Biden and Republicans fail to reach agreement on debt – 5/9/2023 – Market

US President Joe Biden and top lawmakers failed on Tuesday to break the impasse over raising the country’s $31.4 trillion debt limit, but promised to meet again. three weeks before the country was forced into an unprecedented default.

After about an hour of talks in the Oval Office of the White House, Biden, a Democrat, and Speaker of the US House of Representatives Kevin McCarthy, a Republican, showed no signs of easing their stances, with a default looming on 1 June.

Biden called the meeting “productive” and reported that McCarthy said during the meeting that the US would not default on its debt. “Everyone at the meeting understood the risks of default,” Biden said.

McCarthy highlighted the lack of progress. “I haven’t seen any new moves,” he told reporters after the meeting, complaining that Biden would not agree to talks until time ran out. “That’s not the way to govern,” he said. The White House, he said, “has no plan B.”

But he said the two sides had agreed for their teams to meet this week and for the leaders to meet again on Friday to continue discussions.

Mitch McConnell, the Senate Minority Leader, told reporters there would be no increase in the debt ceiling without a spending cut.

Economists warn that a prolonged default could tip the US economy into a deep recession with rising unemployment, while destabilizing a global financial system built on US bonds. Investors brace for impact.

Biden also said he was considering invoking the Fourteenth Amendment to the US Constitution, but that doing so would require legal action.

In practice, the US president would test the constitutionality of the debt limit. “When we get through this, I’m thinking of taking a look at the months ahead to see what the court would say,” Biden told reporters. “I’ve been considering the 14th Amendment,” but “that would have to be litigated,” she added.

Biden asks lawmakers to raise the federal government’s self-imposed loan limit without conditions. McCarthy said the House won’t pass any deal that doesn’t cut spending to deal with a growing budget deficit and signaled he didn’t see a short-term solution.

Past debt ceiling fights usually ended with a hastily agreed deal in the final hours of negotiations, thus avoiding a default. In 2011, the dispute led to a historic downgrade of the country’s top-notch credit rating. Veterans of that battle warn that the current situation is riskier because political divisions have widened.

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The U.S. Chamber of Commerce, the nation’s largest business association, called on Tuesday for a “fast-track” bipartisan deal on the debt limit, which would also include energy bills that allow for reforms and an agreement on discretionary spending caps.

Few countries in the world have debt ceiling laws, and Washington’s periodic lifting of the debt limit only allows the country to pay for spending that Congress has already authorized.

Biden would agree to a separate discussion on the budget but not tied to the debt ceiling, the White House said.

The start of active trading may, however, calm the nerves of investors who, last week, forced the federal government to pay the highest interest rates in its history for a one-month debt issue.