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    If Debt Ceiling Standoff Can’t Be Resolved, Both Parties Will Share the Blame

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    While each party tries to blame the other for the crisis, some acknowledge that they would both share responsibility for a default.Is it the Biden default? Or the Republican Default on America?Even as negotiators push forward with halting talks to resolve the federal debt-ceiling standoff, members of both parties are positioning themselves to try to dodge the blame for the economic fallout if things go south. Democrats lambaste Republicans for taking the debt ceiling hostage to appease “extreme MAGA” conservatives bent on shrinking government spending. Republicans hit Democrats for waiting too long to open talks and not taking G.O.P. demands seriously.But deep down — and in some cases not so deep — officials in both parties know they are all going to pay if they don’t get a deal, the government defaults and Americans lose money and jobs and confidence about their financial well-being and future.“I would hate to be the politician trying to explain to people when the economy is in the toilet that it’s not my fault, it’s their fault,” said Senator Lindsey Graham, Republican of South Carolina. “Yeah, that ain’t going to work. They will flush us all.”Polls have suggested Mr. Graham’s view is correct. A Washington Post-ABC News Poll released earlier this month shows that the public is divided about who will bear the blame, with a significant chunk of independents saying the two sides should share it equally.And some on Capitol Hill say the political backlash will be well deserved if Congress and the White House manage to mangle the situation so badly that public officials careen into a completely avoidable crisis and send both the economy and the retirement accounts of millions of Americans reeling.“I can’t comprehend that anyone who had the ability to prevent this much damage to our country, our economy and our world standing would allow that to happen,” said Senator Joe Manchin III, Democrat of West Virginia, who had been among those pressing his party to engage in negotiations earlier. “It would be absolutely reprehensible. Everyone should get hammered.”But those likely reverberations haven’t yet motivated negotiators to come to an agreement and clear the way for an economic sigh of relief. Representative Garret Graves of Louisiana, the point man for House Republicans in the talks, abruptly exited a Friday negotiating session with administration representatives in the Capitol, accusing them of being “unreasonable,” and the talks were temporarily suspended. Suddenly, the path to a quick agreement that Speaker Kevin McCarthy had seen on Thursday was newly cluttered with obstacles. By the evening, talks had resumed.Such ups and downs in budget negotiations are fairly standard and can be performative as well as substantive. Both sides need to flex to show their respective forces that they are hanging tough and pushing for all they can get. But there are real differences in the positions of Democrats and Republicans on a host of issues on the bargaining table. A positive outcome is no certainty, despite regular high-level assurances that the United States cannot and will not default in the coming days.Still, should that occur, lawmakers and administration officials would like you to know that they didn’t do it.“Here we are on the brink of a Biden default,” Senator Shelley Moore Capito, Republican of West Virginia, declared this week both in person and via news release, sounding a refrain becoming increasingly popular with Republicans — that this was all Mr. Biden’s doing because he refused to engage with them earlier and allow enough time to work out an agreement.Not so, counter the Democrats. “We find ourselves in the midst of a G.O.P.-manufactured default crisis because House Republicans have chosen to try and hold our economy, our small businesses, everyday Americans hostage to unreasonable ransom demands,” Representative Hakeem Jeffries, Democrat of New York and the minority leader, said.Republicans have a retort. They argue that since they squeezed legislation through the House last month that would raise the debt limit and enact spending cuts, they have bragging rights as well as immunity from any criticism because they are the only ones who have acted thus far — though it was widely known the bill could never pass the Democratic-majority Senate.“I don’t know how we own it if we raised the debt limit,” Mr. McCarthy said at the White House when asked if he was ready to face the consequences for a default. His colleagues share his view.“In my district I don’t think it would be a huge problem,” said Representative Tom Cole, Republican of Oklahoma. “I did vote to raise the debt ceiling. Show me one person on the other side who did.”In addition, Republicans know it is traditionally the president who gets credit or fault for the state of the economy even if circumstances are well beyond control of the executive branch.Democrats scoff at the Republican claims. Senator Chuck Schumer, the New York Democrat and majority leader, dubbed the House legislation the Default on America Act, to try to capture both its impact and its dead-on-arrival status in the Senate. He and his fellow Democrats say they refuse to reward Republicans for what they view as highly irresponsible actions that are putting the nation’s economy at risk — even though both parties have used the debt limit for bargaining leverage over the years.“From the beginning, Democrats have said — I have said — that this process demands bipartisanship,” Mr. Schumer said this week. “It’s how we avoided default under President Trump. It’s how we have avoided default under President Biden, and it’s how we should avoid default this time too. Brinkmanship, hiding plans, hostage-taking — none of that will move us closer to a solution.”The two parties can continue to trade shots. But until they trade negotiating positions they can come to terms on, the threat of default hangs over Washington and the nation. And if that happens, those involved may find that the public won’t distinguish between who did or said what when, but will hold them all accountable. More

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    In a Sharp Reversal, Biden Opens a Path for Ukraine to Get Fighter Jets

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    The president told allied leaders that he would allow Ukrainian pilots to be trained on American-made F-16s, and is prepared to approve other countries’ transferring the jets to Ukraine.President Biden told U.S. allies on Friday that he would allow Ukrainian pilots to be trained on American-made F-16 fighter jets, several U.S. officials said, adding that the president is prepared to let other countries give F-16s to Ukraine — a major upgrade of the Ukrainian military and a sharp reversal.Since Russia launched its full-scale invasion of Ukraine 15 months ago, officials in Kyiv have pleaded for advanced warplanes to overcome Russian air superiority. But Mr. Biden has resisted, concerned that the jets could be used to hit targets deep inside Russia, and prompt the Kremlin to escalate the conflict. Pentagon officials have said that other weapons, especially air defenses, were needed more urgently, and the high cost of the F-16s could squeeze out other matériel.But several European countries that belong to the NATO alliance and have F-16s in their arsenals have called for an international effort to provide the training and transfer of their jets to Ukraine. Doing so would require American permission, because the weapons were first sold to them by the United States. Though not the most advanced U.S. fighter, the F-16 carries powerful radar that can spot targets from hundreds of miles away and modern missiles and other technology that American officials do not want duplicated or falling into hostile hands.Mr. Biden told other leaders of the Group of 7 nations, the world’s wealthiest democracies, of his decision on pilot training, opening a path to supplying Ukraine with fighter jets, at their summit meeting in Hiroshima, Japan, according to several officials who requested anonymity to speak candidly about sensitive deliberations.They said the United States and its allies would discuss in the coming months how to supply Kyiv with the jets themselves, and one senior administration official said the White House was prepared to approve that step. The United States is not expected, at least under current plans, to send its own F-16s.A group of F-16s flying over Washington, in March. Ukraine has said it needs the jets to compete effectively with Russia’s air force.Andrew Caballero-Reynolds/Agence France-Presse — Getty Images“I welcome the historic decision of the United States and @POTUS to support an international fighter jet coalition. This will greatly enhance our army in the sky,” President Volodymyr Zelensky of Ukraine, who is expected to address the Group of 7 this weekend, wrote on Twitter.In a joint statement, the allied leaders said they were committed “to continuing our security assistance to Ukraine as it defends itself against Russia’s aggression, tailoring our support to Ukraine’s needs.” The group vowed to provide “financial, humanitarian, military and diplomatic support Ukraine requires for as long as it takes.”Earlier on Friday, Mr. Zelensky had addressed an Arab League summit in Jeddah, Saudi Arabia, where he challenged the neutral stance many Arab countries have adopted on the war and implored them to help save Ukrainians “from the cages of Russian prisons.” “Unfortunately there are some in the world, and here among you, who turn a blind eye to those cages and illegal annexations,” he said. “I am here so that everyone can take an honest look, no matter how hard the Russians try to influence.”Western officials said Mr. Zelensky planned to travel to Hiroshima this weekend to attend the summit meeting. Ukrainian officials gave conflicting accounts, however, with some saying he would appear in person and others saying he would speak to the leaders by video link. The vagueness appears to reflect security concerns as Mr. Zelensky moves across the globe seeking aid and arms; he was in several European countries last week, as well as Saudi Arabia on Friday.Ukraine is expected to launch a major counteroffensive soon, hoping to retake more territory seized by Russia in the war’s early days. Any delivery of fighter jets would be months away, too late to affect that plan.The Group of 7 leaders in Hiroshima spent much of the day discussing the coming counteroffensive and its chances of forcing Russia to the negotiating table to discuss some form of an armistice that would stop the fighting, even if it did not resolve the central issues of the war.They are also poised to unveil a slew of new sanctions and export controls to clamp down further on the Kremlin’s ability to fund the war, and to crack down on third-party nations that have been secretly providing Russia with banned technologies that can be used in weapons systems.Earlier on Friday, President Volodymyr Zelensky of Ukraine told a gathering of the Arab League not to “turn a blind eye” to the atrocities committed by the Russian forces.Saudi Press Agency/EPA, via ShutterstockThe allies appear determined to demonstrate unified resolve to support Ukraine at a time when President Vladimir V. Putin of Russia seems to be betting that their interest and commitment will wane.Mr. Biden’s changed stance on F-16s is his latest about-face on allowing Ukraine to field advanced weapons, including HIMARS rocket launchers, Patriot air defense missile systems and Abrams tanks. In each case, the president at first refused, only to change his mind under pressure from European allies.Top Pentagon officials have consistently said that they do not believe Ukraine needs F-16s at this stage of the conflict.Celeste A. Wallander, the assistant secretary of defense for international security affairs, told the House Armed Services Committee last month that advanced Western fighter aircraft ranked only “about eighth” on Ukraine’s priority list. She said officials have focused on resources with the “highest priority capabilities, and that has been air defense, artillery and armor.”But the push for F-16s by Ukraine and its supporters in Congress was reinforced this week when Yahoo News reported that an internal U.S. Air Force assessment concluded it would take only four months to train Ukrainian pilots to operate the fighters, a far shorter time frame than Pentagon officials had cited previously.The document, which a senior Air Force official confirmed and said was shared with several NATO allies who fly F-16s, contained a detailed assessment undertaken in late February and early March at Morris Air National Guard Base in Tucson, Ariz. Two Ukrainian pilots were given “no formal training” on the F-16, according to the assessment, other than a brief familiarization, and then were tested on a flight simulator for several hours.A Ukrainian soldier passes a crater caused by Russian bombardment in the village of Heorhiivka in eastern Ukraine. Kyiv says F-16s would greatly increase their forces’ ability to defend against aerial attacks.Finbarr O’Reilly for The New York TimesAn appearance by Mr. Zelensky at the Group of 7 would be a strong rebuff to Mr. Putin and a reminder of how thoroughly relations with Russia have deteriorated. Thirty years ago, President Clinton met with Boris Yeltsin, then the president of Russia, in Japan to begin to map the integration of a post-Soviet Russia into the world economy, as Mr. Clinton promised to seek the repeal of Cold War sanctions. Five years later, Russia joined what became the Group of 8.Now all that has been reversed. After Russia annexed Crimea in 2014, it was suspended from the group, and left it entirely three years later. Russia’s economy is struggling under sanctions imposed since the invasion last year, particularly the price cap on its oil sales, and more are coming.Britain on Friday said it was implementing a ban on Russian diamonds, copper, aluminum and nickel. Australia also said on Friday it was imposing new financial sanctions targeting 21 entities and three individuals, including Russia’s largest gold company, petroleum and steel companies and defense entities.The United States also rolled out a “substantial package” of restrictions, including cutting off 70 more firms from American exports and adding more than 200 individuals and entities to its sanctions list. The measures are meant to crack down on people or companies that are helping Moscow to evade existing sanctions.The fresh round of penalties “will further tighten the vise on Putin’s ability to wage his barbaric invasion and will advance our global efforts to cut off Russian attempts to evade sanctions,” Treasury Secretary Janet L. Yellen said in a statement on Friday.Until now, the Ukraine war has seemed far away from daily life in Moscow, but Russian leaders are growing increasingly nervous about the repercussions of a promised Ukrainian counteroffensive.Natalia Kolesnikova/Agence France-Presse — Getty ImagesThe United States will broaden sanctions to cover more corners of the Russian economy, striking at its avenues to acquire semiconductors and other high-tech goods from Group of 7 nations, which American officials said Friday are critical to Russia’s ability to build weapons. Antony J. Blinken, the secretary of state, said in a release that the new sanctions would take aim at components Russia needs to build a drone that is currently being deployed in Ukraine.The new penalties also seek to squeeze Russia’s ability to drill for oil and gas, and to crimp venture capitalists and financial services firms that American officials said were aiding sanctioned Russian businesses.Goods that Western businesses are now prohibited from selling to Russian buyers often reach them through middlemen — changing hands, legal jurisdictions and free-trade zones multiple times. The trade is hard to track and harder to enforce, especially for “dual use” goods that have both civilian and military applications.With many of Russia’s other revenue streams squeezed by previous rounds of sanctions, officials have homed in on diamonds as a lucrative trade still providing Moscow with funding for its war. Russia is the world’s largest supplier of small diamonds, exporting more than $4.5 billion in 2021, making the gem its top non-energy export by value. More

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    How the G7 Oil Price Cap Has Helped Choke Revenue to Russia

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    Group of 7 leaders are prepared to celebrate the results of a novel effort to stabilize global oil markets and punish Moscow.In early June, at the behest of the Biden administration, German leaders assembled top economic officials from the Group of 7 nations for a video conference with the goal of striking a major financial blow to Russia.The Americans had been trying, in a series of one-off conversations last year, to sound out their counterparts in Europe, Canada and Japan on an unusual and untested idea. Administration officials wanted to try to cap the price that Moscow could command for every barrel of oil it sold on the world market. Treasury Secretary Janet L. Yellen had floated the plan a few weeks earlier at a meeting of finance ministers in Bonn, Germany.The reception had been mixed, in part because other countries were not sure how serious the administration was about proceeding. But the call in early June left no doubt: American officials said they were committed to the oil price cap idea and urged everyone else to get on board. At the end of the month, the Group of 7 leaders signed on to the concept.As the Group of 7 prepares to meet again in this week in Hiroshima, Japan, official and market data suggest the untried idea has helped achieve its twin initial goals since the price cap took effect in December. The cap appears to be forcing Russia to sell its oil for less than other major producers, when crude prices are down significantly from their levels immediately after Russia’s invasion of Ukraine.Data from Russia and international agencies suggest Moscow’s revenues have dropped, forcing budget choices that administration officials say could be starting to hamper its war effort. Drivers in America and elsewhere are paying far less at the gasoline pump than some analysts feared.Russia’s oil revenues in March were down 43 percent from a year earlier, the International Energy Agency reported last month, even though its total export sales volume had grown. This week, the agency reported that Russian revenues had rebounded slightly but were still down 27 percent from a year ago. The government’s tax receipts from the oil and gas sectors were down by nearly two-thirds from a year ago.Russian officials have been forced to change how they tax oil production in an apparent bid to make up for some of the lost revenues. They also appear to be spending government money to try to start building their own network of ships, insurance companies and other essentials of the oil trade, an effort that European and American officials say is a clear sign of success.“The Russian price cap is working, and working extremely well,” Wally Adeyemo, the deputy Treasury secretary, said in an interview. “The money that they’re spending on building up this ecosystem to support their energy trade is money they can’t spend on building missiles or buying tanks. And what we’re going to continue to do is force Russia to have these types of hard choices.”Some analysts doubt the plan is working nearly as well as administration officials claim, at least when it comes to revenues. They say the most frequently cited data on the prices that Russia receives for its exported oil is unreliable. And they say other data, like customs reports from India, suggests Russian officials may be employing elaborate deception measures to evade the cap and sell crude at prices well above its limit.“I’m concerned the Biden administration’s desperation to claim victory with the price cap is preventing them from actually acknowledging what isn’t working and taking the steps that might actually help them win,” said Steve Cicala, an energy economist at Tufts University who has written about potential evasion under the cap.The price cap was invented as an escape hatch to the financial penalties that the United States, Europe and others announced on Russian oil exports in the immediate aftermath of the invasion. Those penalties included bans preventing wealthy democracies from buying Russian oil on the world market. But early in the war, they essentially backfired. They drove up the cost of all oil globally, regardless of where it was produced. The higher prices delivered record exports revenues to Moscow, while driving American gasoline prices above $5 a gallon and contributing to President Biden’s sagging approval rating.A new round of European sanctions was set to hit Russian oil hard in December. Economists on Wall Street and in the Biden administration warned those penalties could knock oil off the market, sending prices soaring again. So administration officials decided to try to leverage the West’s dominance of the oil shipping trade — including how it is transported and financed — and force a hard bargain on Russia.Oil tankers near the port city of Nakhodka, Russia. Many analysts were concerned that a price cap might prompt Russia to restrict how much oil it pumped and sold. But the country has mostly kept producing at about the same levels it did when the war began.Tatiana Meel/ReutersUnder the plan, Russia could keep selling oil, but if it wanted access to the West’s shipping infrastructure, it had to sell at a sharp discount. In December, European leaders agreed to set the cap at $60 a barrel. They followed with other caps for different types of petroleum products, like diesel.Many analysts were skeptical it could work. A cap that was too punitive had the potential to encourage Russia to severely restrict how much oil it pumps and sells. Such a move could drive crude prices skyward. Alternatively, a cap that was too permissive might have failed to affect Russian oil sales and revenues at all.Neither scenario has happened. Russia announced a modest production cut this spring but has mostly kept producing at about the same levels it did when the war began.Fatih Birol, the executive director of the International Energy Agency, has called the price cap an important “safety valve” and a crucial policy that has forced Russia to sell oil for far less than international benchmark prices. Russian oil now trades for $25 to $35 a barrel less than other oil on the global market, Treasury Department officials estimate.“Russia played the energy card, and it didn’t win,” Mr. Birol wrote in a February report. “Given that energy is the backbone of Russia’s economy, it’s not surprising that its difficulties in this area are leading to wider problems. Its budget deficit is skyrocketing as military spending and subsidies to its population largely exceed its export income.”Biden administration officials say that there is no evidence of widespread evasion by Russia, and that Mr. Cicala’s analysis of Indian customs reports does not account for the rising cost of transporting Russian oil to India, which is embedded in the customs data. A White House official told reporters traveling with Mr. Biden in Hiroshima on Thursday that the Group of 7 leaders would adopt new measures meant to counter price-cap evasion in their meeting this weekend.There is no dispute that the world has avoided what was privately the largest concern for Biden officials last summer: another round of skyrocketing oil prices.American drivers were paying about $3.54 a gallon on average for gasoline on Monday. That was down nearly $1 from a year ago, and it is nowhere near the $7 a gallon some administration officials feared if the cap had failed to prevent a second oil shock from the Russian invasion. Gas prices are a mild source of relief for Mr. Biden as high inflation continues to hamper his approval among voters.After rising sharply in the months surrounding the Russian invasion, global oil prices have fallen back to late-2021 levels. The plunge is partly driven by economic cooling around the world, and it has persisted even as large producers like Saudi Arabia have curtailed production.Falling global prices have contributed to Russia’s falling revenues, but they are not the whole story. Reported sales prices for exported Russian oil, known as Urals, have dropped by twice as much as the global price for Brent crude.The Group of 7 leaders meeting in Japan this week will probably not spend much time on the cap, instead turning to other collective efforts to constrict Russia’s economy and revenues. And the biggest winners from the cap decision will not be at the summit.“The direct beneficiaries are mostly emerging market and lower-income countries that import oil from Russia,” Treasury officials noted in a recent report.The officials were referring to a handful of countries outside the Group of 7 — particularly India and China — that have used the cap as leverage to pay a discount for Russian oil. Neither India nor China joined the formal cap effort, but it is their oil consumers who are seeing the lowest prices from it. More

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    When Will the U.S. Run Out of Cash? The Answer Is Complicated.

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    The federal government is essentially living paycheck to paycheck, making the X-date hard to pin down.In letters to Congress and warnings to business leaders about the catastrophic consequences if the United States defaults on its debt, Treasury Secretary Janet L. Yellen has repeatedly offered an important caveat.She cannot give the exact date when the federal government will run out of cash.The United States reached its statutory $31.4 trillion debt limit on Jan. 19, forcing the Treasury Department — which borrows huge sums of money to pay nation’s bills — to begin using accounting maneuvers known as extraordinary measures to conserve cash and avoid breaching the cap.On Monday, Ms. Yellen reiterated previous warnings that the Treasury Department could deplete its cash reserves by June 1. Still, the exact day when the United States will reach the so-called X-date is nearly impossible to determine.“These estimates are based on currently available data, and federal receipts, outlays and debt could vary from these estimates,” Ms. Yellen has told lawmakers in her letters. “The actual date Treasury exhausts extraordinary measures could be a number of days or weeks later than these estimates.”While Treasury has the most sophisticated cash management system in the world and employs teams of highly trained economists, its coffers are a blur of payments going out and tax revenues coming in. When its cash balance runs painfully low — as was the case on Wednesday, when the Treasury General Account started the day with less than $100 billion — pinpointing the X-date becomes even harder to predict. In many respects, that is because the moment that a default would occur is a moving target.Big bills are coming due.Ms. Yellen has been eyeing early June as a pivotal month since her first warnings to Congress about the debt limit in January. The reason: The federal government spends a lot of money in a short period of time around June 1, and it is impossible to predict exactly how much revenue is going to be coming in and when.In a report published on Thursday, the Bipartisan Policy Center, a think tank that carefully tracks federal spending, estimated that the government would spend $101 billion on June 1. Most of that money — $47 billion — will go toward Medicare, while the rest will be directed to veterans’ benefits, military pay and retirement, civil service retirement and supplemental security income. On June 2, the government has to pay $25 billion in Social Security benefits and another $2 billion for Medicaid.During those two days, the government is projected to spend about $140 billion and bring in only $44 billion in tax revenue, leaving the nation’s coffers operating on fumes.Revenues sputter as refunds flow.One big problem this year is that tax revenues have been coming in at a more tepid pace than anticipated.Severe storms, flooding and mudslides in California, Alabama and Georgia this year prompted the Internal Revenue Service to push the April 18 tax-filing deadlines in dozens of counties to October.Another surprising reason that cash is running lower than some budget experts projected is that the I.R.S. is starting to operate more efficiently. As a result of the $80 billion that the agency received as part of the Inflation Reduction Act last year, it has been able to ramp up hiring and chip away at the backlog of unprocessed tax returns.Because the I.R.S. has been processing returns more quickly, it is also paying out refunds more quickly and draining the amount of available cash.June 15 is a critical day.If Ms. Yellen can find enough coins in Treasury’s couch to pay the bills until June 15, the United States could find itself with a bit of breathing room.That is because June 15 is when third-quarter payments are due from corporations and people who are required to pay their tax bills throughout the year or choose to make payments every three months to avoid having large bills due in April.The Congressional Budget Office said in a report last week that an expected influx of quarterly tax receipts on June 15 and the availability of additional extraordinary measures would probably allow the government to continue financing operations through at least the end of July.The government could receive approximately $80 billion in tax revenue that day. The Bipartisan Policy Center estimates that those funds could be sufficient to keep the federal government afloat until June 30. At that time, Ms. Yellen would also have some additional extraordinary measures at her disposal — a suspension of investments into retirement funds for federal workers — that would allow her to unlock an additional $145 billion and potentially delay a default until well into July.It’s too close to call.The lack of clarity about the X-date has made it difficult for lawmakers to know how much pressure they are under to strike a deal. The government may not know how quickly cash is running out until right before the country faces default.But pressure is still mounting. Congress is likely to take days — if not weeks — to pass legislation to raise the debt ceiling. And even if President Biden and Speaker Kevin McCarthy strike an agreement, there is no guarantee that the House and Senate will easily pass the legislation.The legislative calendar gets increasingly complicated as summer approaches.Mr. McCarthy and Senator Chuck Schumer, Democrat of New York and the majority leader, would need to navigate legislation reflecting that agreement through their respective chambers, and the days left to do so are rapidly dwindling. The House is scheduled to be in session for only six days before the end of the month. The Senate is set for just five and is scheduled to be out of Washington beginning on Monday before the Memorial Day weekend.Mindful that lawmakers are loathe to reschedule their recesses, analysts have been watching the legislative schedule closely as they try to read the debt limit tea leaves. If no deal is signed into law by Memorial Day and Ms. Yellen does not announce that the X-date is delayed, that could raise the likelihood of a short-term suspension of the borrowing cap to give Congress more time to act.“The congressional calendar is king and will dictate urgency and passage dates for a bill, as has historically been the case,” Henrietta Treyz, the director of economic policy at Veda Partners, said in a note to clients this month. More

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    For Biden, Debt Limit Crisis Complicates Trip to Asia

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    Volatility has become the new norm in Washington as the president heads to Japan, where he will reassure world leaders that the debt ceiling showdown will not upend the global economy.President Biden left for Japan on Wednesday for a meeting of the leaders of seven major industrial democracies who get together each year to try to keep the world economy stable.But as it turns out, the major potential threat to global economic stability this year is the United States.When Mr. Biden lands in Hiroshima for the annual Group of 7 summit meeting on Thursday, the United States will be two weeks from a possible default that would jolt not only its own economy but those of the other countries at the table. It will fall to Mr. Biden to reassure his counterparts that he will find a way to avoid that, but they understand it is not solely in his control.The showdown with Republicans over raising the federal debt ceiling has already upended the president’s international diplomacy by forcing a last-minute cancellation of two stops he had planned to make after Japan: Papua New Guinea and Australia. Rather than being the unchallenged commander of the most powerful superpower striding across the world stage, Mr. Biden will be an embattled leader forced to rush home to avert a catastrophe of America’s own making.He was at least bolstered before leaving Washington by signs of progress as both sides emerged from a White House meeting on Tuesday expressing optimism that an agreement was possible. In the preparations leading up to the G7 meeting, officials from the other participating countries have not struck U.S. officials as all that alarmed about the possibility of default, perhaps because they trust Mr. Biden, know that the moment of truth is still a couple weeks away and assume that Washington will get its act together in time.Mr. Biden is set to depart on Wednesday for the G7 meeting in Hiroshima, Japan.How Hwee Young/EPA, via ShutterstockBut that simply underscores how much volatility has become the new norm in Washington. After generations of counting on the United States as the most important stabilizing force in world affairs, allies in recent years have increasingly come to expect a certain level of dysfunction instead. Extended government shutdowns, banking crises, debt ceiling fights and even political violence would once have been unthinkable but have prompted foreign leaders to factor American unpredictability into their calculations.“I think our biggest threat is us,” said Jane Harman, a former Democratic representative from California who later served as the president of the Woodrow Wilson International Center for Scholars. “Our leadership in the world is being eroded by our internal dysfunction. The markets are still betting against our defaulting, and that’s a decent bet. But if we only manage to eke out a short-term extension and the price is onerous budget caps — including on defense — we will be hobbled when Ukraine needs us most and China is building beachheads everywhere.”The White House warned that a default would only embolden America’s adversaries, using the argument against Republicans, whom they blame for playing with fire.“There’s countries like Russia and China that would love nothing more than for us to default so they could point the finger and say, ‘You see, the United States is not a stable, reliable partner,’” said John F. Kirby, a spokesman for the National Security Council.But he sought to play down the effects of the dispute on the G7 meeting, saying that he doubted it would “dominate the discussion” and maintaining that other leaders “don’t need to worry about that part of it.” The president’s counterparts would understand his need to cut short his trip, he said.“They know that our ability to pay our debts is a key part of U.S. credibility and leadership around the world,” Mr. Kirby said. “And so they understand that the president also has to focus on making sure that we don’t default and on having these conversations with congressional leaders.”Even if they understand, though, they see consequences. Mr. Biden’s decision to head home early reinforces questions about American commitment to the Asia-Pacific region and leaves a vacuum that China may exploit, according to analysts. A presidential visit to places like Papua New Guinea, where no U.S. leader has gone before, speaks loudly about diplomatic priorities — as does the failure to follow through.This is not the first time an American president has scrubbed a foreign trip to deal with domestic concerns. President George H.W. Bush canceled a two-week trip to Asia in 1991 to show he was focused on a lagging economy at home, while President Bill Clinton scrapped a trip to Japan during a government shutdown in 1995. President Barack Obama delayed a trip to Indonesia and Australia in 2010 to focus on health care legislation, then skipped an Asia-Pacific summit meeting in 2013 during a government shutdown of his own.The perpetual culture of crisis in Washington, however, has grown only more intense since the arrival of President Donald J. Trump, who threatened to unravel bedrock alliances and embraced longstanding adversaries abroad while disrupting democratic norms and economic conventions at home.Speaker Kevin McCarthy said it was possible that a deal regarding the debt ceiling could materialize in days.Haiyun Jiang/The New York TimesThe debt ceiling showdown between Mr. Biden and Speaker Kevin McCarthy has underscored to the president’s peers that however much he may seek to restore normalcy, U.S. politics has not returned to the steady state of the past — not least because Mr. Trump seeks to reclaim office in next year’s election.World leaders took notice last week during Mr. Trump’s CNN town hall-style interview in which he refused to back Ukraine in its war against Russian invasion and casually endorsed the idea of a default, saying it would not be that damaging and indeed “could be maybe nothing.”That is not how most policymakers and analysts see it.Treasury Secretary Janet L. Yellen said at a meeting of G7 finance ministers and central bankers in Japan last week that a default “would spark a global downturn” and “risk undermining U.S. global economic leadership and raise questions about our ability to defend our national security interests.”Mr. Biden, a veteran of half a century in high office in Washington, has regularly remarked on the uncertainty surrounding America’s place in the world that he discovered when he took office after Mr. Trump’s disruptive four years. “America is back,” he said he would tell foreign counterparts, only to hear, “But for how long?”By contrast to his predecessor, Mr. Biden has conducted a far more conventional foreign policy familiar to world leaders, and foreign officials see him as a more traditional U.S. president. But they also understand that he is presiding over a country whose democracy has been tested and found to be fragile. And they see a fractious politics in Washington that values confrontation over compromise, even at the risk of something that would have once been unimaginable, like a default.“For sure, the U.S. debt ceiling issue will be a topic of conversation and concern at the G7 summit,” Matthew P. Goodman, a senior vice president for economics at the Center for Strategic and International Studies in Washington, said at a briefing about the meeting last week. “I’m sure the other leaders will ask, you know, how serious this risk is. And I assume President Biden will say he’s working on it and doing everything he can to avoid it.”By this point, U.S. partners have become oddly accustomed to the culture that dominates Washington. They have watched the brewing debt ceiling fight with little evident fear.“I don’t think many European governments are very concerned, presumably because these crises come round quite often but never end in disaster,” said Charles Grant, the director of the Centre for European Reform in London. “Cutting short the trip is a bad signal, but there is such good will to Biden in most capitals that they are prepared to cut him some slack.” More

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

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    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 Team to Counter Tech Espionage Unveils Cases Involving China and Russia

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    A new division set up by the government to pursue sanctions evasion and technology espionage announced arrests of individuals with ties to foreign governments.The Biden administration announced arrests and criminal charges on Tuesday in five cases involving sanctions evasion and technology espionage efforts linked to Russia, China and Iran.Two Russian nationals were taken into custody last week under accusations of sending aircraft parts to Russia in violation of sanctions imposed after the invasion of Ukraine. In another case, a former Apple engineer is accused of stealing the company’s autonomous vehicle technology to provide it to a Chinese competitor.The announcements were the work of a recently established “technology strike force,” which aims to protect critical American technology or data from theft by hostile nations. The strike force was set up in February and brings together agents with the Commerce and Justice Departments, as well as the F.B.I. and local attorneys offices.Federal agents are working to trace the global movement of U.S. goods and data, as well as the funds used to pay for them. The effort seeks to crack down on the global networks that are channeling goods and technology through opaque jurisdictions and middlemen to try to circumvent sanctions and technology restrictions imposed by the United States.In another case unveiled Tuesday, a California-based engineer is accused of trying to steal source code for advanced machinery that can be used to make parts for military submarines and aircraft to sell it to several Chinese companies.Two other cases were announced, including charges against China-based agents who were accused of attempting to send materials used in weapons of mass destruction to Iran, according to U.S. officials, and charges involving the alleged provision of advanced technology to Russia that could be repurposed by the Russian military.Matthew G. Olsen, the assistant attorney general of the Justice Department’s national security division, told reporters that the cases showed the U.S. government’s ability “to accelerate investigations and surge our collective resources to defend against these threats.”“Foreign nation states are working hard to acquire our most sensitive technologies,” said Matthew Axelrod, the assistant secretary for export enforcement at the Commerce Department’s Bureau of Industry and Security. “We’re working even harder to stop them.”Oleg Patsulya and Vasilii Besedin, the two Russian nationals who were arrested last week under suspicion of trying to procure millions of dollars of prohibited parts for Russian airlines, were charged with conspiracy to violate the Export Control Reform Act and conspiracy to commit international money laundering. If convicted, they would face up to 20 years in prison for each charge.The Commerce Department issued a temporary denial order Tuesday against the men, which prohibits them from transactions involving any U.S. products for 180 days.The order also applies to a freight forwarder in the Maldives that the men had utilized to route shipments of prohibited products into Russia, as well as a Russian airline, Smartavia, that sought to purchase these products.On Thursday, federal officials seized luxury goods purchased with proceeds of their scheme, a U.S. official said. More

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

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    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