Daily Management Review

Biden Appears Upbeat About The Debt Ceiling, While The Treasury Issues A June 5 Default Warning


Biden Appears Upbeat About The Debt Ceiling, While The Treasury Issues A June 5 Default Warning
After the Treasury Department warned that a June 5 default loomed in the absence of action, Democratic President of the United States Joe Biden and a Republican negotiator announced on Friday that they were working on an agreement to raise the U.S. government's $31.4 trillion debt ceiling.
The federal government's self-imposed borrowing ceiling has been the subject of weeks of negotiations between the two sides, with Republicans also asking for significant spending cuts. The United States may experience a catastrophic default if there is no agreement.
"Things are looking good," Biden told reporters. "I'm optimistic."
Republican Representative Patrick McHenry agreed with Biden's remarks but emphasised that talks were still ongoing.
"I'm hopeful," said McHenry, one of House of Representatives Speaker Kevin McCarthy's lead negotiators with the White House. "But we have to make sure we have a line on tax, we have a line on agreement - there’s significant challenges ahead."
Soon after U.S. Treasury Secretary Janet Yellen stated that the government would not have enough money on hand to pay its payments on June 5, the two spoke separately. The updated projection provided more time but with a stricter ultimate limit than Yellen had previously stated, which was as early as June 1.
The two-year cap is being discussed by negotiators, but they can't agree on whether to impose stricter work requirements on some anti-poverty programmes.
Following a conference call in which one of his top lieutenants informed other Republicans that no deal had been reached, McCarthy left the Capitol on Friday, according to CNN.
Before Biden could sign a deal into law, it would need to be approved by both the Democratically-led Senate and the Republican-controlled House, a procedure that might take more than a week.
According to a U.S. official, negotiations have resulted in a tentative deal that would limit the amount of money the government will spend on various programmes in 2019.
The safety-net programmes continued to be a problem. Republican leader Garret Graves said his side will not budge on its demand that more people be employed.
"Hell no. Not a chance," Graves told reporters.
In order to be eligible for the Medicaid health plan and the SNAP food assistance programme, childless persons under the age of 56 would have to demonstrate that they are working or searching for job. Biden and his fellow Democrats have fought this Republican proposal.
More participants in those programmes would be required to demonstrate that they are employed or seeking for employment under the Republican proposal. According to the impartial Congressional Budget Office, doing so would result in savings of $120 billion over ten years but would also drive more than a million Americans out of such programmes.
Democrats claim that the measure will just increase red tape, excluding some who would otherwise be eligible.
After sharply increasing during the COVID-19 outbreak, Medicaid and SNAP have decreased in recent months.
Particularly Biden has resisted the work requirements for Medicaid, which as of January covered 85 million Americans.
According to the individual, who spoke on the condition of anonymity, the proposed arrangement would essentially maintain non-defense discretionary spending at current levels while increasing funding for the military and veterans' care.
The agreement may potentially reduce money for the Internal Revenue Service, which received an additional $80 billion in budget last year, partly to strengthen enforcement and increase tax revenue. Republicans want to stop providing that funds.
The official stated that the White House is attempting to maintain its push to target rich taxpayers.
Prior to May 31, the Treasury Department had issued a warning that it might not be able to pay all of its obligations.
The United States has reportedly been reviewed by several credit rating agencies for a potential downgrading, which would increase borrowing rates and diminish its status as the backbone of the international financial system.
A similar impasse in 2011 prompted Standard & Poor's to lower its assessment of US debt.
Even if a compromise is reached, party leaders will have to work hard to secure enough support in Congress. Democrats have opposed the increased work requirements for assistance programmes, while right-wing Republicans have stressed that any agreement must include significant spending cutbacks.
However, congressional leaders have instructed them to be prepared to return for voting when a deal is reached. The majority of legislators have already left Washington for the Memorial Day holiday.
Before a vote, members will have three days to consider the agreement, according to House leaders. In the Senate, a single senator has the authority to stall proceedings for several days. Republican Mike Lee is one who has made such a threat.