May 16, 2023 Biden and McCarthy meet to discuss US debt ceiling

House Speaker Kevin McCarthy speaks to reporters outside the West Wing following debt limit talks with President Joe Biden at the White House on May 9, 2023 in Washington, D.C.

House Speaker Kevin McCarthy has departed Capitol Hill for his meeting at the White House with President Joe Biden and congressional leaders on the debt ceiling.

McCarthy said this was his message for Biden ahead of the meeting:

Earlier Tuesday, the speaker told House Republicans in a closed-door meeting that talks could be hitting a rocky period, according to an attendee. McCarthy urged his caucus to stick together and insisted that the White House won’t get a “clean debt deal” – something Biden has asked to maintain alongside separate negotiations about the budget.

John Kirby, NSC Coordinator for Strategic Communications, answers questions during the daily press briefing at the White House on May 16, 2023 in Washington, D.C.

The US administration is currently “reevaluating” President Joe Biden’s upcoming foreign trip stops to Papua New Guinea and Australia, White House official John Kirby said Tuesday, but there are no plans for Biden to cancel or change his upcoming trip to Japan.

“What I can speak to is the G7 and going to Hiroshima. The president is looking forward to that. We are taking a look at the rest of the trip,” said Kirby, who serves as National Security Council coordinator for strategic communications.

“There’s not been a cancellation as of yet, but that could happen. We’ll see where it goes,” Kirby told CNN’s Jeremy Diamond. 

Asked what message canceling a trip to Papua New Guinea and Australia would send in the region, Kirby said, “Modifying an overseas to deal with this particular issue, an issue which is central to our international standing around the world, that’s the message. That we understand how important it is that the United States not only say we are — but prove we are a reliable, stable, strong partner for our allies and partners around the world.” 

More background: Biden has publicly acknowledged the trip may be scrapped as negotiations on raising the nation’s borrowing limit in order to avert a historic default slog forward with congressional Republicans, an effort he called the “single most important thing” on his agenda.

Privately, Biden has told his team skipping this week’s Group of 7 summit in Japan should be a last-resort option only and could send the wrong signal — both to his Republican interlocutors and to foreign allies to whom he has repeatedly insisted “America is back.”

President Joe Biden hosts debt limit talks with House Speaker Kevin McCarthy and other Congressional leaders in the Oval Office at the White House on May 9, 2023 in Washington, D.C.

President Joe Biden’s meeting Tuesday with House Speaker Kevin McCarthy and other congressional leaders was originally scheduled for last week, but both sides decided to postpone in order to give the staff-level talks space to proceed.

Ahead of the White House meeting, Senate Minority Leader Mitch McConnell criticized Biden for only scheduling two meetings with McCarthy and other congressional leaders in recent months as the pressure for resolving the debt ceiling crisis has increased.

Senate Majority Leader Chuck Schumer has tried to drive home the point that Democrats see any possible agreement on spending cuts as a separate negotiation from the debt ceiling talks, which he insists must be increased without conditions.

“The talks are separate but simultaneous to our responsibility to avoid default,” Schumer said, adding, “Democrats welcome the debate about this year’s budget. For decades, both parties have regularly worked out their differences about spending and revenues throughout the appropriations process. That’s what’s happening right now, while we separately but simultaneously work to avoid default.”

Aides meeting at the staff level have been working to identify issues with the highest potential for progress ahead of Tuesday’s meeting in the Oval Office. That includes limits on federal spending, clawing back some unspent pandemic aid and changes to permitting rules for domestic energy production.

It also includes the potential for stricter work requirements for some government aid programs, something Republicans have proposed in the discussions.

Biden sounded guardedly open to such a provision Sunday.

“I voted for tougher aid programs (that are) in the law now, but for Medicaid, it’s a different story,” he said. “And so I’m waiting to hear what their exact proposal is.”

Other Democrats have balked at the idea of bolstering work requirements.

House Democratic Leader Hakeem Jeffries has told his colleagues he won’t accept new work requirements for social safety net programs, according to a person familiar with the matter. And Senate Majority Whip Dick Durbin said it’s “ridiculous” that work requirements are at the center of debt ceiling negotiations.

McCarthy, however, has said the issue is a red line.

What other lawmakers are saying: House Majority Leader Steve Scalise on Tuesday acknowledged that there is a chance the bill House Republicans passed to raise the nation’s debt ceiling will not be the final product if negotiations yield a deal both sides can agree to.

But he also questioned how seriously Democrats are taking negotiations, saying he hopes Biden comes into the meeting and either says he supports the House GOP plan or has specific proposals as a counteroffer.

Louisiana Republican Rep. Garret Graves, McCarthy’s top confidant on the debt ceiling, told CNN’s Manu Raju that “there’s still a lot of distance” between the House Republicans and the White House on the debt limit.

Jeffries has indicated that he believes a deal could include a debt limit increase through 2024 and changes to permitting laws to ease the approval of energy projects. He also thinks there could be some caps on discretionary spending and some Covid funds could be reclaimed.

Shalanda Young, the director of the Office of Management and Budget, outlined the impact of proposed Republican spending cuts in a new memo Tuesday, warning that if the GOP preserves funding for the Departments of Defense, Veterans Affairs and Homeland Security as they’ve suggested, it could lead to a 30% cut in spending for other federal agencies

Treasury Secretary Janet Yellen arrives for a news conference in the Cash Room at the Treasury Department on April 11 in Washington, DC. 

It’s still likely that the US could default on its obligations early next month – possibly as soon as June 1 – if Congress doesn’t act, Treasury Secretary Janet Yellen reiterated Monday.

The looming deadline is keeping the pressure high on House Republicans and the White House to bridge their differences and address the debt ceiling in the coming days. President Joe Biden is set to meet again on Tuesday with House Speaker Kevin McCarthy and other top congressional leaders.

Still, the actual date could be a number of days or weeks later, depending on how much revenue the federal government collects and how much it has to pay out in coming weeks, Yellen said. She will update Congress next week as more information becomes available.

Yellen’s missive comes two weeks after she first warned that the so-called X-date, when the US would default, could come as soon as June 1. That accelerated timetable sparked a meeting last week between Biden and the top four congressional leaders after months of talks being at a standstill.

Several forecasters had thought that Treasury would be able to continue paying the bills using cash and “extraordinary measures” until later in the summer. But weak tax collections this year pushed up the date.

Yellen once again urged Congress to act as soon as possible, noting that Treasury’s borrowing costs have increased substantially for securities maturing in early June.

“We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States,” she wrote.

The Congressional Budget Office last week said there is a “significant risk” that the federal government will no longer be able to pay all its obligations in the first two weeks of June if the debt limit remains unchanged.

Senator John Thune (R-SD) speaks during a press conference calling on President Joe Biden to negotiate with Republicans in order to make a deal on raising the debt ceiling on Capitol Hill on May 3, 2023 in Washington, D.C.

Senate Minority Whip John Thune said “times wasting” as he lamented a lack of movement in the debt ceiling and spending reduction costs between the White House and Republicans and Democrats on Capitol Hill.

He added, “You all know how long it takes to transact some of this stuff through the House and the Senate. If we really are working on a June 1 deadline, then things need to start happening fairly quickly here.” 

Thune said Democrats “don’t seem to have a sense of urgency” and speculated that they may think the fast-approaching June 1 deadline could slide into July or August if tax receipts pick up that give the Treasury Department more money to spend.  

Thune said the optics of not having a deal by the end of this week — as House Speaker Kevin McCarthy has said must happen in order to get the bill through both chambers before the current deadline — would be bad as the “stakes get really high.” 

Thune reiterated he does not believe there would be enough support to pass a short-term extension of the debt limit if an agreement is not reached, and said members will be prepared to return to Washington from their recesses next week if they need to vote on an agreement. 

Office of Management and Budget Director Shalanda Young responds to questions during a House Committee on the Budget hearing The Presidents Fiscal Year 2023 Budget in the Canon House Office Building on March 29, 2022 in Washington, DC.

Shalanda Young, the director of the Office of Management and Budget, outlined the impact of proposed Republican spending cuts in a new memo, warning that funding for other federal agencies could be cut by 30% of the GOP preserved funding for the Department of Defense, Veterans Affairs, and Homeland Security.

The memo marks the White House’s latest effort to highlight the impact of spending cuts proposed by Republicans as the debt ceiling standoff continues with Biden and House Speaker Kevin McCarthy set to meet again today. It also comes as House Republicans are set to soon begin the appropriations markup process.

“House Republicans have tried to make deep cuts to discretionary funding a centerpiece of their demands in exchange for doing their Constitutional duty of avoiding default,” she writes. “The bill House Republicans passed last month is vague by design and does not explain how their proposed cuts would be dispersed throughout appropriations bills—leaving the American people to wonder which programs will be on the chopping block.”

Young writes that Republican have pledged to return spending to FY22 levels and “the simplest way to make that math work across all 12 appropriations bills would be to cut them all by 9 percent, including the military, veterans’ medical care, border security and more.” But if the GOP preserves or increases funding for Defense, Veterans Affairs and Homeland Security, the cuts across remaining agencies jumps to 30%, she writes. 

“House Republicans can do this math as well as anyone. They are absolutely aware of these very calculations,” Young writes.

President Joe Biden boards Marine One as he departs from the Wall St. Landing Zone en route to John F. Kennedy International Airport in New York City on May 10.

As the stalemate over addressing the debt ceiling continues and the threat of default looms larger, President Joe Biden has resurfaced the controversial idea of using the 14th Amendment as a way to lift the borrowing cap without Congress.

How could a 145-year-old change to the US Constitution that gave citizenship to former slaves serve as a path out of the debt ceiling drama? Government officials and legal authorities are divided over whether it does.

Some experts, including Laurence H. Tribe of Harvard Law School, point to Section 4 of the amendment as the basis of their argument that the president has the authority to order the nation’s debts be paid regardless of the debt limit Congress put in place more than 100 years ago.

Lawmakers who crafted the amendment are very strongly saying that once the US borrows money, it has to pay it back, said Garrett Epps, a constitutional law professor at the University of Oregon. The section was designed to remove debt payments from potential post-war partisan bickering between the North and South, but it also applies to the wide divide between Democrats and Republicans today.

“The federal government is required to pay the debt on time in full,” said Epps, who has long supported using this option in the event Congress refuses to raise the debt ceiling.

Were Biden to invoke the 14th Amendment to allow Treasury to borrow above the debt ceiling to pay the nation’s obligations, it would almost certainly prompt a constitutional crisis and swift legal action. The president acknowledged as much, saying that he doesn’t think it would solve the current problem.

“I’ll be very blunt with you, when we get by this, I’m thinking about taking a look at, months down the road, as to see whether what the court would say about whether or not it does work,” Biden said Tuesday after meeting with congressional leaders about the impasse.

Treasury Secretary Janet Yellen, who has warned lawmakers that the government may default on its obligations as soon as June 1, also poured cold water on the idea.

“There would clearly be litigation around that. It’s not a short-run solution,” Yellen said at a news conference earlier this month when asked about the 14th Amendment. “It’s legally questionable whether or not that’s a viable strategy.”

Keep reading here.

Treasury Secretary Janet Yellen leaves a Financial Stability Oversight Council meeting at the Department of the Treasury in Washington, DC, on April 21.

With time running out to reach a deal on the debt ceiling, Treasury Secretary Janet Yellen plans to meet with bank CEOs on Thursday afternoon in Washington, DC, sources tell CNN.

JPMorgan Chase CEO Jamie Dimon and Citigroup CEO Jane Fraser plan to attend the Yellen meeting, which will very likely include a focus on the debt ceiling as well as the banking crisis, people familiar with the matter told CNN.

The huddle with bank executives is part of an annual meeting held by the Bank Policy Institute, a financial trade group that represents dozens of banks including Goldman Sachs, Wells Fargo and Citigroup.

The Treasury Department previously confirmed that Yellen plans to meet this week with the Bank Policy Institute’s board of directors, which is chaired by Dimon and includes the CEOs of BNY Mellon, Citigroup and Truist.

Dimon has been outspoken on the debt ceiling, warning last week in a Bloomberg interview that a default would be “potentially catastrophic” and risks setting off “panic” in financial markets.

As the White House and Republican leaders struggle to reach a deal on the debt ceiling, Yellen has stepped up her warnings about the economic stakes.

Yellen has also been calling CEOs and business leaders to discuss the consequences of brinksmanship around the debt ceiling, CNN previously reported.

The debt ceiling is not necessarily the focus of the meeting, which will also include regional bank CEOs at a time when that industry is in turmoil. The banking crisis and the government’s response to this moment of stress is also likely to be discussed at Thursday’s meeting, a person familiar with the matter tells CNN.

Yellen is also likely not the only figure from Washington who will speak before the bank CEOs this week. Previous meetings have featured a range of lawmakers and regulators.

As the date that the US could default on its obligations grows closer, the Treasury Department must prepare for an unprecedented situation – figuring out which bills to pay with the money it has on hand if Congress doesn’t act.

One option that Treasury officials have seriously contemplated in past debt ceiling dramas is prioritizing payments, which would entail satisfying certain bills before others. Among the highest priorities would be paying interest and principal on Treasury securities, according to a transcript of a Federal Reserve’s Federal Open Market Committee call during the 2011 debt ceiling crisis.

Treasury has never been forced to implement any contingency plans because lawmakers always addressed the borrowing cap in time. But the threat of default is now looming large – as soon as June 1 – while President Joe Biden and House Republicans remain in an impasse.

Some Republicans lawmakers are pushing payment prioritization as a way to minimize the fallout from a default, an option the party has supported in the past. But experts say it would be risky on many levels.

For one, it would not avoid the consequences of a default.

“Prioritization is effectively a default by just another name,” Treasury Secretary Janet Yellen told senators at a committee hearing in March. “It’s simply a recipe for economic and financial catastrophe to think we can pay some of our bills and not all of them.”

Read more here.

President Joe Biden warned that if the US defaults on its debt “our economy would fall into recession and our nation’s global reputation would be damaged.”  

Biden is scheduled to meet with House Speaker Kevin McCarthy at the White House later Tuesday to discuss the debt limit, even as the California Republican has signaled the two sides are still far from a deal.

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