Washington () — The United States heads to the brink of a self-imposed economic disaster as the Republican-led House of Representatives refuses to service the country’s debt unless President Joe Biden agrees to current and future spending cuts and further cuts. in social programs.
Unless a commitment is reached to increase the government’s borrowing capacity in a matter of days, the United States could lose its reputation as a stable anchor of the world economy. Millions of people could see their retirement and veterans benefits suspended once the government exhausted its ability to pay its debts due to the debt limit set by Congress.
A US default would reverberate through the financial market, likely triggering a recession that would cause severe job losses and shatter many families’ already fragile sense of economic security.
After a weekend of acrimony between House and White House Republican negotiators, Biden will meet with House Speaker Kevin McCarthy on Monday for crucial talks on how to get the economy out of business. from the precipice The president has just returned to the United States from Japan, where he found himself in the surprising position of being unable to reassure other world leaders that Washington will not throw the world economy into chaos.
The pressure on the meeting is immense, as Treasury Secretary Janet Yellen has warned that the government will not be able to meet its obligations unless Congress raises the debt ceiling by June 1. But serious damage could be done before then, because the mere suggestion that the crisis cannot be resolved could send financial markets into a panic and damage confidence in the solvency of the United States.
Biden has already retracted his position of not negotiating on the debt limit, which must be raised to pay expenses already authorized by Congress and for which he and previous presidents are responsible. His officials say it is irresponsible for the Republican Party to hold the country “hostage” on such a critical issue. Republicans, however, say the government is spending too much money and see the threat of financial calamity as their main weapon of lobbying against Biden.
While Biden was in Japan, the only stop on a longer trip he was forced to cut short, negotiators on both sides appeared to make progress before talks stalled, with each side blaming the other. The president suggested that pro-Donald Trump extremists in the House were willing to sabotage the economy in an attempt to doom his re-election campaign.
“I think there are some MAGA Republicans in the House who know the damage it would do to the economy, and because I’m president, and a president is responsible for everything, Biden would take the blame and that’s the only way to make sure Biden doesn’t be re-elected,” he said in Japan.
McCarthy said Sunday morning that Biden was backtracking due to pressure from within his own party. “So I think he has to get away from the socialist wing of the Democratic Party and represent America,” he told reporters.
Biden and McCarthy will meet this Monday
The rhetoric softened somewhat, however, after Biden and McCarthy spoke as the president flew home on Air Force One. “I think it was a productive call,” McCarthy said, adding that his representatives, Congressmen Garret Graves and Patrick McHenry, were resuming talks with the White House.
The roller coaster of negotiations, suspended talks and accusations of bad faith are part of any spending showdown in Washington. The acrimony is usually higher when the negotiations reach a critical point before reaching an agreement. And both McCarthy and Biden have a political interest in showing members of their own parties that they are being tough on the other party.
But there are reasons to think that this is not like the quarrels between presidents and previous congresses, a factor that makes the current situation so serious.
For starters, there are no guarantees that a Biden-McCarthy deal will make it through Congress. McCarthy has already approved a bill to raise the debt ceiling in exchange for a wish list from Republicans. Even that measure — which had no chance in the Democratic-led Senate — only passed by one vote. Any deal acceptable to Biden would, by definition, be far less attractive to Republicans, raising questions about McCarthy’s ability to pass it.
Given his meager majority in the House, the Californian is one of the weakest presidents of modern times. To get the job in January, he offered multiple concessions to GOP hardliners, including reinstating a rule that any member could call a vote on his removal. That means he could once again be held hostage by the right wing of a party that includes many members who see compromise as defeat.
Biden may not be wrong to say that some Trump supporters are willing to risk economic disaster if it ruins his presidency and helps his predecessor win a second non-consecutive term. Trump fueled these suspicions by suggesting on a forum earlier this month that the US debt default might not be all that bad.
In any case, Republican demands are hardening. The budget proposal the GOP presented over the weekend included at least two items that were not in the original GOP draft: provisions on immigration and additional changes to work requirements for food stamps, said a source with direct knowledge of the matter.
McCarthy earned the support of Republican Senator Bill Cassidy of Louisiana, who told ‘s Jake Tapper on State of the Union on Sunday that “the president has been skyrocketing spending in his first two years in office. Now wants the Republicans to accept that as a new baseline.”
“I think the Republicans and the American people are reasonable in saying, ‘Mr. President, just because you’ve artificially inflated spending for the first two years of your presidency, by the way, giving us all kinds of inflation, to top it off, does that make in the new baseline?
Republicans have every right to try to cut spending: they won the House of Representatives last year, albeit narrowly, on a platform based in part on this issue. But the GOP’s willingness to use the debt ceiling to cut spending at the risk of plunging the country into an economic nightmare is an example of the radicalism of the House majority.
McCarthy could have chosen to seek concessions in the lower-stakes process of the budget talks. The Republican Party has also faced charges of hypocrisy after agreeing to raise the debt ceiling when Republicans were in the White House, especially under the spendthrift Trump.
Yellen on Sunday disputed claims by Republicans that the Biden administration could extend the deadline to raise the debt limit until June 15, saying the likelihood that government finances will last that long is fairly low.
“My assumption is that if the debt ceiling isn’t raised, there will be tough decisions about which bills go unpaid,” Yellen said on NBC’s Meet the Press.
A dangerous accusation game
The dynamic of the confrontation is based on the assumption of each side that the other will pay the highest political price if the economy goes into free fall due to default.
It is doubtful that the GOP’s refusal to compromise with Biden fully reflects the will of the American people. Although they control the House with a minuscule majority—McCarthy can only lose four votes to pass a bill—the Democrats run the Senate (with an even smaller majority) and also hold the White House.
It’s a balance of power that should lead both sides to compromise, but extremist elements in the GOP in the House of Representatives could make it impossible.
How this showdown plays out will be decisive for the power dynamic in Washington, as if Biden relents, the GOP will almost certainly try to get him back on the debt limit before the next election. The showdown will also be vital to Biden’s legacy, as the GOP looks to cut back on some of the president’s previous accomplishments, including his efforts to fight the climate crisis.
Like McCarthy, Biden is also facing political pressure from within his own party after some progressive Democrats expressed fear that he would offer the president too much in any deal. Democrats are especially angry about the efforts of the Republican Party to impose new work requirements for Medicaid and supplemental food benefits for needy families.
Democratic Rep. Summer Lee of Pennsylvania accused Republicans of “cruelty” and told Tapper at State of the Union that the GOP’s proposals would push people further into poverty.
Some Democrats called on Biden to invoke the powers conferred by the 14th Amendment to the Constitution to unilaterally raise the debt ceiling, an obligation reserved by law for Congress. The president said in Japan that he believed he had the authority to do so, but raised questions about whether such a move was possible in the limited time available and could be defended in legal challenges that could go all the way to the Supreme Court.
But in addition to protecting his own legacy, Biden has to be aware of the malaise in his own party. Any final deal with McCarthy will need Democratic support in the Senate. And polls already show limited enthusiasm in the party for his re-election bid, which will depend on a large voter turnout among Democrats in November 2024.
Although the main victims of a default would be millions of Americans, the tense politics of the moment mean that the careers of both Biden and McCarthy could depend on how their confrontation unfolds in the coming days.
Meanwhile, the United States is headed for an economic cataclysm of its own making.
“We’re in a crazy situation,” Sen. Chris Van Hollen, D-Md., said on ABC’s This Week.
