Biden hosts a big debt ceiling meeting while insisting there's nothing to talk about

W. James Antle III

May 09, 07:00 AM May 09, 07:01 AM

President Joe Biden is set to meet Tuesday with House Speaker Kevin McCarthy (R-CA) and other congressional leaders about the debt ceiling standoff, but if you believe the White House, there is nothing to talk about.

“Look, there shouldn't be negotiations on the debt limit,” White House press secretary Karine Jean-Pierre told reporters Monday. “This is something that they should get to regular order and get to work on. We should not have House Republicans manufacturing a crisis on something that has been done 78 times since 1960.”

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Jean-Pierre pitched the meeting as more of a Biden lecture. “So we're telling them — or saying to them: Do your job,” she said. “Pay for something that you've already spent on. That's it.” The message was similar last week.

“It is the president's job to also be very clear with Congress, with Republicans in Congress: You got to do your job,” Jean-Pierre said. “It is simple.”

“The question is to Speaker McCarthy, as I've said many times before here, is to — to the MAGA Republicans: What is going on here?” she added. “Why can you not get this done? It is simple. It is simple.”

“Let me be very clear: Congress needs to do its job,” budget director Shalanda Young concurred. “Tomorrow, they could put a bill on the floor to make sure we don't default. This is of people's own making.”

“As you know, the president is going to make clear that default has to come off the table, that he is happy to talk about spending priorities and who you value in this country, what our right tax policy is in this country, why every time we have this debate it has to go to working families in this country first in order to do the right thing for this country,” Young also told reporters.

In this telling, McCarthy and other congressional leaders are going to the White House for some coaching, and Biden is Bill Belichick: Do your job. There is no dialogue, only a monologue.

Young mocked this idea even while suggesting it would be Biden’s approach.

“Imagine if this president said, ‘Here's my budget' on March 9. 'If you don't take it all — lock, stock, and barrel, don't change your word, pass it without changes, I'd be willing to cause a recession and cost millions of people their jobs.’ That would be extreme,” she said.

At the same time, Young was saying Biden and his team did not view the only debt ceiling extension to pass a house of Congress, however narrowly, to be the starting point for the talks even though there is a risk of default sometime in June.

On the one hand, Young said Biden is “eager to have a separate conversation about the budget without threatening our economy.” On the other hand, “this is not some abstract debate.” The Biden budget, it seems, is better.

At Monday’s briefing, there were nearly a dozen instances of Jean-Pierre telling Congress to do its job, though some of those comments were referring to passing gun control rather than raising the debt ceiling without spending cuts.

This could all be posturing. In his 36 years in the Senate, Biden threw sharp partisan elbows in public and negotiated in private. He led the debt ceiling talks with House Republicans as vice president under former President Barack Obama, which did result in some spending cuts.

It is possible that Biden’s off-ramp will be an agreement on spending cuts passed through legislation separate from a debt ceiling extension or suspension. The White House invitation itself was a softening of the no-negotiations stance in response to a letter from Treasury Secretary Janet Yellen moving up the day of debt limit reckoning.

“I think that we have to make it clear to the American people that I am prepared to negotiate in detail with their budget,” Biden said in an interview with MSNBC on Friday night. “How much are you going to spend? How much are you going to tax? Where can we cut?”

At the same time, Biden and congressional Republicans are far apart on spending priorities. There is little trust between them that would allow for a quick debt ceiling extension to be followed by budget negotiations.

The White House meeting could also be about establishing blame, as Biden’s team has spent a considerable amount of time arguing that any default, with economic consequences that could prove as dangerous to the president as the GOP, is the fault of House Republicans.

Biden was elected as a legislative deal-maker extraordinaire. But don’t call Tuesday’s bipartisan meeting a negotiation just yet.

Biden refrains from attacks on McCarthy as debt ceiling fight favors GOP

Cami Mondeaux

May 06, 08:48 AM May 06, 08:48 AM

In his first interview since announcing his reelection bid, President Joe Biden offered a change of tune over his relationship with House Speaker Kevin McCarthy (R-CA).

The president declined to criticize McCarthy's leadership ahead of a high-stakes meeting over the debt ceiling next week, instead calling McCarthy “an honest man.” Biden attempted to relieve McCarthy of blame by suggesting the Republican leader is being forced into tough positions by other members of his party.

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“I think he’s in the position, well, he had to make a deal,” Biden said. “There’s the Republican Party and there’s the MAGA Republicans, and the MAGA Republicans really have put him in a position where in order to stay speaker he has to agree — he’s agreed to things that, maybe he believes, but are just extreme.”

The comments come as the pair are scheduled to meet with the other three main congressional leaders on Tuesday to continue negotiations over the debt ceiling just weeks before the country is expected to default on its loans. It also marks a shift in attitude by Biden, who has often used the debt ceiling to criticize McCarthy’s leadership and undercut his leadership in the House.

As the two have sparred over the debt ceiling, Biden has repeatedly accused McCarthy of holding the economy “hostage” by tying the debt ceiling to his fiscal budget proposal, seeking to place the responsibility squarely on the speaker’s shoulders.

"In a speech to Wall Street, the speaker failed to guarantee he would be the first speaker not to default on our debt,” Biden said on April 29. “Let's be clear. If he fails, the American people will be devastated.”

Now it appears Biden is softening his stance as Republican leaders in the Senate are coalescing behind McCarthy — leaving the negotiations entirely between him and the White House.

“The message to the president is pretty clear: You got a choice between accepting the House bill or entering into a discussion, which the speaker’s been trying to have with the president for some time,” Senate Minority Leader Mitch McConnell (R-KY) said on Tuesday. “There is no solution in the Senate … The president and the speaker need to reach an agreement to get us past this impasse. That’s my message going down to the White House meeting.”

Negotiations on the debt ceiling have long remained stalled inside the halls of Congress as both parties have refused to budge in order to come to a compromise. Now, government leaders are scrambling to avoid a default on the country’s loans after Treasury Secretary Janet Yellen issued a warning that Congress has just under a month until the United States will be unable to make payments if lawmakers don’t take action.

House Republicans passed a bill last week that would raise the debt ceiling in exchange for cuts to government spending, but Senate Democrats have called those proposals “dead on arrival” in the upper chamber. Biden has also indicated he would not sign the legislation should it reach his desk.

Schumer did move ahead with placing two competing debt limit bills on the Senate calendar, including one that would suspend the debt limit through 2024 as well as the GOP-led debt limit package that already passed the House. It’s not yet clear whether either bill will come to the floor for a vote, and Schumer said a decision would come after leaders meet with Biden on Tuesday.

The meeting will mark the first time McCarthy and Biden have met to discuss the debt ceiling since Feb. 1.

White House refines its messaging war on debt ceiling ahead of McCarthy meeting

Naomi Lim

May 05, 06:46 PM May 05, 06:46 PM

The White House is tinkering with its criticism of Republicans before President Joe Biden sits down with Democratic congressional leaders, House Speaker Kevin McCarthy, and Senate Minority Leader Mitch McConnell to discuss the debt ceiling.

From warning of a "fire-alarm fire" and the country's risk of being perceived as a "deadbeat nation" to the debt ceiling fight being a "manufactured crisis," complementing claims Republicans will cut Meals on Wheels to law enforcement funding, the White House is still workshopping its response to the GOP as new polling reveals a public opinion split on who will be held responsible if there is a default.

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The White House does not have a message regarding the debt ceiling because they do not have a strategy for negotiating with Republicans, according to Dan Schnur, the communications director of the late Sen. John McCain's (R-AZ) 2000 presidential campaign and founder of the University of Southern California-Los Angeles Times state poll.

"They have misunderstood and under-estimated McCarthy every step of the way, and they still can’t decide if he’s an ally or an enemy," Schnur told the Washington Examiner.

The House has passed the Limit, Save, Grow Act, which would raise the debt ceiling by $1.5 trillion if non-defense discretionary federal spending is decreased to fiscal 2022 levels, budget increases are capped at 1% per year, and entitlement program work requirements are introduced, in addition to COVID-19 funding, Inflation Reduction Act green energy tax credit and IRS provisions, and Biden's student loan forgiveness proposal being repealed, per former Rep. Tim Huelskamp (R-KS).

"Now Joe Biden and the Senate Democrats are on the clock,” Huelskamp, a former House Tea Party Caucus chairman, and veteran of multiple debt ceiling squabbles, said. “Rather than attacking Republicans, it’s time for Biden and the rest of the Democrats to do their job and provide a solution that ends their out-of-control spending spree."

It is difficult for the public to know who to blame in the debt ceiling impasse after Biden scheduled talks with McCarthy and McConnell next Tuesday following months of declining to, Brookings Institution governance studies senior fellow Darrell West added.

Almost 40% of respondents to a Washington Post-ABC poll published Friday, for example, would blame congressional Republicans if there is a default and 36% Biden. Another 16% contend both the president and the GOP would be responsible if the country cannot pay its bills when the Treasury Department can no longer use cash on hand and so-called extraordinary measures this summer. Interestingly, almost 60% agree with Biden that the debt ceiling and spending cuts should be dealt with separately. Roughly a quarter side with Republicans in that the borrowing cap should only be raised in return for spending decreases.

"In a polarized world, people assume anyone on the other side is to blame so if Congress is unable to lift the ceiling, most people [will] side with their own group so there may not be a clear political winner," West said. "It will be easy to blame the other side for the intransigence that led to a government shutdown. The president [holds] big cards in a shutdown because he gets to decide what gets shutdown first."

"One popular tactic during summertime is to close the national parks knowing that the public will be outraged and will demand an end to the stalemate," TechTank's editor-in-chief went on. "Other popular bargaining chips could be Social Security payments, veterans benefits, and food programs because each has a ready-made constituency for its cause. The only safe prediction is political blame will be unpredictable and lots of people will end up being angry if Congress cannot resolve this issue."

Biden appeared to address the debt ceiling polling divide, repeating that he hoped to speak directly with the public during remarks to reporters before a Roosevelt Room meeting.

"This is becoming an issue in other countries. 'What is the United States going to do? Are they really fooling around with not paying the debt?'" he said. "So next week I'm going to reiterate to congressional leaders that they should do what every other Congress has done: that is pass the debt limit, avoid default. As I have said all along, we can debate where to cut, how much to spend, how to finally move the tax system where everybody has to pay their fair share or continue the route they're on, but not under the threat of default."

While Biden and Republicans may have publicly reiterated their positions, the White House is reportedly privately considering a short-term stopgap to the debt ceiling, a stance Office of Management and Budget director Shalanda Young confirmed during a briefing this week.

"Congressional leaders are going to have to figure out a way to do this," she said. "You saw the length in the congressional Republicans’ bill that would take us into this situation again, this time next year. So I'm sure one of the things on the table we will have to work through is how long. I'm not going to take anything off the table."

How Manchin and Sinema are helping Republicans plot a big win over Democrats and Biden

Jack Birle

May 03, 09:40 AM May 03, 09:40 AM

Sens. Joe Manchin (D-WV) and Kyrsten Sinema (I-AZ) may be the GOP's key to victory in the battle over the debt ceiling, as Democrats and the White House push for a deal to raise the limit without any negotiations.

In a break from their Democratic caucus, both senators are calling for negotiations and could stall Democratic pressure in the Senate for the House to pass a debt ceiling resolution with no stipulations.

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Manchin has called on President Joe Biden to negotiate with the GOP and other congressional leadership and has expressed optimism for a planned meeting between the parties next week.

"I hope President Biden's invitation to Congressional leaders is sincere and he is genuinely willing to negotiate because the country cannot afford a failed negotiation," Manchin said in a statement on Monday. "Every day without action brings the American government closer to default and the American people closer to economic chaos. I urge President Biden to show true leadership and finally put politics aside and the well-being of our nation first.”

The West Virginia Democrat also told Politico that he has communicated to House Speaker Kevin McCarthy (R-CA) that regarding the debt ceiling bill passed in the House, "there’s things I don’t like in there, but there’s a lot of things we can agree on."

Sinema, who left the Democratic Party in December 2022, also expressed concern over the coming debt ceiling deadline and has urged both sides to negotiate.

“Both sides need to come together, put down the partisan talking points, and discuss realistic solutions to prevent default,” Sinema said to the outlet.

The Arizona independent has also reportedly "quietly dined" with McCarthy and has expressed a desire to come to an agreement with Republican senators, per Politico.

Both Manchin and Sinema face difficult reelection bids for their Senate seats in 2024, but neither has publicly said whether they will seek an additional term in the upper chamber of Congress.

Manchin would likely face popular Gov. Jim Justice (R-WV) if he runs for reelection in the heavily GOP state. Polling suggests Justice holds a significant advantage in opinion polling compared to the incumbent senator, with a 66% approval rating compared with Manchin's 38% approval rating.

The West Virginia Democrat has positioned himself against Biden, who is deeply unpopular in the Mountain State, by coming out against some of the president's recent proposals.

Manchin has come out strongly against a rule that would halt tariffs on Chinese solar panel manufacturers, saying he "cannot fathom why the Administration and Congress would consider extending" reliance on China.

He has also gone after Biden for the way his administration has implemented the Inflation Reduction Act, which he served as the key vote for, even threatening to vote to repeal the bill if the Biden administration continues using it to fund "its radical climate agenda."

Sinema will likely face a three-way race if she decides to run for reelection, with Rep. Ruben Gallego (D-AZ) running from the left and a GOP candidate to her right.

Treasury Secretary Janet Yellen has said the U.S. is set to default on its debt obligations on June 1, leaving a short window to raise the debt ceiling. Biden and congressional leaders from both parties, including McCarthy, are set to meet to discuss the debt ceiling on May 9.

Signs of stress start to build in markets as debt ceiling deadline looms

Zachary Halaschak

May 03, 04:30 AM May 03, 06:06 AM

Signs of stress are building as the deadline for lawmakers to act on the debt ceiling approaches, and negotiations are strained.

Market indicators this week suggest rising fear about the possibility of the Treasury missing payments after Treasury Secretary Janet Yellen said Monday that the U.S. may be unable to pay its obligations as soon as June 1.

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The date, less than a month away, upped the urgency for a solution.

“Now that we’re potentially within a month of hitting the debt limit, now lawmakers are firing with real bullets,” Brian Riedl of the Manhattan Institute told the Washington Examiner. “Delays and refusals to negotiate will soon be getting to the point where it creates a legitimate danger of going off a cliff.”

Yields on Treasury securities maturing in June, around the time the government is thought to run out of ability to pay all of its incoming bills on time and in full, are now higher than most of the yields for those maturing before or after that month, according to Tuesday's readings.

For instance, Treasurys maturing on June 15 have yields of about 5.29%, while those maturing on May 15 have yields at or below 5%. Those maturing in September and October all have yields below 5%.

Bank of the West chief economist Scott Anderson argued that the “true existential threat” to the economic outlook is a congressional failure to act on the debt ceiling.

McCarthy offered up a plan that would raise the debt ceiling over the next year either by $1.5 trillion or until March 31, 2024, whichever comes first. But the plan would cut back on spending and includes machinations that are unpalatable to Democrats in the Democratic-controlled Senate, such as beefed-up work requirements for welfare.

Anderson pointed out that even with the plan, which some tout as a jumping-off point for negotiations, parts of the market seem to think progress on a deal isn’t going well. He notes that credit default swap spreads for Treasury securities have been widening.

Credit default swaps, known as CDS, allow an investor to swap their credit, creating a form of insurance against default. CDSs typically go up as investors see the entity in question as being riskier.

“The cost of insuring against a Treasury default over the coming year is now the highest on record - far surpassing levels seen in the 2011 debt ceiling crisis or during the 2008 Great Recession. Even more troubling, the CDS spread appears to have skyrocketed since the passage of McCarthy’s bill,” Anderson said in a note last week, even before Yellen moved up the deadline.

Riedl was more cautious in connecting the debt ceiling detente to individual changes in the markets.

“I’m not seeing too much yet, but I’m seeing some skittishness,” he said. “It’s hard to pinpoint exact parts of the market and say this is driven by debt limit fears; I think that might be presumptuous.”

Still, he said some of the general nervousness and volatility of the markets, such as declines in the stock market, can be at least partially influenced by the saga with the debt ceiling. On Tuesday, the Dow Jones Industrial Average was down as much as 400 points, and the S&P 500 shed more than 1% of its value.

The U.S. hit its $31.4 trillion debt ceiling in January, and Yellen said that Treasury would begin taking “extraordinary measures” to temporarily stave off default. The measures essentially amount to shifting money around government accounts in order to pay incoming bills without issuing new debt. But this week, she said those measures will soon be exhausted.

“After reviewing recent federal tax receipts, our best estimate is that we will be unable to continue to satisfy all of the government’s obligations by early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time,” Yellen said, although she added that the X-date — that is, when the Treasury could no longer guarantee paying all incoming bills on time and in full — could be “a number of weeks later” than June 1.

The urgency of the situation has seemingly dawned upon President Joe Biden and Republican leadership in Congress. Just days ago, the Biden administration still had its feet dug in on raising the ceiling without spending cuts, and Republicans vowed to reduce spending. Now both sides have agreed to start talking. Biden invited House Speaker Kevin McCarthy (R-CA) to the White House after Yellen’s warning on Monday.

Biden put out calls to all four congressional leaders, and McCarthy agreed to sit down on May 9. Biden hasn’t met McCarthy since February, shortly after McCarthy won a lengthy battle for the speaker’s gavel.

Riedl said that he thinks that this week, negotiations in Washington, D.C., may take on a more serious tone and markets may start to become more nervous as each day ticks closer to the dreaded X-date. And as the X-date gets closer absent a deal, there will be a bigger reaction in the markets. Riedl pointed out that during the debt limit scare in 2011, interest rates rose and ended up costing the federal government about $1.3 billion in higher interest costs.

In 2011 Standard & Poor’s downgraded the country’s credit rating, having it fall below AAA for the first time in history. There is also the possibility that such a downgrade could occur again if the government comes too close to the deadline.

Adding to the mounting pressure is that the House will only be in session for 12 days this month, while the Senate will be in session for just over two weeks.

Some lawmakers have expressed a willingness for a temporary fix, which would essentially just mean kicking the can down the road in order to allow more time for negotiations. For instance, last month, the bipartisan Problem Solvers Caucus floated suspending the debt ceiling through the end of the year.