized that he believed that a positive outcome would be the result.“I’m a total optimist,” he told reporters as negotiations continued with no apparent breakthrough.One way Mr. McCarthy has said a default could be avoided is for the Senate to pass and the president to sign the measure Republicans passed in the House raising the debt limit while making steep budget cuts and rolling back other Biden administration initiatives. But that is unlikely to happen even if the Treasury runs out of money. Mr. McCarthy has also ruled out an emergency short-term suspension of the debt ceiling.Representatives Garret Graves, left, and Patrick McHenry are two of the negotiators for the Republicans.Haiyun Jiang/The New York TimesEven an agreement between House Republicans and Mr. Biden would not end the drama; in some respects, it would be just the beginning.House Republicans have a 72-hour rule for the time between when the legislation is made public and when it is to be voted on, a timeline that pushes the showdown ever closer to the Treasury’s early June deadline.Plus, with hard-right elements of the Republican conference joining progressive Democrats in expressing reservations about the deal taking shape, Mr. McCarthy and Mr. Jeffries may have to thread the needle to produce the necessary votes from both sides to win approval of the deal.Mr. McCarthy and his leadership team will have to assess extremely accurately the number of Republicans committed to voting for any final budget deal with a debt limit increase attached. Then they will need to let Mr. Jeffries know the number of votes Democrats need to produce to make sure at least 218 lawmakers will support the package.House Republicans have a 72-hour rule for the time between when the legislation is made public and when it is to be voted on, which makes the deadline to tight.Kenny Holston/The New York TimesMiscalculation could mean disaster. With the nation in a dire financial crisis in September 2008, the House stunned the Bush administration by failing to pass its bank bailout program. In a chaotic turn of events on the House floor, the measure failed as many Republicans refused to back it despite presidential pleas and some Democrats balked as well. The stock market tumbled in real time as the vote unfolded. Four days later, rattled House members came back and approved the proposal with a few changes.Some believe that it might require a similar scenario now to push the debt limit plan through Congress — a failed vote and market drop that underscores the economic consequences of a default and motivates lawmakers to act. Others would prefer it not come to that given the potentially severe ramifications of even a brief default.“I have been of the optimistic view that it wouldn’t happen, but the longer it goes on, the more likely it seems to me,” said Mr. Hoagland, the budget expert. “Time has run out for getting this done, but I am just praying a default doesn’t happen.”Luke Broadwater More

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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 and McCarthy to Discuss Debt Limit as a Possible Default Looms

    The president will host the House speaker and other congressional leaders at the White House on Tuesday to discuss their impasse over the debt ceiling and spending cuts.WASHINGTON — President Biden will meet with Speaker Kevin McCarthy at the White House on Tuesday in a critical face-to-face confrontation that will frame their showdown over the federal debt and spending in the weeks before the nation is set to default on its obligations for the first time in history.With the American and perhaps the global economy hanging in the balance, the meeting will be the first sit-down session between the Democratic president and Republican speaker since February. But even the terms of the discussion are in dispute: Mr. McCarthy insists the president negotiate a debt ceiling deal with him, while Mr. Biden insists the meeting will just be an opportunity to tell the speaker that there will be no negotiations over the limit.The meeting in the Oval Office will feature Mr. Biden, Mr. McCarthy and three other congressional leaders: Representative Hakeem Jeffries of New York, the Democratic leader in the House, and Senators Chuck Schumer of New York and Mitch McConnell of Kentucky, the Democratic and Republican leaders in the Senate. But Mr. Biden and Mr. McCarthy are the key players, locked in a political game of chicken to see who will blink first on raising the debt ceiling.With the federal government expected to default on its debt as soon as June 1 without an agreement, Mr. McCarthy and his Republican caucus have refused to raise the debt ceiling without commitments to major spending cuts. Mr. Biden has said he would discuss ways to reduce the deficit but has refused to link any spending decisions to the debt ceiling increase, arguing that Congress should simply raise the ceiling as it has for generations to pay for spending already approved.Karine Jean-Pierre, the White House press secretary, repeatedly referred to Mr. Biden’s meeting with Mr. McCarthy on Tuesday as a “conversation” rather than negotiations.Pete Marovich for The New York Times“We should not have House Republicans manufacturing a crisis on something that has been done 78 times since 1960,” Karine Jean-Pierre, the White House press secretary, said on Monday. “This is their constitutional duty. Congress must act. That’s what the president is going to make very clear with the leaders tomorrow.”The meeting that Mr. Biden has called, she added, will not involve any haggling over the debt ceiling. “I wouldn’t call it ‘debt ceiling negotiations,’” she said in reply to a reporter who used that phrase. “I would call it a conversation.” In fact, she was so intent on calling it a “conversation” that she used the word to describe the meeting 15 times during her briefing.Neither side expects any breakthrough at the session, scheduled for 4 p.m., but instead the leaders plan to use it to emphasize their positions in the dispute, in effect setting the parameters for the debate that will play out over the next few weeks. In recent years, such standoffs have not been resolved until the final hours and days before a deadline — or the deadline is extended.Mr. Biden has indicated that he is willing to have a separate discussion with Mr. McCarthy and the Republicans over spending that is not directly linked to the debt ceiling legislation. White House officials said the president plans to push Republicans to consider the tax increases and prescription drug savings he laid out in his most recent budget, which would reduce deficits by an estimated $3 trillion over 10 years, as part of a larger package to reduce debt accumulation over time.He is likely to challenge Republicans in Tuesday’s meeting to be more specific in the spending they would cut. He has hammered them for more than a week over the potential consequences — like reduced funding for veterans’ health services — that could result from the discretionary spending caps they included in a debt ceiling bill that passed the House late last month.Republicans have bristled at the president’s attacks on their legislation, calling them misleading. But they noted that unlike the Democrats, they at least have passed a measure to raise the debt ceiling, albeit conditioned on spending cuts. They argued that Mr. Biden and his Democratic allies have to come to the table with a counterproposal. Otherwise, they maintain, it would be the Democrats, not the Republicans, who failed to raise the debt ceiling, leading to a possible default.“They have to now step up and act like responsible leaders,” Representative Jodey C. Arrington, a Republican from Texas and the chairman of the House Budget Committee, said on CNBC on Monday. “We’ve done that, and we have set that example, and we have placed in their hands a list of proposals that we have gotten consensus on. It’s their time to respond, and the American people expect them to.” More