Debt talks spiral downward as US moves toward default

Debt negotiations took a downward turn as the White House accused Republicans of taking a “big step back” by rejecting their offer and Speaker Kevin McCarthy said talks were on hold until President Joe Biden returns from Japan.

Both sides have accused the other of negotiating in bad faith as the clock ticks toward the June 1 deadline to raise the country’s borrowing limit, now at $31 trillion, so the United States can pay its bills. Otherwise, it will default on its debt.

A war of words broke out over the weekend as meetings between the two negotiating teams were canceled, rescheduled, only to be canceled again.

The White House, which had taken a hopeful tone that a deal was in the works, released a pessimistic statement accusing Republicans of backing down and favoring a default over a deal.

“The Speaker’s team tabled an offer that was a major step backwards and contained a series of extreme partisan demands that could never get through either House of Congress,” White House Press Secretary Karine Jean-Pierre said. in the statement.

“Only a Republican leadership beholden to its MAGA wing — not the president or the Democratic leadership — threatens to default our country for the first time in our history unless extreme partisan demands are met,” she said.

Republicans, according to reports, rejected an offer from the Biden administration that would have kept both non-defense and defense spending the same next year compared to fiscal year 2023.

McCarthy has reportedly asked to speak with Biden, who is meeting for a full day in Hiroshima, Japan, where he is attending the G7 summit. That includes a meeting with Ukrainian President Volodymyr Zelensky and a trilateral meeting with the leaders of Japan and South Korea.

The speaker said it was the White House that held out.

“Unfortunately, the White House went downhill,” McCarthy told reporters on Capitol Hill. “I don’t think we’ll be able to move forward until the president can come back.”

Biden is scheduled to return to the United States on Sunday evening.

“Only from the last day to today have they deteriorated. They actually want to spend more money than we spend this year,” McCarthy said of the talks.

McCarthy said he wants to cut non-defense spending compared to what was spent in previous years, while Democrats argue that keeping those numbers the same amounts to an effective cut because of inflation.

President Biden has appointed a negotiating team and has been in regular contact with them while he is in Japan. The White House said those negotiators are ready to meet with McCarthy’s team at any time.

“Let’s be clear: the president’s team is ready to meet at any moment,” Jean-Pierre said in her statement.

Both parties are fighting over budget cuts. Republicans are demanding them in exchange for raising the debt limit. The White House has dismissed the GOP demands as too extreme, but has expressed a willingness to make some cuts.

But as talks have broken down, attacks have intensified.

“Republicans are holding the economy hostage and pushing us to the brink of bankruptcy, which could cost millions of jobs and plunge the country into recession after two years of steady growth in jobs and wages,” White House communications director Ben LaBolt said. Saturday in a statement. .

“We’re too far apart on the topline number,” Republican Rep. Dusty Johnson, an ally of McCarthy, told CNN, referring to the level of discretionary spending for fiscal year 2024.

McCarthy holds the line. He knows where the Republican conference is. And the White House doesn’t understand that Washington has a spending problem.”

To reach a deal, cuts must be significant enough to be accepted by conservative Republicans, as well as acceptable Democrats, who have a majority in the Senate and likely need to get between 50 and 100 votes in the House.

Speaking in Japan on Saturday, Biden expressed hope that the two sides can reach an agreement.

“I still believe we can avoid a default and get something decent done,” the president said.