Daily Management Review

Republicans And The White House Make Progress In Negotiations In US Debt Ceiling Issue


Republicans And The White House Make Progress In Negotiations In US Debt Ceiling Issue
In an effort to negotiate an agreement to raise the United States' $31.4 trillion debt ceiling and prevent a catastrophic default, negotiators for Democratic President Joe Biden and senior legislative Republican Kevin McCarthy met on Wednesday.
U.S. House Speaker McCarthy declared that negotiations had improved and would resume in the evening following a four-hour meeting at the White House. Even if there are still some outstanding concerns, he believed that the two parties would come to an agreement.
"We've made some progress working down there. So that's very positive," McCarthy told reporters. "I want to make sure we get the right agreement. I can see that we're working towards that."
The White House's Karine Jean-Pierre claimed that the negotiations are still going well.
"If it keeps going in good faith, we can get to an agreement here," she said at a briefing while discussions were taking place.
Republicans have been accused by the White House and congressional Democrats of holding the economy hostage to push an agenda that they would otherwise be unable to pass. They claimed that in order to pass any compromise, Republicans would have to make further concessions to the Democratic Party.
"Just listen to members of The House Freedom Caucus... now openly referring to the full faith and credit of the United States as a hostage," Jean-Pierre, the White House spokesperson, said.
The standoff between McCarthy's insistence on budget reductions and Biden's desire to maintain current spending levels has been noted by rating agencies.
On Wednesday, Fitch placed the "AAA" ratings of the United States under caution. The agency added that "increased political partisanship... is impeding reaching a resolution," saying it believes "risks have increased" that the debt ceiling won't be lifted before the so-called X-date, when the Treasury runs out of money.
The Fitch rating is "one more piece of evidence that default is not an option and all responsible lawmakers understand that," a White House official said. It emphasises how urgently Congress needs to adopt a decent, bipartisan deal to avert default.
If politicians suggest a default is anticipated, Moody's, another rating agency, may modify its evaluation of US debt. For U.S. debt, Moody's now has an excellent "AAA" rating, but rival rating agency S&P Global downgraded its rating in the wake of a 2011 debt-ceiling standoff. A lower grade could raise the cost of borrowing.
The Treasury Department has warned that the federal government may not be able to pay all of its debts by June 1 - just eight days away - and that it will take several days for legislation to be passed through the closely divided Congress. Time is of the essence.
According to Punchbowl News, House Republican leaders stated they will call legislators back if necessary for any votes before the scheduled week-long Memorial Day vacation recess on Thursday.
Any agreement, according to McCarthy, must not increase taxes and must reduce discretionary spending, not maintain it as suggested by Biden.
Any agreement reached by Biden and McCarthy will have a difficult time getting approved by the split Congress, where McCarthy's Republicans have a 222-213 House majority and Biden's Democrats have a 51-49 Senate majority.
Concerns that Congress might unintentionally start a catastrophe by failing to act quickly have increased due to the lack of movement.
"We're certainly getting to a place that's too close for comfort," said Shai Akabas of the Bipartisan Policy Center, a think tank.