HIROSHIMA, Japan, May 21 (Reuters) – US President Joe Biden and Republican Speaker of the House Kevin McCarthy will meet Monday to discuss the debt ceiling, after the two leaders made a phone call on Sunday as the president flew back to Washington that both sides described as positive.
McCarthy, who spoke to reporters at the Capitol after the call, said there were positive discussions about resolving the crisis and staff-level talks would resume later Sunday.
Asked if he had more hope after speaking with the president, McCarthy said, “Our teams are talking today and we plan (sic) to have a meeting tomorrow. That’s better than it was before. So yeah.”
A White House official confirmed Monday’s meeting, but did not give a specific time.
Biden, who returned to the White House late Sunday night after his trip to Japan, said the conversation with McCarthy went well. “It went well,” Biden said. “We’ll talk tomorrow.”
Staffers from both sides reconvened Sunday night in McCarthy’s Capitol office for talks that lasted about two and a half hours.
White House senior adviser Steve Ricchetti told reporters as he left the meeting, “We’ll keep working tonight.”
Before leaving Japan after the G7 summit earlier on Sunday, Biden said he would be willing to cut spending along with tax adjustments to broker a deal, but the Republicans’ latest offer was “unacceptable”.
Less than two weeks remain until June 1, when the Treasury Department has warned that the federal government may not be able to pay all of its debts, a deadline that US Treasury Secretary Janet Yellen reaffirmed on Sunday. If the debt ceiling is not lifted, it would lead to a bankruptcy that would cause chaos in the financial markets and raise interest rates.
McCarthy’s comments on Sunday seemed more positive than the increasingly heated rhetoric of recent days, as both sides called the other’s position extremist again and talks stalled.
“Much of what they’ve already proposed is frankly just plain unacceptable,” Biden said at a news conference in Hiroshima. “It’s time for the Republicans to accept that there is no bipartisan deal that can only be made, only on their partisan terms. They also need to move.”
The president later tweeted that he would not agree to a deal that protected “Big Oil” subsidies and “wealthy tax fraud” while endangering health care and food aid for millions of Americans.
He also suggested that some Republican lawmakers were willing to see the US default on its debt so that the disastrous results would prevent Biden, a Democrat, from winning re-election in 2024.
After Sunday’s call, McCarthy said that while there was still no final deal, there was agreement to get negotiators on both sides back together before the two leaders met: “There is no agreement. We are still apart .”
“What I look at is where our differences are and how we can work them out, and I felt that part was productive,” he told reporters.
Meanwhile, concerns about default are weighing on the markets as an increase in the government’s self-imposed borrowing limit is regularly needed to cover the cost of spending and tax cuts previously approved by lawmakers.
On Friday, the United States was forced to pay record high interest rates in a recent debt offering.
CUTS
McCarthy said Republicans supported an increase in the defense budget while cutting overall spending, and that the debt ceiling talks do not include discussions of tax cuts passed under former President Donald Trump.
A source familiar with the negotiations said the Biden administration had proposed keeping non-defense spending flat for next year.
Biden emphasized ahead of the call that he was open to cuts, saying he wasn’t afraid they would lead to a recession, but he couldn’t agree with the Republicans’ current demands.
The Republican-led House passed legislation last month that would cut much of government spending by 8% next year. Democrats say this would lead to average cuts of at least 22% on programs like education and law enforcement, a figure Republicans have not disputed.
Republicans have a slim majority in the House and Biden’s fellow Democrats have a slim control of the Senate, so no deal can pass without bipartisan support. But time is running out as Monday’s meeting will take place with just 10 days left to close a deal before the Treasury deadline.
McCarthy has said he will give House lawmakers 72 hours to review a deal before it goes to a vote.
The last time the country came this close to bankruptcy was in 2011, also with a Democratic president and Senate with a Republican-led House.
Congress eventually averted bankruptcy, but the economy suffered severe shocks, including the first-ever downgrade of the United States’ top credit rating and a major sell-off in stocks.
Reporting by Trevor Hunnicutt; Edited by Simon Cameron-Moore