May 22, 2023 Latest on US debt ceiling negotiations

Rep. Ken Buck speaks at the Heritage Foundation in Washington, DC, on January 11.

Republican Rep. Ken Buck told CNN that he and his GOP colleagues aren’t in a panic over a potential government default – and they believe a deal to raise the nation’s borrowing cap will come together in the 11th hour.

Buck added that, while he doesn’t think the GOP conference is overly concerned that House Speaker Kevin McCarthy and President Joe Biden won’t be able to reach a deal before the June 1 deadline of a potential default, “there is a sense that we may not have the same Memorial Day Weekend that we thought we would.”

Buck said he thinks McCarthy has done a fine job during negotiations, adding, “I don’t think we’re in a worse position now than we were three weeks ago. So I think that’s good for Republicans. Not to get blamed for all of this right now is good.”

Leading House conservatives warned Speaker Kevin McCarthy against giving in to the White House in debt limit negotiations, a sign of the challenges he faces in winning support from his right flank over any deal he cuts with President Joe Biden. 

Members of the hard-right House Freedom Caucus demanded that McCarthy stop negotiating with Biden and instead push for the Senate to pass the GOP bill that passed the House last month.

Several members told CNN that McCarthy must not accept a deal that rolls back their proposal. And they warned McCarthy against putting a bill on the floor that could lose a majority of House Republicans and win the support of most Democrats.

Perry added: “What we’re not fine with is them just complaining about what we passed, having brought nothing to the table, and then demanding that we take less when they haven’t offered a thing. They have offered nothing to solve this.”

Virginia Rep. Bob Good, another member of the House Freedom Caucus, said the Senate needs to pass the House bill.

Rep. Byron Donalds, another member of the bloc of conservatives, told CNN “yes” it would be problematic if a majority of House Republicans opposed a debt limit bill and McCarthy had to rely on Democrats.

“If the majority of the majority is not happy, would Nancy Pelosi ever do that? Nope,” he said.

House Democratic leaders plan to begin reaching out to “a handful” of House Republicans about signing onto a discharge petition that can be used as a vehicle to bypass House GOP leadership and force a vote to raise the debt ceiling. 

House Minority Whip Katherine Clark added that Democratic leadership will “be reaching out and saying to a handful of our colleagues: ‘Come join us. Come fight for the American people.’”

Some context: Earlier this month, Jeffries announced that his party had taken a key procedural step enabling House Democrats to bring up a discharge petition.

A discharge petition can be used to force a floor vote, but only if a majority of House members sign on in support. It’s difficult for discharge petitions to succeed because of the high threshold that must be cleared.

Rep. Patrick McHenry (R-NC), left, and House Speaker Kevin McCarthy (R-CA) talk to reporters outside the West Wing after meeting with President Joe Biden in the Oval Office of the White House on May 22.

North Carolina Rep. Patrick McHenry, who has been a chief negotiator in the debt ceiling negotiations on behalf of House Speaker Kevin McCarthy, described the talks on the debt ceiling as challenging.

House Minority Leader Hakeem Jeffries (D-NY) speaks to members of the media following a meeting on the debt limit with President Joe Biden at the White House in Washington, DC, on May 16.

House Democratic Leader Hakeem Jeffries sounded the alarm on the state of the debt limit negotiations Monday evening, contending they are moving in the wrong direction, a marked difference from Speaker Kevin McCarthy’s tone following his meeting with President Joe Biden.

Jeffries’ position is critical because McCarthy will almost certainly need House Democratic support to pass any deal cut with the White House. 

At a hastily called news conference on the steps of the Capitol, the New York Democrat repeatedly referred to the GOP as “extreme MAGA Republicans” who are holding “unreasonable” positions and abusing the power of their narrow majority.

In particular, Jeffries attacked the GOP for rejecting a White House compromise: To freeze domestic spending at the current levels. Republicans instead want to roll back spending to previous years’ levels – and write into law that spending would be capped for several years.

Jeffries repeatedly refused to say if House Democrats would accept a spending cut as McCarthy has demanded.

He also attacked Republicans for insisting on work requirements for social safety net programs, seeking provisions to ease the permitting of energy projects and pushing for more border security as part of a deal, as well as their push to roll back some of the provisions in the Inflation Reduction Act that Democrats passed last Congress.

House Speaker Kevin McCarthy said his meeting with President Joe Biden was “more productive than the other meetings” and that staff will meet “through the night to get a deal together.”

Despite the ever-tightening deadline toward default, McCarthy said again that there are no concrete agreements yet, but still counted the meeting as productive.

“We literally talked about where we are having disagreements and ideas. So to me, that’s productive, not progress, but productive,” he said. But when pressed why he would make staffs stay all night to work if there is no agreement, he expressed optimism that a final deal can still happen.

“I don’t think we would agree to talks if we saw it wasn’t productive, and that we couldn’t come to an agreement. I actually believe at the end of the day, we can come to an agreement. So that’s why we’re together, why, why it was productive today.”

President Joe Biden said the meeting Monday with House Speaker Kevin McCarthy on raising the debt ceiling was “productive,” while acknowledging that areas of disagreement persist.

House Speaker Kevin McCarthy (R-CA) speaks to the media as he leaves a meeting on the debt ceiling with President Joe Biden at the White House in Washington, DC, on May 22.

House Speaker Kevin McCarthy said he will not waive the House’s three-day rule amid ongoing debt ceiling talks Monday, despite negotiations coming closer and closer to a potential date of default.

The three-day rule requires that legislation be posted for at least three days to allow House members to study it before it can be voted on.

“No, I’m not going to waive the three-day rule because you have the three-day rule for a reason,” McCarthy said after his meeting with President Joe Biden at the White House. “You lend your voice to your elected officials. You want to make sure they have their voice.”

McCarthy then proceeded to criticize former House Speaker Nancy Pelosi for previously moving legislation so quickly that “nobody could read the bill.”

Why this matters: Time is running short to raise the nation’s borrowing limit and the US could default as soon as June 1, the Treasury Department has warned.

If and when a deal is reached, there will still be major challenges ahead to successfully pass it in the House and Senate. Legislative text will need to be written, which can be arduous and complicated work as lawmakers and staff dive into nitty-gritty policy details – and can often lead to further issues over the fine print.

Then leaders from both parties will need to wrangle the votes to pass a bill, no small task with narrow majorities in both chambers.

House Speaker Kevin McCarthy (R-CA) speaks during a meeting on the debt ceiling with President Joe Biden in the Oval Office of the White House in Washington, DC, on May 22.

No debt ceiling agreement was reached following Monday’s meeting with President Joe Biden at the White House, House Speaker Kevin McCarthy told reporters.

However, he called the meeting productive.

The speaker also noted, “I think the tone tonight was better than any other time we’ve had discussions.”

Pressed by CNN’s Jeremy Diamond, the speaker said that raising revenue through taxes, as Biden suggested during the Oval Office media availability, was not something Republicans would be willing to consider.

Top progressives in the House are warning of consequences for the White House from their caucus if President Joe Biden makes certain cuts central to their agenda.

Congressional Progressive Caucus Chair Pramila Jayapal said that there would be “a huge backlash” if Biden cuts a “bad deal” with Speaker Kevin McCarthy. 

“I think there would be a huge backlash from our entire House Democratic Caucus, certainly the progressives, but also in the streets,” she said. “I mean, I think that it’s important that we don’t take steps back from the very strong agenda that the president himself shepherded and led over the last two years.” 

Jayapal warned Biden against including spending cuts, permitting reform, and work requirements for certain social safety net programs. 

Rep. Alexandria Ocasio-Cortez said that if Biden agrees to rolling back domestic spending and adding work requirements to some social safety net programs “it’s going to be a problem.” 

“We do not legislate through the debt ceiling for this very reason,” she said, adding that the backlash on the White House for such a deal would be “significant.” 

“We need to really make clear that what Kevin McCarthy is asking is for veterans and single moms to pay for tax cuts on yachts and private jets. And that is not fair,” said Ocasio-Cortez. 

President Joe Biden speaks during a meeting on the debt ceiling with House Speaker Kevin McCarthy in the Oval Office of the White House in Washington, DC, on May 22.

President Joe Biden said he and House Speaker Kevin McCarthy are “optimistic we may be able to make some progress” on a deal to avoid a default on the nation’s debt.

The two leaders were meeting in the Oval Office on Monday evening to discuss raising the debt ceiling, while still acknowledging significant distance between the two sides.

“We both talked about the need for bipartisan agreement. We have to be in a position where we can sell it to our constituencies,” Biden said. “We’re pretty well divided in the House, almost down the middle, and it’s not that different in the Senate, so we’ve got to get something we can sell to both sides.”

The president said that the areas of disagreement remain are issues over how to address the nation’s deficit, and whether the federal government should raise revenue through taxes to do so.

For his part, McCarthy praised Biden for what he said was “a very productive conversation,” on Sunday as Biden returned from the G7 summit in Hiroshima.

“We do have disagreements,” McCarthy said. “I think we, on a 50-year average, we’re having more revenue than any time coming in, but I think we both agree that we need to change the trajectory, that our debt is too large, and I think at the end of the day, we can find common ground.” 

Pressed by a reporter on if cutting overall spending would address the areas of disagreement over the deficit, Biden said, “Not alone, not that alone.”

House Speaker Kevin McCarthy of Calif., speaks as he meets with President Joe Biden to discuss the debt limit in the Oval Office of the White House, Monday, May 22, in Washington.

President Joe Biden and House Speaker Kevin McCarthy are meeting at the White House as the deadline to avoid a US debt default looms.

Ahead of the meeting, McCarthy warned that the White House and House GOP must get a deal this week. Treasury Secretary Janet Yellen is reiterating that tight timeline, writing to McCarthy on Monday that it is “highly likely” that the agency will not be able to pay all of its bills in full and on time as soon as June 1.

Where things left off: Negotiations hit a snag and were put on pause Friday. Representatives of each side spent most of the next two days criticizing the other while defending their own positions. Biden and McCarthy did speak on the phone as the president was aboard Air Force One, heading back to Washington after a shortened trip to Japan. 

House Republicans are seeking spending cuts in the federal budget in exchange for their support to raise the debt ceiling. On Sunday, Biden acknowledged “significant” disagreement with Republicans, insisting that while he’s willing to reduce spending, tax “revenue is not off the table” as part of the deal.

Jerome Powell, chairman of the US Federal Reserve, during a Fed Listens event in Washington, D.C., on Friday, Sept. 23, 2022.

Federal Reserve Chair Jerome Powell plans to speak at the New Democrat Coalition’s member lunch on Tuesday, a person familiar with the matter told CNN.

The meeting, first reported by Axios, comes as leaders in Washington scramble to reach a deal to raise the debt ceiling and as the Fed deliberates pausing interest rate hikes.

During his 12:30 p.m. ET meeting with the coalition in the House, Powell is expected to discuss the debt ceiling as well as high inflation and rising interest rates, the source said.

Chaired by Rep. Annie Kuster, the New Democrat Coalition describes itself as a group of nearly 100 House Democrats who are “committed to pro-economic growth, pro-innovation and fiscally responsible policies.”

The Federal Reserve did not respond to a request for comment.

Rep. Kevin Hern leaves the House Republicans' caucus meeting at the Capitol Hill Club in Washington on Wednesday, May 10.

Rep. Kevin Hern, who chairs the Republican Study Committee, one of the largest policy caucuses in the House conference, would not say if members will support any deal that Speaker Kevin McCarthy cuts with the White House.

Pressed if a deal could pass through the House before June 1, after Treasury Secretary Janet Yellen reiterated in a letter that it is the likely X-date for default, Hern noted that “at this juncture, we would all have to come back early,” from their scheduled Memorial Day recess next week, “and we’re all perfectly OK with that on the House side.”

He criticized Yellen for not declaring unequivocally that June 1 is the X-date. “If it’s the first, then she needs to quit using language like ‘as soon as the first’ or ‘if we get to the 15 we can go to the end of the month,’ or ‘maybe it’s the first to the 15th.’ She needs to define that.”

Hern accused Democrats of trying “to jam us politically” by not raising the debt ceiling in December, when they still controlled the chamber, and then refusing to negotiate earlier this year. 

Treasury Secretary Janet Yellen listens during a signing ceremony for the Indonesia Infrastructure and Finance Compact, at the International Monetary Fund (IMF) headquarters in Washington, DC, on April 13.

Treasury Secretary Janet Yellen reiterated her warning to Congress that the nation could default on its debt obligations within a week’s time.

It is “highly likely” that the agency will not be able to pay all of its bills in full and on time as soon as June 1, Yellen wrote in a letter to House Speaker Kevin McCarthy on Monday.

People walk along Wall Street outside of the New York Stock Exchange on May 03.

If the United States defaults on its debt, it would be catastrophic for the economy. Millions of jobs would be impacted, the cost of borrowing money would skyrocket and government benefits many people rely wouldn’t be sent on time.

Markets have been mostly indifferent to the debt ceiling since it was breached in January. That is bound to change as the default date, also known as the X-date, approaches.

President Joe Biden and House Speaker Kevin McCarthy are set to meet for more talks on Monday afternoon after a weekend with little progress to avoid the nation’s first default.

If lawmakers can’t reach an agreement by the last week of this month, it could get very ugly for markets.

The S&P 500 fell by more than 16% over the span of five weeks in 2011 when the United States narrowly avoided a default, which led to a downgrade of the nation’s debt. But two months after the downgrade, the S&P 500 recovered those losses and ended the year virtually unchanged.

Even if a deal isn’t reached in time and the United States defaults, it’s unlikely to go unresolved for a long stretch of time, experts told CNN. And when it does get resolved, it’s quite possible there will be a “relief rally,” said Callie Cox, eToro US investment analyst.

But there could be a correction period immediately following a deal as the Treasury replenishes the cash it burned through when it couldn’t borrow money, said Michael Reynolds, vice president of investment strategy at Glenmede.

“We have so many other pressures weighing on the economy,” she said. The US economy has spent the past year defying recession forecasts, but its luck could run out later this year, according to a new survey of business economists. Many big-box retailers’ earnings reports indicated that consumers are cutting back on non-essential purchases, a possible sign of a looming recession.

Speaker of the House Kevin McCarthy speaks to reporters as he stands with Congressional Republicans from both the House and Senate during an event addressing debt ceiling negotiations with President Joe Biden outside the Capitol in Washington, DC, on May 17.

House Speaker Kevin McCarthy said Monday that the White House and House Republicans need to get a deal this week in order to avoid the nation’s first-ever default. 

McCarthy is scheduled to meet with President Joe Biden later today at 5:30 p.m. ET. Treasury Secretary Janet Yellen’s “hard deadline” for the US to raise the debt ceiling. 

McCarthy defended the demands Republicans are making now on the debt ceiling, as he was pressed over why they didn’t make those spending cuts when Donald Trump was President. 

“The outcry was the speaker was different. The speaker was Nancy Pelosi,” he said.

McCarthy downplayed the possibility of a revolt among the right flank over any deal he cuts with the White House, but he didn’t say he would only put a bill on the floor if it got a majority of Republican support. Instead, he said, “I firmly believe what we’re negotiating right now, a majority of Republicans will see that it is a right place to put us on a right path.”

Where things stand: Pressed if Biden has agreed to the spending levels that Republicans have been pushing for, McCarthy replied, “Nothing is agreed to. We’ve had very good discussions, very professional going through. I have the highest respect for the individuals he has down here working on it.” 

He would not say if work requirements for certain social safety net programs were a red line for him, but defended Republican demands to include them, saying, “every study has shown it helps people.”

“There is a number of places we’ve been discussing, a number of places the president discussed. That’s why we’re going to get together, and we’re not going to cut the deal here, but we’re going to work together, solve this problem and make America stronger,” he said.

A trader on the floor at the New York Stock Exchange (NYSE) in New York during the opening bell on May 22.

Wall Street is taking a no-worries attitude about the ticking time bomb in Washington that threatens to blow up the world economy. That might be a problem.

Debt ceiling-inspired selloffs have been almost nonexistent. The Nasdaq is still up by a staggering 22% on the year. And CNN’s Fear and Greed Index of market sentiment is nearing “extreme greed” mode.

Perhaps this indifference is because investors have seen this drama before. They know how it ends: with politicians waiting until the last minute before giving in and finally raising the debt ceiling before disaster strikes.

No one wants to see markets panic, needlessly shrinking the 401(k) plans, nest eggs and college savings plans of millions of Americans. Unfortunately, there is a growing sense that a bit of market mayhem might be necessary.

On Friday, it looked like the White House and Republicans were getting closer to a deal on the debt ceiling before talks unexpectedly broke down.

But even news of that setback was greeted with a collective shrug on Wall Street. Stocks retreated from their highs but the Dow ended the day with a loss of just 109 points, or 0.3%. That’s not exactly going to get people to call their lawmakers.

In some ways, the calm mood in markets is acting like a feedback loop. Investors are betting it’ll all get taken care of. Lawmakers are in no rush because the markets are not freaking out. Rinse and repeat.

“Both political parties may need to see incremental market turmoil before settling on an agreement,” said Nicholas Colas, co-founder of DataTrek Research.

Read more about this here.

House Speaker Kevin McCarthy reiterated to reporters Monday that decisions regarding raising the debt ceiling have to start being made to get a deal worked out before June 1, which is Treasury Secretary Janet Yellen’s “hard deadline” for the US to raise the nation’s borrowing limit.

“We don’t like governing by deadline,” McCarthy said. Adding that the meetings, so far, have been “professional and productive.”

The optimistic tone comes after negotiations hit a snag and were put on pause Friday, and representatives of each side spent most of the next two days criticizing the other while defending their own positions.

McCarthy also said that he has been clear with President Joe Biden from the beginning about Republican priorities. “We’re not going to raise taxes. We’re going to spend less money than we spent this year,” he said.

McCarthy also said that he believes that a majority of Republicans will support a negotiated deal. “I firmly believe what we’re negotiating right now, a majority of Republicans will see that it is a right place to put us on a right path,” he said.

McCarthy said that cutting defense spending is not on the table.

“I look at what’s happening in the world today. Look where the president just went. The G7 all focused on China. Look what the president has done with the funding, what we have voted for Ukraine. Look at our weaponry we had shipped a lot to Ukraine we’ve got to replace. I don’t think you should put America in jeopardy. So, no,” he said.

He also suggested that the House could give up their planned Memorial Day recess if a deal isn’t reached. 

“Oh yeah. We’re going to stay and do our job,” he said. 

McCarthy reiterated that currently “nothing is agreed to” but there have been “good discussions” between negotiators. The top House Republican warned something has to get done “this week” to move through Congress in time. He said “it is still possible” to make the June 1 date.

Hear the exchange:

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03:08 • Source: CNN

The White House and congressional Republicans have yet to reach a debt ceiling deal, and the possibility of a US default looms on the horizon.

Business owners, along with the rest of the country, are in wait-and-see mode, bracing for a possible recession and job losses in the event of a prolonged default.

While some still think a default is unlikely, the nonpartisan Congressional Budget Office (CBO) said earlier this month that there is a “significant risk” the federal government won’t be able to pay all of its obligations in the first two weeks of June. Treasury Secretary Janet Yellen warned that could happen as soon as June 1.

“We all hope that we don’t default. But hope is not a plan,” said Joshua White, assistant professor of finance at Vanderbilt’s school of management. “Companies need to have a plan.”

But there are some things businesses can do to prepare, according to experts:

Read more about this here.