© Reuters. U.S. President Joe Biden participates in a Quad Leaders’ meeting with Prime Minister Fumio Kishida of Japan, Prime Minister Narendra Modi of India, and Prime Minister Anthony Albanese of Australia, May 20, 2023, in Hiroshima, Japan. Kenny Holston/Pool via
By David Morgan, Jeff Mason and Trevor Hunnicutt
WASHINGTON (Reuters) -U.S. President Joe Biden and House Republican Speaker Kevin McCarthy will meet to discuss the debt limit on Monday after a “productive” phone call as the president headed back to Washington, the top House Republican leader said on Sunday.
McCarthy, speaking to reporters following the call, said there were positive discussions on solving the crisis and that staff-level talks were set to resume later on Sunday.
Biden earlier said he would be willing to cut spending together with tax adjustments to reach a deal but that latest offer from Republicans on lifting the government’s debt ceiling was “unacceptable.” The White House has not yet offered comment on their call.
Before leaving Hiroshima, Japan, after a meeting of G7 leaders, Biden suggested some Republicans in Congress were willing to see the U.S. default on its debt so that the disastrous results would prevent Biden, a Democrat, from winning re-election in 2024.
Less than two weeks remain until June 1, when the Treasury Department has warned that the federal government could be unable to pay all its debts. That would trigger a default that would cause chaos in financial markets and spike interest rates.
“Much of what they’ve already proposed is simply, quite frankly, unacceptable,” Biden said before heading back to Washington. “It’s time for Republicans to accept that there is no bipartisan deal to be made solely, solely on their partisan terms. They have to move as well.”
The talks have grown increasingly heated in the past two days. Democratic and Republican negotiators said Friday meetings at the Capitol yielded no progress and the two sides did not meet on Saturday. Instead, each has reverted to calling the other’s position extremist.
The Democratic president said he believed he had the authority to invoke the 14th Amendment to the U.S. Constitution to raise the debt ceiling without Congress, but that it was unclear that enough time remained to try to use that untested legal theory to avoid default.
U.S. Treasury Secretary Janet Yellen in a television interview on Sunday said June 1 remains a “hard deadline” for raising the federal debt limit, telling NBC News the odds were “quite low” that the government will collect enough revenues to pay its bills through June 15, when more tax receipts are due.
A source familiar with the negotiations said Republicans had proposed an increase in defense spending, while cutting overall spending. The source said the Biden administration had proposed keeping non-defense discretionary spending flat for the next year.
Concerns about default are weighing on markets. The U.S. was forced to pay record-high interest rates in a recent debt offer and worries about the lack of a deal weighed on U.S. stocks on Friday.
The Republican-led House last month passed legislation that would cut a wide swath of government spending by 8% next year. Democrats say that would force average cuts of at least 22% on programs like education and law enforcement, a figure top Republicans have not disputed.
Republicans hold a slim majority of seats in the House and Biden’s fellow Democrats have narrow control of the Senate, so no deal can pass without bipartisan support.
Republicans are pushing for sharp spending cuts in many domestic programs in exchange for the increase in the government’s self-imposed borrowing limit, which is needed regularly to cover costs of spending and tax cuts previously approved by lawmakers.
Biden stressed that he was open to making spending cuts and said he was not concerned they would lead to a recession, but he could not agree to Republican demands.
The last time the nation has come this close to default was in 2011, also with a Democratic president and Senate with a Republican-led House.
Congress eventually averted default, but the economy endured heavy shocks, including the first-ever downgrade of the United States’ top-tier credit rating and a major stock sell-off.