Hiroshima May 21 2023: President Joe Biden on Sunday called Republicans’ latest offers in talks on lifting the government’s debt ceiling “unacceptable,” but said he would be willing to cut spending together with tax adjustments to reach a deal.
Speaking to reporters in 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 could cause chaos in financial markets and spike interest rates.
Biden said he would speak to top congressional Republican Kevin McCarthy on his flight home and hoped the speaker of the House of Representatives had been waiting to negotiate with Biden directly.
“Much of what they’ve already proposed is simply, quite frankly, unacceptable,” Biden said. “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.
“Unfortunately, the White House moved backwards,” McCarthy told reporters late Saturday.
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.
Officials did not meet on Saturday and announced no progress from meetings on Friday or any plan to talk again. Instead, both sides cast the other’s proposals as too extreme.
A source familiar with the negotiations said Republicans had proposed an increase in defense spending, while cutting overall spending. The source also said House Republicans wanted to extend tax cuts passed under then-President Donald Trump, which would add $3.5 trillion to the federal debt.
The source said the Biden administration had proposed keeping non-defense discretionary spending flat for the next year.
Another person familiar with the talks said Republicans’ latest proposal included “steep” cuts over a longer period of time than recent budget deals, as well as a variety of measures that irk Democrats, including work requirements for aid, cuts to food assistance and less money for the tax-collecting Internal Revenue Service.
The person said Republicans had also rejected Democrats’ proposed measures to raise revenue, including drug payment reforms and closing “tax loopholes.”
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.
SPENDING CUTS
Biden heads back to Washington on Sunday after truncating his Asia trip to focus on the debt ceiling talks.
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.
U.S. Representative Patrick McHenry, a Republican negotiator, had said Republicans leaders were “going to huddle as a team and assess” where things stood.
McCarthy could not be immediately reached for comment early on Sunday.
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.
