Reuters, May 24: Washington 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.
McCarthy declared that negotiations had made progress and would resume in the evening following a four-hour White House meeting. Even if there are still some outstanding concerns, he believed that the two parties would come to an agreement.
“Working down there, we’ve made some progress. Therefore, that’s quite encouraging,” McCarthy told the media. “I want to ensure that we get the appropriate accord. I see that’s what we’re aiming for.
The White House’s Karine Jean-Pierre claimed that the negotiations are still going well.
She stated during a briefing while negotiations were taking place, “If it keeps going in good faith, we can come to an agreement here.”
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.
The full faith and credit of the United States are being openly described as a hostage by members of the House Freedom Caucus, according to Jean-Pierre, a spokeswoman for the White House.
It will take several days for legislation to pass through the closely divided Congress, and 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.
According to Punchbowl News, House Republican leaders announced that they would bring legislators back if necessary for any votes before leaving the chamber on Thursday for a weeklong Memorial Day holiday break.
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 undoubtedly going too close for comfort, according to Shai Akabas of the research tank Bipartisan Policy Center.
If lawmakers suggest a default is anticipated, the ratings firm Moody’s may modify its evaluation of American debt. For U.S. debt, Moody’s now has an excellent “Aaa” rating, but competitor 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.
STIPULAS SLIDE
The prolonged deadlock has alarmed Wall Street, dragging on American markets and raising borrowing costs for the country.
On Wednesday, U.S. stock indexes declined due to worries about the debt ceiling.
Investors had been pretty upbeat up until yesterday, according to Edward Jones senior financial strategist Angelo Kourkafas. But as we draw nearer, we are once more observing caution.
The United States won’t be able to pay all of its payments by early June, according to Treasury Secretary Janet Yellen, who added that she is unsure of the precise day the country will run out of money.
According to analysts, that would lead to a collapse of Wall Street and a recession in the US economy, with the default also harming normal Americans. Those healthcare organizations that depend on government funding may be the first to feel the pressure.
Democrats have advocated to maintain discretionary spending at this year’s levels, while Republicans want to reduce it by about 8% for the fiscal year 2024 that starts in October.
Republicans’ demands to add additional work requirements to low-income Americans’ welfare programs and relax regulations governing energy permits have divided negotiators.
In keeping with previous bipartisan budget agreements, the White House has offered to set spending caps on discretionary items for the next two years. For the following six years, Republicans have proposed budget limits.
According to Democratic Representative Pramila Jayapal, who serves as the chair of the 101-member Congressional Progressive Caucus, Republicans have rejected White House proposals to impose a minimum tax on corporations and billionaires and expand the scope of the government’s ability to bargain lower prices for prescription drugs.
The nation’s self-imposed debt ceiling must be raised frequently by Congress to fund the expense of the spending and tax cuts it has previously enacted.
Progressive Democrats are opposed to expenditure cutbacks and new job requirements, while conservative Republicans insist on the drastic spending cuts they enacted in a House bill last month. Both parties are facing internal opposition to the discussions.
For months, Biden insisted he would not negotiate a debt ceiling increase, only to change his mind recently and start speaking with McCarthy.