Earlier, US Treasury Secretary Jeanette Yellen said in a letter to Congress that as early as June 1, “most likely” the government would not be able to pay all of the country’s bills. Such an unprecedented default would financially harm many Americans and others around the world who rely on US stability and send shock waves through the global economy.
Each side praised the other for the seriousness of the negotiations, but the main differences between them remained. The parties disagree on how to reduce the annual budget deficit. Republicans are determined to cut spending, while Biden’s team has proposed keeping it unchanged. Biden wants to raise some taxes on the wealthiest Americans and some big corporations, but McCarthy was quick to say that was out of the question.
“Spend, just spend more money in America and the government is wrong,” McCarthy said after the Oval Office meeting. In a brief statement, Biden called the meeting productive, but only added that he, McCarthy and their chief negotiators “will continue to discuss ways forward.” In response, McCarthy said their teams would be working “all night”. Biden explained: everyone agrees that “the default is not really discussed”.
Although there is no agreement on the main issues, the broad outlines of the deal appear quite achievable, observers noted. The tax deal would allow a separate vote to raise the current debt ceiling by $31 trillion to allow the government to borrow more.
Negotiations are focused on finding a compromise on the fiscal year 2024 limit, which will be key to resolving the impasse. Republicans are pushing for next year’s spending to be lower than it is now, but the White House has instead proposed keeping spending at 2023 levels. Republicans initially sought to cut government spending. next year to 2022 levels and to limit spending growth to 1% over 10 years, although a later proposal reduced that figure to around six years. The White House wants a two-year budget deal, keeping 2024 spending flat. “We’re going to find a baseline that we accept is less than what we’ve spent this year,” McCarthy said.
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