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    Rural Georgia Factory, Flush With Federal Funds, Votes to Unionize

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    Friday’s victory by the United Steelworkers at a factory building electric school buses was a test for Democratic hopes that clean-energy funding from Washington could bolster organized labor.Workers at a rural Georgia factory that builds electric school buses under generous federal subsidies voted to unionize on Friday, handing organized labor and Democrats a surprise victory in their hopes to turn huge new infusions of money from Washington into a union beachhead in the Deep South.The company, Blue Bird in Fort Valley, Ga., may lack the cachet of Amazon or the ubiquity of Starbucks, two other corporations that have attracted union attention. But the 697-to-435 vote by Blue Bird’s workers to join the United Steelworkers was the first significant organizing election at a factory receiving major federal funding under legislation signed by President Biden.“This is just a bellwether for the future, particularly in the South, where working people have been ignored,” Liz Shuler, president of the A.F.L.-C.I.O., said Friday evening after the vote. “We are now in a place where we have the investments coming in and a strategy for lifting up wages and protections for a good high-road future.”The three bills making up that investment include a $1 trillion infrastructure package, a $280 billion measure to rekindle a domestic semiconductor industry and the Inflation Reduction Act, which included $370 billion for clean energy to combat climate change.Each of the bills included language to help unions expand their membership, and Blue Bird’s management, which opposed the union drive, had to contend with the Democrats’ subtle assistance to the Steelworkers.Banners appeared outside the Blue Bird plant in the period leading up to the union vote.Jonathan Weisman/The New York TimesBlue Bird stands to benefit from the new federal funds. Last year, it hailed the $500 million that the Biden administration was providing through the infrastructure bill for the replacement of diesel-powered school buses with zero- and low-emission buses. Georgia school systems alone will get $51.1 million to buy new electric buses, but Blue Bird sells its buses across the country. Still more money will come through the Inflation Reduction Act, another law praised by the company.But that money came with strings attached — strings that subtly tilted the playing field toward the union. Just two weeks ago, for instance, the Environmental Protection Agency, which administers the Clean School Bus Program, pushed a demand on all recipients of federal subsidies to detail the health insurance, paid leave, retirement and other benefits they were offering their workers.They also required the companies to have “committed to remain neutral in any organizing campaign and/or to voluntarily recognize a union based on a show of majority support.” And under the rules of the infrastructure bill, no federal money may to be used to thwart a union election.The Steelworkers union used the rules to its advantage. In late April, it filed multiple unfair labor practice charges against Blue Bird’s management, citing $40 million in rebates the company had received from the E.P.A., which stipulated that those funds could not be used for anti-union activity.“The rules say if workers want a union, you can’t use any money to hire anti-union law firms, or use people to scare workers,” Daniel Flippo, director of the Steelworkers district that covers the Southeast, said before the vote. “I’m convinced Blue Bird has done that.”Politicians also got involved. Georgia’s two Democratic senators and southwestern Georgia’s Democratic House member also subtly nudged the plant’s management, in a union-hostile but politically pivotal state, to at least keep the election fair.“I have been a longtime supporter of the USW and its efforts to improve labor conditions and living standards for workers in Georgia,” the Democratic congressman, Representative Sanford Bishop, wrote of the United Steelworkers in an open letter to Blue Bird workers. “I want to encourage you in your effort to exercise your rights granted by the National Labor Relations Act.”Blue Bird’s management minimized such pressure in its public statements, even as it fought hard to beat back union organizers.“Although we respect and support the right for employees to choose, we do not believe that Blue Bird is better served by injecting a labor union into our relationship with employees,” said Julianne Barclay, a spokeswoman for the company. “During the pending election campaign, we have voiced our opinion to our employees that a union is not in the best interest of the company or our employees.”Friday’s union victory has the labor movement thinking big as the federal money continues to flow, and that could be good for Mr. Biden and other Democrats, especially in the pivotal state of Georgia.“Workers at places like Blue Bird, in many ways, embody the future,” Mr. Flippo said after the vote, adding, “For too long, corporations cynically viewed the South as a place where they could suppress wages and working conditions because they believed they could keep workers from unionizing.”The Blue Bird union shop, 1,400 workers strong, will be one of the biggest in the South, and union leaders said it could be a beachhead as they eyed new electric vehicle suppliers moving in — and potentially the biggest, most difficult targets: foreign electric vehicle makers like Hyundai, Mercedes-Benz and BMW, which have located in Georgia, Alabama and South Carolina in part to avoid unions.“Companies move there for a reason — they want as smooth a path toward crushing unions as possible,” said Steve Smith, a national spokesman for the A.F.L.-C.I.O. “But we have federal money rolling in, a friendly administration and a chance to make inroads like we have never had before.”The Blue Bird plant, which rises suddenly off a rural highway lined with peach and pecan orchards, has long made it a practice to hire less educated workers, some of whom have prison records and most of whom start at $16 or $17 an hour, said Alex Perkins, a main organizer for the United Steelworkers in Georgia.A union was a tough sell for such vulnerable workers against a management that was fiercely opposed, organizers conceded. Coming off the last shift of the day on Thursday, most workers declined to speak on the record. A clutch of about a dozen workers stood on Friday at the Circle K gas station across the street from the plant in the predawn darkness, holding pro-union signs as the first workers arrived to cast ballots under the gaze of National Labor Relations Board monitors.But Cynthia Harden, who has worked at the plant for five years and voted in favor of organizing, did talk about the pressure workers were under to vote against it. Slide shows on the voting process, which showed ballots marked “no,” said that the company could go broke if the union won, and there was a sudden appearance of food trucks at lunch and banners on the perimeter fence reading, “We Love Our Employees!”“They’ve made some changes already, but if the union hadn’t started, nothing would have happened,” she said.The letter that Georgia’s Democratic senators, Raphael Warnock and Jon Ossoff, wrote to Matt Stevenson, Blue Bird’s chief executive and president, was remarkably timid, praising the company for its cooperation and its well-paying jobs before “encouraging all involved, whatever their desired outcome, to make sure that the letter and the spirit of the National Labor Relations Act are followed.”Mr. Perkins fumed at that tone, considering the work that unions had put in to help Mr. Warnock win re-election last year. “I won’t forget it next time,” he said.Both senators declined requests to comment on the election. More

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    U.S. Solar Makers Criticize Biden’s Tax Credits as Too Lax on China

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    U.S.-based manufacturers of solar products say rules issued by the Biden administration on Friday will “cement China’s dominance” over the solar industryBiden administration rules released on Friday that will determine which companies and manufacturers can benefit from new solar industry tax credits are being criticized by U.S.-based makers of solar products, who say the guidelines do not go far enough to try to lure manufacturing back from China.The rules stem from President Biden’s sweeping clean energy bill, which offers a mix of tax credits and other incentives to try and spur the construction of more solar factories in the United States and reduce the country’s reliance on China for clean energy goods needed to mitigate climate change.The Treasury Department, in guidance issued on Friday, said it would offer a 10 percent additional tax credit for facilities assembling solar panels in the United States, even if they import the silicon wafers used to make those panels from foreign countries. Under the Biden administration’s new climate legislation, solar and wind farms can apply for a 30 percent tax credit on the costs of their facilities.Senior administration officials told reporters on Thursday that they were trying to take a balanced approach, one that leaned toward forcing supply chains to return to the United States. But China’s dominance of the global solar industry has created a tricky calculus for the Biden administration, which wants to promote U.S. manufacturing of solar products but also ensure a plentiful supply of low-cost solar panels to reduce carbon emissions.The officials said that the Biden administration would have the leeway to change the rules when American supply chains become stronger.“The domestic content bonus under the Inflation Reduction Act will boost American manufacturing, including in iron and steel, so America’s workers and companies continue to benefit from President Biden’s Investing in America agenda,” Treasury Secretary Janet L. Yellen said in a statement. “These tax credits are key to driving investment and ensuring all Americans share in the growth of the clean energy economy.”Critics said the new rules would not go far enough to give companies incentives to move the solar supply chain out of China.Mike Carr, the executive director of the Solar Energy Manufacturers for America Coalition, which includes solar companies with U.S. operations like Hemlock Semiconductor, Wacker Chemie, Qcells and First Solar, called the move “a missed opportunity to build a domestic solar manufacturing supply chain.”“The simple fact is today’s announcement will likely result in the scaling back of planned investments in the critical areas of solar wafer, ingot, and polysilicon production,” he said in a statement. “China is producing 97 percent of the world’s solar wafers — giving them substantial control over both polysilicon and cell production. We fear that this guidance will cement their dominance over these critical pieces of the solar supply chain.”A four-acre solar rooftop in Los Angeles. The Biden administration wants 100 percent of the nation’s electricity to come from carbon-free energy sources by 2035.Mario Tama/Getty ImagesThe Biden administration has set an ambitious goal of generating 100 percent of the nation’s electricity from carbon-free energy sources by 2035, a goal that may require more than doubling the annual pace of solar installations.The United States still relies heavily on Chinese manufacturers for low-cost solar modules, although many Chinese-owned factories now make these goods in Vietnam, Malaysia and Thailand.China also supplies many of the key components in solar panels, including more than 80 percent of the world’s polysilicon, which most solar panels use to absorb energy from sunlight. And a significant portion of Chinese polysilicon comes from the Xinjiang region, where the U.S. government has banned imports because of concerns over forced labor.Other companies in the solar supply chain, which rely on imported components, were more positive about the Treasury Department’s guidance.Abigail Ross Hopper, the chief executive of the Solar Energy Industries Association, said the guidance was an important step forward that would “spark a flood of investment in American-made clean energy equipment and components.”“The U.S. solar and storage industry strongly supports onshoring a domestic clean energy supply chain, and today’s guidance will supplement the manufacturing renaissance that began when the historic Inflation Reduction Act passed last summer,” she said.Congressional Republicans have already targeted the Biden administration’s climate legislation, saying that it fails to set tough guidelines against manufacturing in China and that it may funnel federal dollars to Chinese-owned companies that have set up in the United States.The Biden administration is also dispensing funding to build up the semiconductor and electric vehicle battery industries. Guidelines for that money include limits on access to so-called foreign entities of concern, like Chinese-owned companies. But the Inflation Reduction Act does not contain guardrails against federal dollars going to the U.S. operations of Chinese solar companies.In a congressional hearing on April 25, Representative Jason Smith, chairman of the House Ways and Means Committee, pointed to the Florida facilities of JinkoSolar, a Chinese-owned manufacturer, as being eligible for federal tax credits.“Work at the plant involves robots placing strings of solar cells — which are largely sourced from China — onto a solar panel base,” a fact sheet released by Mr. Smith said.Mr. Biden has also clashed with domestic solar manufacturers over a separate trade case that would see tariffs imposed on solar products imported from Chinese companies based in Southeast Asia.Mr. Biden’s decision to waive the tariffs for two years angered Republicans and some Democrats in Congress, who said U.S.-based manufacturers deserved more protection. In recent weeks, the House and Senate approved a measure to reverse the president’s decision, which Mr. Biden is expected to veto. More

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

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

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    Biden Taps Philip Jefferson and Adriana Kugler for Top Fed Jobs

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    President Biden announced his plan to nominate Adriana Kugler, an official at the World Bank, for a Fed governor job, while elevating Philip Jefferson to the role of vice chair.WASHINGTON — President Biden on Friday said he would nominate Adriana Kugler for a seat on the Federal Reserve Board and would elevate Philip Jefferson, a current governor, as vice chair of the central bank.If they are confirmed by the Senate, the Fed would get its first Latina board member and its second Black vice chair, a move that could both make the Fed more diverse and build out its leadership team at a challenging economic moment.Mr. Biden chose Ms. Kugler, an economist with a background in labor economics who has Colombian heritage and is the U.S. executive director of the World Bank, to fill the Fed’s only remaining open governor position on its seven-member board. In a corresponding move, he elevated Mr. Jefferson, an economist who was confirmed overwhelmingly to the board when Mr. Biden nominated him to an open governor position, to be the Fed’s vice chair.The New York Times previously reported on the expected nominations.Lael Brainard, who became head of Mr. Biden’s White House National Economic Council earlier this year, was the vice chair of the Fed until February.Because the Fed’s vice chair comes from among its seven governors, Ms. Brainard’s resignation left both a governor seat open and the vice chair role vacant. Ms. Kugler will take the open spot on the board, while Mr. Jefferson, who is already a Fed governor, will be elevated to the leadership position.The Biden administration needed to balance a complicated set of priorities as it filled those open spots at the Fed, the world’s most powerful central bank. The administration is under pressure, especially from Senator Bob Menendez, Democrat of New Jersey, to appoint a Latino or Latina to the Fed Board. And the Fed itself is at an unusually challenging juncture: It is trying to wrestle rapid inflation lower with the most aggressive policy campaign since the 1980s, one that could come at a significant cost the job market.Mr. Biden also announced that he would nominate Lisa Cook, a sitting Fed governor whose term will expire early next year, to another full 14-year term as a member of the board.“These nominees understand that this job is not a partisan one, but one that plays a critical role in pursuing maximum employment, maintaining price stability and supervising many of our nation’s financial institutions,” Mr. Biden said in statement announcing the picks.A Latino person has never served on the Fed board in the central bank’s more than 109-year history, so Ms. Kugler’s nomination would be a first if it ended in confirmation. It would also add an official with considerable experience in labor economics: Ms. Kugler, who was formerly an economist and administrator at Georgetown University, served as chief economist of the Labor Department during the Obama administration from 2011 to 2013.She has worked in the economics departments at the University of Houston and at University Pompeu Fabra in Barcelona, and she has a doctorate from the University of California, Berkeley.Mr. Menendez praised the decision in a statement on Friday, and made clear that he will support the nominees.“I for one will make it my personal mission to help ensure swift confirmations for Jefferson, Cook and Kugler,” he said.Mr. Jefferson, who took office at the Fed last May, is an economist who most recently served as an administrator at Davidson College and has a doctorate in economics from the University of Virginia. During his tenure at the Fed, he has built a reputation as an inquisitive listener with an interest in staff economic research.Mr. Jefferson was born in Washington D.C., in a neighborhood called Kingman Park. During his confirmation hearing to be a Fed governor, he recalled that in his youth, “it was a place where the line between a future of success or struggle was thin.”If confirmed, he would be the second Black person to reach such an elevated position at the Fed, following Roger W. Ferguson Jr., an economist and business executive. More

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

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

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

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

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    Biden Woos Republican Moderates in Debt Ceiling Standoff

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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