America is heading to the brink of self-imposed economic disaster, with the Republican-led House refusing to pay the country’s debts unless President Joe Biden agrees to current and future spending cuts and new restrictions social programs.
Unless a compromise to increase government borrowing power is reached within days, the United States could lose its reputation as a stable anchor of the global economy. Millions of people could see retirement and veterans’ benefits cut once the government exhausts its ability to repay its debts due to the borrowing limit set by Congress.
A US default would ripple through the financial market, likely triggering a recession that would lead to severe job losses and shatter an already fragile sense of economic security for many families.
After a weekend of acrimony between House Republican negotiators and the White House, Biden will meet with House Speaker Kevin McCarthy on Monday for critical talks on pulling the economy from the precipice. The president has just returned to the United States from Japan, where he has been placed in the astonishing position of being unable to reassure other world leaders that Washington will not tip the global 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 occur by then as the mere suggestion that the crisis cannot be resolved could cause panic in financial markets and damage confidence in the solvency of the United States.
Biden has already backed down from his stance that he will not negotiate the debt ceiling — which must be increased to pay for spending already authorized by Congress and drafted by him and previous presidents. Its officials say it is irresponsible for the GOP 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 primary leverage against Biden.
While Biden was in Japan, the only leg of a longer trip he was forced to cut short, negotiators from both sides appeared to make progress before talks bogged down, with each side blaming the other. The president suggested that pro-Donald Trump extremists in the House were prepared to sabotage the economy in a bid to doom his re-election campaign.
“I think there are MAGA Republicans in the House who know the damage this would do to the economy, and because I’m president and a president is responsible for everything, Biden would take responsibility and that is the only way to ensure Biden is not re-elected,” he said in Japan.
McCarthy said Sunday morning that Biden was changing his stance due to pressure within his own party. “So I think he needs to step away from the socialist wing of the Democratic Party and represent America,” the speaker told reporters.
The rhetoric eased a bit, however, after Biden and McCarthy spoke as the president flew home on Air Force One. “I think it was a productive phone call,” McCarthy said, adding that his proxies, Reps. Garret Graves and Patrick McHenry, were resuming talks with the White House.
Roller-coaster negotiations, suspended talks and accusations of bad faith are part of any showdown over spending in Washington. The acrimony is often greater when the negotiation reaches a critical point before an eventual agreement. And McCarthy and Biden both have a political interest in showing members of their own parties that they are tough on the other side.
But there’s reason to think it’s not like the bickering between presidents and previous congresses – a factor that makes the current situation so dire.
For starters, there’s no guarantee that a Biden-McCarthy deal can pass through Congress. McCarthy has already passed a bill raising the debt ceiling in exchange for a wish list of Republican demands. Even that measure — which didn’t stand a chance in the Democratic-led Senate — only passed by a single vote. Any deal acceptable to Biden would, by definition, be far less attractive to Republicans — raising doubts about McCarthy’s ability to pass it.
Given his slim majority in the House, the Californian is one of the weakest speakers of modern times. In order to win the job in January, he offered several concessions to hardliners in the GOP, including reinstating a rule that any member could call for a vote on being ousted. That means he could again be held hostage by the right wing of a party that includes many members who view the compromise as a defeat.
Biden may not be wrong that some pro-Trump supporters are willing to risk economic disaster if it ruins his presidency and helps his predecessor win a nonconsecutive second term. Trump fueled those suspicions by suggesting during a CNN town hall earlier this month that defaulting on US debt may not be so bad.
On the contrary, the republican demands harden. The budget proposal presented by the GOP over the weekend included at least two items that were not in the original GOP bill – provisions on immigration and additional changes to work requirements for food stamps. , said a source with direct knowledge of the matter.
McCarthy has won the backing of Republican Senator Bill Cassidy of Louisiana, who told CNN’s ‘State of the Union’ Jake Tapper on Sunday that “the president has spent his first two years in office. Now he wants that Republicans accept this as a new baseline.
“I think Republicans and the American people are reasonable to say, ‘Mr. President, just because you artificially inflated spending for the first two years of your presidency, by the way, given all kinds of inflation , to start, does this become the new base? »
Republicans have every right to seek spending cuts — they won the House, albeit narrowly last year on a platform partly rooted in the issue. But the House 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 House majority’s radicalism.
McCarthy could have chosen to seek concessions in the lower-risk process of budget talks. The GOP also faced accusations of hypocrisy after it was willing to raise the debt ceiling when Republicans were in the White House, notably under the spendthrift Trump.
Yellen on Sunday pushed back against claims by Republicans that the administration could push back the deadline for raising the borrowing limit until June 15, saying the likelihood that public finances could hold out that long was quite low.
“My guess is that if the debt ceiling isn’t raised, there will be tough choices to be made about unpaid bills,” Yellen said on NBC’s “Meet the Press.”
The stalemate dynamic relies on each side assuming that the other will pay the highest political price if the economy goes into a tailspin due to a default.
One wonders if the House GOP’s refusal so far to compromise with Biden fully reflects the will of Americans. While they control the chamber with a tiny majority — McCarthy can only lose four votes to pass a bill — Democrats lead 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 a compromise, but extremist elements within the House GOP could make that impossible.
How this showdown unfolds will be critical for power dynamics in Washington since, if Biden relents, the GOP will certainly try to corner him on the debt limit again before the next election. The confrontation will also be vital to Biden’s legacy, as the GOP seeks to roll back some of the president’s past accomplishments, including his efforts to fight climate change.
Like McCarthy, Biden also faces political pressure within his own party after some progressive Democrats expressed concern that he was offering the speaker too much in any deal. Democrats are particularly angry with GOP efforts to impose new work requirements for Medicaid and additional food benefits for needy families.
Democratic Rep. Summer Lee of Pennsylvania accused Republicans of “cruelty,” telling Tapper on “State of the Union” that the GOP proposals would push people deeper into poverty.
Some Democrats have called on Biden to invoke the powers of the 14th Amendment to the Constitution to unilaterally raise the debt ceiling — an obligation reserved for Congress by law. The president told Japan he believed he had the authority to do so, but expressed doubts whether such a decision was possible in the limited time available and whether it could be upheld in legal challenges of up to in the Supreme Court.
But in addition to protecting his own legacy, Biden must be mindful of his own party’s discomfort. Any final deal with McCarthy will need Democratic support in the Senate. And polls are already showing limited enthusiasm within the party for his re-election bid that will rely on strong voter turnout among Democrats in November 2024.
While the main casualties of a default would be millions of Americans, the tense politics of the moment mean Biden and McCarthy’s careers could hinge on how their showdown unfolds in the coming days.
In the meantime, the United States is heading for an economic cataclysm of its own making.
“We’re in an insane situation,” Democratic Maryland Senator Chris Van Hollen said on ABC’s “This Week.”