President Joe Biden on Wednesday sought to assure Americans that the U.S. would not default on its debts as the White House and top congressional leaders conducted tense, protracted budget negotiations in which Republicans were seeking substantial spending cuts in exchange for raising the debt limit.
“I'm confident that we'll get the agreement on the budget and America will not default,” Biden said as he prepared to leave Washington for a Group of Seven summit in Japan with the leaders of some of the world’s biggest economies. “And every leader in the room understands the consequences if we fail to pay our bills. And it would be catastrophic for the American economy and the American people if we didn't pay our bills.”
The White House argues that the two events — setting a budget and raising the debt ceiling to pay for expenses the U.S. has already incurred — should not be linked, as they are in the budget presented by Republican House Speaker Kevin McCarthy. Biden insists that Congress raise the current $31.4 trillion debt ceiling without conditions on future spending.
McCarthy’s budget seeks future spending caps, new work requirements for able-bodied public assistance beneficiaries and changes to approve domestic energy projects at a faster pace.
Biden said he had appointed senior members of his administration to negotiate with McCarthy’s team in his absence. An administration official told VOA that the team includes one of Biden’s closest, longtime advisers, Steve Ricchetti; the head of his budget office, Shalanda Young; and the head of his legislative affairs team, Louisa Terrell.
Biden added that the negotiators met Tuesday night — just hours after Biden ended his meeting with McCarthy and congressional leaders — and that they would also meet Wednesday.
“To be clear, this negotiation is about the outlines of what the budget will look like, not about whether or not we're going to, in fact, pay our debts,” the president said. “Leaders all agreed we will not default.”
McCarthy said default was never his plan.
“We already had taken default off the table because the House Republicans passed a bill that raised the debt ceiling, limited our future spending, saved taxpayers money by being able to pull back unspent money and waste and actually grow our economy by making our economy stronger and helping lifting people out of poverty into work,” the House speaker told reporters outside the West Wing of the White House on Tuesday.
Biden has indicated he is willing to talk about future spending limits to pare chronic overspending by the government, where annual trillion-dollar deficits have been common for years. But it’s not clear what parts of McCarthy’s plan he is willing to swallow.
“I'm not going to accept any work requirements that go much beyond what is already — what I voted for years ago — for the work requirements that exist,” Biden said Wednesday when asked by reporters. “But it's possible there could be a few others, but not anything of any consequence.”
The negotiations come under a tight deadline, with Treasury Secretary Janet Yellen warning that the U.S. could run out of cash to meet all its obligations by June 1 and then could default on some of them.
“A default would crack open the foundations upon which our financial system is built. And it's very conceivable that we'd see a number of financial markets break, with worldwide panic triggering margin calls, runs and fire sales," she said Tuesday before the leaders met.
Although the current debt limit was reached in January, Yellen and U.S. financial officials have taken what they describe as “extraordinary measures” to juggle U.S. spending accounts to keep paying the government’s bills.
The United States has never defaulted on its debt. Top government officials have warned that doing so would have immediate and widespread consequences inside the U.S., including massive U.S. worker layoffs and delayed payments to U.S. pensioners, government contractors and health care providers treating older Americans.
Congress has raised the debt ceiling 78 times under both Democratic and Republican presidents, including three times during the four-year term of former President Donald Trump.
If an agreement is reached in Washington’s politically charged atmosphere, it might be a matter of semantics whether a debt ceiling increase and a tandem cut in future spending are linked. Both Biden and congressional Republicans want to be able to claim victory.
The two sides are debating to what extent the debt ceiling would be raised and for how long, as well as specific spending cuts House Republicans recently approved in a narrow vote over united Democratic opposition.