McCarthy, Kevin (1965- )

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    Biden Woos Republican Moderates in Debt Ceiling Standoff

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    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

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    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

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    Biden and McCarthy to Discuss Debt Limit as a Possible Default Looms

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    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

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    In Debt Limit Talks, Biden and Republicans Start Far Apart

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    As the president prepares to meet with Speaker Kevin McCarthy this week, his budget shares little common ground with spending and tax proposals from House Republicans.President Biden is set to welcome Speaker Kevin McCarthy and other top congressional leaders to the White House on Tuesday for a pivotal round of discussions about the nation’s taxes, spending and debt as a potentially catastrophic government default rapidly approaches.The talks come just weeks before the United States is expected to run out of cash to pay its bills unless the nation’s borrowing cap is lifted. Like previous moments of brinkmanship, the discussions have echoes of 2011 and 2013, when congressional Republicans refused to raise the debt ceiling unless a Democratic president agreed to curb federal spending and reduce budget deficits. The same dynamic is at play now, but with a crucial difference: The parties share almost no common ground on tax and spending proposals that are meant to reduce the growth of the nation’s $31.4 trillion debt.The meeting is not expected to produce anything close to final agreement on a fiscal plan that could include raising the debt limit. But even small points of consensus could be hard to come by.Mr. Biden wants to expand federal spending and reduce future debt, largely by raising taxes on high earners and large companies. Republicans have passed a bill to cut federal discretionary spending — a category that includes national parks, education and more — and cancel tax breaks for certain low-emission energy sources that were part of Mr. Biden’s signature climate law. Republicans have promised to extend the 2017 tax cuts that were approved by President Donald J. Trump and are set to expire at the end of 2025.While both sides say they want to reduce the nation’s future debt burden, there is almost no overlap in how they aim to achieve that outcome. The only point of agreement so far is on the one thing Mr. Biden and Mr. McCarthy consider off limits in budget talks: Social Security and Medicare, the primary sources of projected federal spending growth in the decades to come.The gulf on fiscal issues is one of several complicating factors in discussions over the debt limit, which the government technically hit earlier this year. Officials have been employing what are essentially accounting maneuvers to keep paying all the government’s bills on time without going over the current $31.4 trillion limit. But Janet L. Yellen, the Treasury secretary, warned in a letter last week that those efforts will no longer be possible as soon as June 1, risking a debt default that economists warn could spawn a financial crisis and recession.We Hit the Debt Limit. What Happens Now?Lawmakers will need to reach a bipartisan agreement to lift the debt limit. The longer it takes, the more turmoil there could be for the United States and the global economy.Mr. Biden has refused to negotiate directly over the limit, saying Republicans must vote to raise it without conditions, given that it simply allows the government to pay for spending that lawmakers in both parties have already approved. But he invited Mr. McCarthy and other congressional leaders to come to the White House on Tuesday for what he called a separate negotiation on fiscal policy — even though it is effectively linked to the debt limit drama.Republicans say they will not raise the limit without significant curbs in spending. That is the same position they took in 2011 and 2013, under President Barack Obama, when Mr. Biden was vice president. They did not make similar demands to raise the limit when they controlled Congress at the start of Mr. Trump’s term and Republican votes helped to effectively raise the limit.In 2011, Mr. Obama entered debt limit negotiations with a set of proposed spending cuts. They included a five-year freeze on discretionary spending not related to national security, a separate freeze on federal workers’ salaries for two years and the elimination of an air-to-air missile program and a fighting vehicle for the Marine Corps. Republicans countered with a budget that featured deep cuts to federal health care spending, privatizing Medicare for future beneficiaries and new tax cuts.Republicans ultimately agreed to raise the debt limit in exchange for budget changes centered on caps on discretionary spending — essentially modifying and expanding the spending freeze Mr. Obama had proposed in his budget.Unlike Mr. Obama more than a decade ago, Mr. Biden has never agreed with Republicans’ argument that federal spending has grown too large. He has proposed to scale back the growth in government debt, but his aides reject the Republican contention that the current path of the debt poses a significant threat to economic growth.Mr. Biden’s most recent budget included $3 trillion in proposals to reduce future deficits. The savings would come largely from tax increases on the wealthy and big corporations, along with cutting government spending on health care by broadening Medicare’s ability to negotiate prescription drug prices.Republicans have rejected all the tax increases and criticized Mr. Biden earlier this year for not proposing to spend even more on the military than he already did.House Republicans have not put forth or passed a budget. The bill they passed last month would raise the debt limit by $1.5 trillion or through March 2024, whichever came first. It would reduce future deficits by nearly $5 trillion, largely by freezing certain federal spending for a decade, according to the nonpartisan Congressional Budget Office.It also included new supports for fossil fuels, a rollback of Mr. Biden’s climate change agenda and an end to the president’s attempt to cancel student loan debt for most borrowers, which appears likely to be struck down by the Supreme Court regardless.Neither side has found anything to like in the other’s starting position. Republicans “didn’t produce a budget,” Representative Hakeem Jeffries of New York, the Democratic leader, who will join Mr. McCarthy at the White House meeting, told NBC News on Sunday. “What they did was produce a ransom note.”Representative Jodey C. Arrington of Texas, the chairman of the Budget Committee, countered that Mr. Biden would have to relent and negotiate with Republicans.Mr. Biden “has negotiated, as vice president and as a senator, debt ceiling increases, with common-sense spending controls and fiscal reforms,” Mr. Arrington told Fox News on Sunday. “And we’re just asking him to be a responsible leader and do that again.” More

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    What Options Biden Has in the Debt Limit Crisis

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    The president has not wavered in his calls for Republicans to raise the nation’s borrowing limit without condition. Privately, his aides have discussed other paths.The federal government has perhaps less than a month left before an economically devastating default on its debt.No matter who bears the political blame for a default, aides acknowledge that President Biden has a lot to lose if the nation tips into recession just as he is moving into his re-election campaign.Mr. Biden has several strategic options as he tries to prevent that from happening. All have been the subject of discussions inside the administration and with Democratic allies in recent weeks. They range from continuing to hold out for Republicans to raise the nation’s debt limit with no strings attached to preparing unilateral action to effectively bypass the limit and keep paying the nation’s bills.Some involve negotiations with Republican leaders, which Mr. Biden will insist are not related to the debt limit even though they would be.Each path carries risks, which administration officials acknowledge privately. The biggest by far is economic calamity: White House economists warned in an analysis released on Wednesday that if the country defaulted on its debt and that default continued for several months, the economy would shed eight million jobs as it entered recession.The economists also warned that merely approaching a possible default would rattle markets and drive up borrowing costs across the economy, “inhibiting firms’ ability to finance themselves and engage in the productive investment that is essential for extending the current expansion.”Here are the paths available to Mr. Biden, as his aides and allies see them.Stay the courseMr. Biden has insisted for months that lawmakers must raise the nation’s borrowing cap with no conditions attached, saying that it simply allows the United States to pay for spending Congress has already authorized. He could continue to do so, refusing to negotiate, as many progressives have urged him to do.It would be an attempt to stare down House Republicans, who last week passed a bill pairing an increase in the limit with cuts to federal spending and a reversal of Mr. Biden’s climate agenda. Mr. Biden would effectively be daring Speaker Kevin McCarthy of California to allow the government to run out of cash to pay its bills on time, which the Treasury Department estimates could happen as soon as June 1.The risk is that Mr. McCarthy refuses to give in, pointing to the House bill as evidence that Republicans had done enough to raise the debt limit. Mr. Biden would count on pressure from business groups and turmoil in financial markets to push Republicans to blink at the last moment and at least pass a bill to avoid default for a few weeks or months. But as of now, House Republicans have shown no willingness to pass such a bill, known as a “clean” debt-limit increase. Neither have a critical mass of Senate Republicans needed to advance the bill in that chamber.Shalanda Young, the White House budget director, said, “I have hope that we will find a path to avoid default.”Pete Marovich for The New York TimesNegotiate spending cuts not tied to the debt limitMr. Biden will welcome Mr. McCarthy and other congressional leaders to the White House next week for talks about fiscal policy — how much the nation taxes, spends and borrows. The president says those talks are divorced from the debt limit, but effectively, they are not.The deadline hanging over the talks is the so-called X-date, estimated for June 1; Mr. Biden’s invitation to congressional leaders was accelerated by the revised projections of when that date will hit. In contrast, the bill funding federal government operations, which Mr. Biden signed late last year, runs through the end of September.Mr. Biden could negotiate without “negotiating” by trying to broker an early agreement on spending levels for the next fiscal year, before the X-date. In exchange, Mr. McCarthy would commit to passing a clean extension of the debt limit.Business groups and even some administration officials expect any deal of that nature to center on limits on federal discretionary spending — though almost certainly not as stringent as the ones in the bill Republicans have passed. White House officials have said privately for months that they do not expect the House to approve significant spending increases for next year anyway, so some sort of limits may prove palatable to Mr. Biden, depending on the details.The risk of that strategy is that Mr. McCarthy’s most conservative members have shown no appetite for a deal of that scope. Mr. Biden will not accept those members’ more sweeping demands. That complicates the prospects for an agreement that runs through the speaker.Speaker Kevin McCarthy pointed to the bill the House passed last week as evidence that Republicans had done enough to raise the debt limit.Kenny Holston/The New York TimesBypass McCarthyMr. Biden could try to bypass the speaker and court a handful of moderate Republicans in the House and the Senate to vote to raise the limit, offering some fiscal concessions as an enticement. Bringing such a deal to the House floor could require some legislative maneuvering, like the so-called discharge petition Democrats have been keeping at the ready for months.It could also require a different approach from Mr. Biden to the congressional Republicans he needs to pass such a bill. Moderate Republicans in the House say they are receiving little friendly outreach from the White House so far. Instead, Biden administration officials have gleefully hammered them for voting to advance the Republican debt-limit bill and its deep spending cuts.This week administration officials have posted, again and again, the headshots and names of House Republicans on Mr. Biden’s official Twitter account, accusing them of voting to cut funding to veterans’ programs and Meals on Wheels. Two of the featured lawmakers were members of leadership, including Mr. McCarthy. Two others were high-profile, far-right congresswomen. The remainder — more than two dozen — were lawmakers in seats Mr. Biden won in 2020.Officials have defended that strategy. “I have hope that we will find a path to avoid default,” Shalanda Young, the White House budget director, told reporters on Thursday, after assailing budget cuts included in the Republican bill. “But it’s our job to keep coming to you, to go to the American people, and make sure people understand what this debate is about.”Go it aloneIf Mr. Biden’s chosen tactics do not produce a bill he will sign that raises the debt limit before the X-date, the president will have to choose between allowing the nation to default or pursuing what is effectively a constitutional challenge to the debt ceiling by continuing to borrow to pay the bills when the government runs out of cash.That challenge would be rooted in a clause in the 14th Amendment that stipulates that the government must pay its debts. Administration officials have debated that idea, with no resolution, for months. But even its proponents concede that it would not be a perfect solution. The move would draw an immediate court challenge and sow at least temporary uncertainty in the bond market, sending government borrowing costs soaring.Catie Edmondson More

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    Debt Ceiling: U.S. Could Run Out of Cash by June 1, Yellen Warns

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    President Biden said he would meet with lawmakers on May 9 to discuss ways to avoid a default.WASHINGTON — Treasury Secretary Janet L. Yellen said on Monday 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, putting pressure on President Biden and lawmakers to reach a swift agreement to avoid defaulting on the nation’s debt.The more precise warning over when the United States could hit the so-called X-date dramatically reduces the projected amount of time lawmakers have to reach a deal before the government runs out of money to pay all of its bills on time.The new timeline could accelerate negotiations between the House, Senate and Mr. Biden over government spending — a high-stakes standoff between the president and the House Republicans who have refused to raise the limit without deep spending cuts attached.In response to Ms. Yellen’s new timeline, Mr. Biden on Monday called the top four leaders in Congress to ask for a meeting on May 9 to discuss fiscal issues. The president reached out to Speaker Kevin McCarthy and Representative Hakeem Jeffries of New York, the minority leader, along with Senator Chuck Schumer of New York, the majority leader, and Senator Mitch McConnell of Kentucky, the minority leader.Economists have warned that failure to raise the debt limit, which caps the total amount of money the United States can borrow, threatens to rock financial markets and throw the global economy into a financial crisis.Because the United States runs a budget deficit — meaning it spends more money than it takes in — it must borrow huge sums of money to pay its bills. In addition to paying Social Security benefits, along with salaries for the military and government workers, the United States is also required to make interest and other payments to the bondholders who own its debt.The Treasury Department had previously projected that it could run out of cash sometime in early June, but the new estimate raises the alarming prospect that the United States could be unable to make some payments, including to bondholders, in a matter of weeks.“Given the current projections, it is imperative that Congress act as soon as possible to increase or suspend the debt limit in a way that provides longer-term certainty that the government will continue to make its payments,” Ms. Yellen said in a letter to Congress.The Congressional Budget Office also warned on Monday that time was running out more quickly than previously thought. The nonpartisan budget office said tax receipts from income payments that were processed in April were smaller than it had anticipated and that future tax payments were unlikely to have much impact.“That, in combination with less-than-expected receipts through April, means that the Treasury’s extraordinary measures will be exhausted sooner than we previously projected,” Phillip Swagel, the C.B.O. director, wrote in an analysis posted on the agency’s website.White House officials had not expected the date of possible default to arrive so soon, and the accelerated timetable could scramble the president’s approach to the potential crisis.Mr. Biden has continued to insist he will not negotiate directly over the limit, saying Congress must raise the cap without conditions. The newly compressed calendar leaves little time for the president and congressional leaders to find agreement on raising the limit. Mr. McCarthy is traveling in the Middle East this week. Later this month, Mr. Biden is scheduled to attend the Group of 7 nations leaders’ summit in Japan, then travel on to Australia for a summit with the leaders of Japan, India and Australia.House Republicans passed legislation in April that would raise the debt limit in exchange for deep spending cuts and roll back recent climate legislation that Democrats passed along party lines. Mr. Biden has blasted that bill, saying it would hurt working families while benefiting the oil and gas industry, and he has accused Republicans of putting America’s economy on the line.On Monday, the president called on Republicans “to make sure the threat by the Speaker of the House to default on the national debt is off the table.”“For over 200 years, America has never, ever, ever failed to pay its debt. To put in the capital — in colloquial terms, America is not a deadbeat nation. We have never, ever failed to meet the debt,” Mr. Biden said.Republican Senators reacted to the news on Monday by emphasizing the onus was now on Mr. Biden to negotiate to avoid economic calamity.“It is very scary,” Senator Joni Ernst of Iowa and a member of Republican leadership said of the looming crisis. “President Biden needs to step it up and get to the table. Kevin McCarthy and the folks in the house, they did their part.”Some expressed optimism that the approaching deadline would force action.“Washington’s at its best when it has a deadline to respond to,” Senator Thom Tillis, Republican of North Carolina, said.Mr. Schumer and Mr. Jeffries urged Republicans to lift the limit immediately with no strings attached. “We do not have the luxury of waiting until June 1 to come together, pass a clean bill to avoid a default and prevent catastrophic consequences for our economy and millions of American families,” the lawmakers wrote in a joint statement on Monday. While there is bipartisan agreement that the nation needs to find a way to reduce the gap between when it spends and what it collects, even the most ardent supporters of fiscal reform say the debt limit must be raised.“We need to raise the debt limit as soon as possible, without drama and without serious risk of default,” said Maya MacGuineas, the president of the Committee for a Responsible Federal Budget. “To threaten default or drag one’s feet is the height of irresponsibility. Lawmakers need to commence serious discussions immediately.”The possibility of a default by June 1 could compel lawmakers to agree to a short-term increase or suspension of the debt limit to provide more time for negotiations. But even that temporary salve is far from assured given competing factions within the Republican Party.The United States technically hit its $31.4 trillion debt limit in January, forcing the Treasury Department to employ accounting maneuvers known as extraordinary measures to allow the government to keep paying its bills, including payments to bondholders who own government debt. Ms. Yellen said at the time that her powers to delay a default — in which the United States fails to make its payments on time — could be exhausted by early June. She cautioned, however, that the estimate came with considerable uncertainty.Tax receipts depend on a complicated array of factors such as the jobless rate, wages and whether taxpayers submit their returns on time. On Monday, the Treasury secretary underscored the challenges of predicting the default date, noting that the new estimate was based on currently available data that is inherently variable, such as tax payments from individuals.“The actual date that Treasury exhausts extraordinary measures could be a number of weeks later than these estimates,” Ms. Yellen said.A Treasury Department official said that, as of April 30, the government had a cash balance of about $300 billion. Ms. Yellen’s ability to delay a default will depend in part on how much tax revenue comes into the federal government this spring.Payments for the 2022 tax year are still arriving. Goldman Sachs economists projected last week that by the second week of June, the Treasury Department could have about $60 billion of cash remaining, which would allow the government to keep making its payments until late July.Some budget analysts have suggested that winter storms could complicate the Treasury Department’s ability to delay a default. Severe storms, flooding and mudslides in California, Alabama and Georgia this year prompted the Internal Revenue Service to push the April 18 filing deadline to October for dozens of counties.The I.R.S. also gave those affected areas more time to make contributions to retirement and health savings accounts, potentially affecting their taxable income.Ms. Yellen has already been taking steps to ensure that the federal government has sufficient cash on hand.Earlier this year, she announced that she would redeem some existing investments and suspend new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund.Ms. Yellen said on Monday that the Treasury Department was suspending the issuance of State and Local Government Series Treasury securities to help manage the risks associated with the debt limit. She lamented that the move would deprive state and local governments of an important tool to manage their finances.Brinkmanship over the debt limit has revived debates over how far the executive branch can go to avoid a default. Ms. Yellen, however, has dismissed the notion that she could prioritize certain payments or mint a platinum coin worth $1 trillion to ensure that the United States remains solvent.Although markets have broadly remained calm about the prospect of a default, there are some signs that investors are becoming nervous.They have sold government bonds that mature in three months — around the time policymakers have said the United States could run out of cash — and snapped up bonds with just one month until they are repaid.The cost of insuring existing bond holdings against the possibility that the United States will default on its debts has also risen sharply. Still, some analysts say the market reaction would need to be much more pronounced to force a fast deal.In a separate report issued by the Treasury Department on Monday about the risks facing the economy, Eric Van Nostrand, the acting assistant secretary for economic policy, laid out the dire consequences of failing to raise the debt limit.“A default by the U.S. government — including the failure to pay any of the United States’ obligations — would be an economic catastrophe, sparking a global downturn of unknown but substantial severity,” Mr. Van Nostrand said.Catie Edmondson More

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    Trickling Tax Revenue Complicates Debt Limit Talks

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    The Treasury Department’s ability to delay a default, the so-called X-date, hinges on how fast the money is coming in.WASHINGTON — A vote by House Republicans last week to lift the nation’s debt limit in exchange for deep spending cuts was the first step in what is likely to be a protracted battle over raising or suspending the borrowing cap to avoid defaulting on United States debt.But while Republicans and President Biden and his fellow Democrats are gearing up for a fight, a key question is beginning to sow unease in Washington and on Wall Street: How much time is there to strike a deal?The United States technically hit its $31.4 trillion debt limit in January, forcing the Treasury Department to employ accounting maneuvers known as extraordinary measures to allow the government to keep paying its bills, including payments to bondholders who own government debt. Treasury Secretary Janet L. Yellen said at the time that her powers to delay a default — in which the United States fails to make its payments on time — could be exhausted by early June. She cautioned, however, that the estimate came with considerable uncertainty.With June now just a few weeks away, uncertainty around the timing of when the United States will run out of cash — what’s known as the X-date — remains, and determining the true deadline could have huge consequences for the country.Tax receipts will be key to the X-date.Determining the X-date depends on a complex set of factors, but ultimately what matters most is how much money the government spends and how much it takes in through taxes and other revenue.The Bipartisan Policy Center, which tracks federal revenues, projected in February that lawmakers would need to raise or suspend the debt limit sometime between summer and early fall to avoid a default. The specific date would largely depend on how quickly tax revenues are coming into the government’s coffers.There are signs that 2022 tax receipts are trickling in too slowly for comfort. Economists at Wells Fargo wrote in a note to clients last week that because tax collections appear to be weaker than expected, there is a chance the X-date could be as soon as early June. However, they continue to believe early August is the most likely default deadline.“A low but not insignificant probability of a U.S. default is still very concerning, and we would think the last thing Treasury officials want is an X-date that sneaks up on Congress,” they wrote.Tax day payments are still arriving. Goldman Sachs economists projected last week that by the second week of June, the Treasury Department could have around $60 billion of cash remaining, which would allow the government to keep making its payments until late July.Natural disasters could fuel a debt disaster.There is a surprising factor that could cause the X-date to arrive sooner: the weather. Severe storms, flooding and mudslides in California, Alabama and Georgia this year prompted the Internal Revenue Service to push the April 18 filing deadlines in dozens of counties to October.The I.R.S. said this year that, because of the storms, individuals and businesses in the affected areas could file their returns late. They were also given more time to make contributions to retirement and health savings accounts.Farmers, who often file their tax returns by March 1, also have received a reprieve until Oct. 16, and estimated payments that normally would have been made in January were allowed to be pushed back to that date.It is not clear how much tax revenue has been delayed by the storms, but the extensions have given the Treasury Department less wiggle room to keep paying the bills.An update could come this week.The Treasury Department is expected to send a letter to Congress in the coming days with a more precise estimate of when it could start running out of cash. It could also lay out new measures intended to stave off a default. This year, Ms. Yellen announced that she would redeem some existing investments and suspend new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund.In a speech last week, Ms. Yellen warned that a default would have real consequences for the economy.“Household payments on mortgages, auto loans and credit cards would rise,” Ms. Yellen said in remarks to the Sacramento Metropolitan Chamber of Commerce. “And American businesses would see credit markets deteriorate.”She added, “On top of that, it is unlikely that the federal government would be able to issue payments to millions of Americans, including our military families and seniors who rely on Social Security.”Here’s what the X-date means for negotiations.As the X-date approaches, it will put more pressure on lawmakers to take action.Analysts at Beacon Policy Advisors predicted that if a default could really happen as soon as June, that would increase the likelihood that Congress will pass a short-term suspension of the debt limit through October. If the X-date is expected to hit in July, that might compel lawmakers to file legislation by early May so they have sufficient time to deal with procedural obstacles in Congress.Although markets have broadly remained calm about the prospect of a default, there are some signs that investors are becoming nervous.They have sold government bonds that mature in three months — around the time policymakers have said the United States could run out of cash — and snapped up bonds with just one month until they are repaid.The cost of insuring existing bond holdings against the possibility that the United States will default on its debts has also risen sharply. Still, analysts say the market reaction would need to be much more pronounced to force a fast deal.“This has caused some heartburn among policymakers but not enough to move the negotiating needle in a meaningful way,” the Beacon analysts wrote. “There needs to be a bigger market response and a more definitive X-date to get negotiations going in full.”That has yet to happen, however. While Mr. Biden has indicated he is open to talking with Speaker Kevin McCarthy about ways to get the nation’s fiscal situation on a better track, the two have yet to schedule a meeting after the House passage last week. More

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    The Debt Ceiling Debate Is About More Than Debt

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    Republicans’ opening bid to avert economic catastrophe by raising the nation’s borrowing limit focuses more on energy policy than reducing debt.WASHINGTON — Speaker Kevin McCarthy of California has repeatedly said that he and his fellow House Republicans are refusing to raise the nation’s borrowing limit, and risking economic catastrophe, to force a reckoning on America’s $31 trillion national debt.“Without exaggeration, America’s debt is a ticking time bomb that will detonate unless we take serious, responsible action,” he said this week.But the bill Mr. McCarthy introduced on Wednesday would only modestly change the nation’s debt trajectory. It also carries a second big objective that has little to do with debt: undercutting President Biden’s climate and clean energy agenda and increasing American production of fossil fuels.The legislation, which Republicans plan to vote on next week, is meant to force Mr. Biden to negotiate over raising the debt limit, which is currently capped at $31.4 trillion. Unless the cap is lifted, the federal government — which borrows huge sums of money to pay its bills — is expected to run out of cash as early as June. The House Rules Committee said on Friday that it will meet on Tuesday to consider the bill and possibly advance it to a floor vote.More than half the 320 pages of legislative text are a rehash of an energy bill that Republicans passed this year and that aimed to speed up leasing and permitting for oil and gas drilling. Republicans claim the bill would boost economic growth and bring in more revenue for the federal government, though the Congressional Budget Office projected it would slightly lose revenue.The Republican plan also gives priority to removing clean energy incentives that were included in Mr. Biden’s signature climate, health and tax law. That legislation, known as the Inflation Reduction Act, included tax credits and other provisions meant to encourage electric vehicle sales, advanced battery production, utility upgrades and a variety of energy efficiency efforts.The proposal does include provisions that would meaningfully reduce government spending and deficits, most notably by limiting total growth in certain types of federal spending from 2022 levels.The bill would claw back some unspent Covid relief money and impose new work requirements that could reduce federal spending on Medicaid and food assistance. It would block Mr. Biden’s proposal to forgive hundreds of billions of dollars in student loan debt and a related plan to reduce loan payments for low-income college graduates.As a result, it would reduce deficits by as much as $4.5 trillion over those 10 years, according to calculations by the Committee for a Responsible Federal Budget in Washington. The actual number could be much smaller; lawmakers could vote in the future to ignore spending caps, as they have in the past.Even if the entire estimated savings from the plan came to pass, it would still leave the nation a decade from now with total debt that was larger than the annual output of the economy — a level that Mr. McCarthy and other Republicans have frequently labeled a crisis.The Republican plan is estimated to reduce that ratio — known as debt-to-G.D.P. — in 2033 by about nine percentage points if fully enacted. By contrast, Mr. Biden’s latest budget, which raises trillions of dollars in new taxes from corporations and high earners and includes new spending on child care and education, would reduce the ratio by about six percentage points.Those reductions are a far cry from Republicans’ promises, after they won control of the House in November, to balance the budget in 10 years. That lowering of ambitions is partly the product of Republican leaders’ ruling out any cuts to the fast-rising costs of Social Security or Medicare, bowing to an onslaught of political attacks from Mr. Biden.The lower ambitions are also the result of party leaders’ unwillingness or inability to repeal most of the new spending programs Mr. Biden signed into law over the first two years of his presidency, often with bipartisan support.At the New York Stock Exchange on Monday, Mr. McCarthy accused the president and his party of already adding “$6 trillion to our nation’s debt burden,” ignoring the bipartisan support enjoyed by most of the spending Mr. Biden has signed into law.The speaker’s plan would effectively roll back one big bipartisan spending bill, which Mr. Biden signed at the end of 2022 to fund the government through this year. But the other big drivers of debt approved under Mr. Biden that are not singled out for repeal in the Republican bill include trillions in new spending on semiconductor manufacturing, health care for veterans exposed to toxic burn pits, and upgrades to critical infrastructure like bridges, water pipes and broadband.Some of that spending could potentially be reduced by congressional appropriators working under the proposed spending caps, but much of it is exempt from the cap or already out the door. Most of the $1.9 trillion economic aid plan Mr. Biden signed in March 2021, which Republicans blame for fueling high inflation, is already spent as well.The plan squarely targets the climate, health and tax bill that Democrats passed along party lines last summer by cutting that bill’s energy subsidies. It would also rescind additional enforcement dollars that the law sent to the Internal Revenue Service to crack down on wealthy tax cheats. The Congressional Budget Office says that change would cost the government about $100 billion in tax revenue.Taken together, those efforts reduce deficits by a bit over $100 billion, suggesting debt levels are not the primary consideration in targeting those provisions. The bill’s next 200 pages show what actually is: a sustained push to tilt federal support away from low-emission energy and further toward fossil fuels, including mandating new oil and gas leasing on federal lands and reducing barriers to the construction of new pipelines.Republicans say those efforts would save consumers money by reducing gasoline and heating costs. Democrats say they would halt progress on Mr. Biden’s efforts to galvanize domestic manufacturing growth and fight climate change.The plan “would cost Americans trillions in climate harm,” said Senator Sheldon Whitehouse of Rhode Island, the Democratic chairman of the Budget Committee. “And it would shrink our economy by disinvesting in the technologies of tomorrow.”Republicans have positioned their fossil fuel efforts as a solution to a supposed production crisis in the United States. “I have spent the last two years working with the other side of the aisle, watching them systematically take this country apart when it comes to our natural resources,” Representative Jerry Carl of Alabama said last month before voting to pass the energy bill now embedded in the debt ceiling bill.Government statistics show a rosier picture for the industry. Oil production in the United States has nearly returned to record highs under Mr. Biden. The Energy Department projects it will smash records next year, led by output increases from Texas and New Mexico. Natural gas production has never been higher.White House officials warn that Republicans are risking a catastrophic default with their demands attached to raising the borrowing cap. “The way to have a real negotiation on the budget is for House Republicans to take threats of default, when it comes to the economy and what it could potentially do to the economy, off the table,” Karine Jean-Pierre, the White House press secretary, told reporters on Thursday.Mr. McCarthy has defended his entire set of demands as a complete package to reorient economic policy. But he mentioned energy only in passing in his speech to Wall Street.The issue he called a crisis — and the basis he cited for refusing to raise the borrowing limit without conditions — was fiscal policy and debt. Debt limit negotiations, he said, “are an opportunity to examine our nation’s finances.” More