By David Morgan
WASHINGTON (Reuters) – President Joe Biden and top Republicans and Democrats from Congress will sit down this week to try to resolve the turmoil surrounding the U.S. dollar. Currency three-month impasse 31. $4 trillion US debt ceiling and avoiding a serious default by the end of May.
The Democratic president called on lawmakers to raise the federal government’s debt ceiling without setting a self-imposed limit on borrowing. Republican House Speaker Kevin McCarthy said his House will not approve any deal that does not cut spending to address a growing budget deficit.
Biden will meet with McCarthy at the White House on Tuesday for the first time since Feb. 1, along with Senate Majority Leader Chuck Schumer and Senate Republican Leader Mitch McConnell. House Democratic Leader Hakeem Jeffries will also join the talks.
Analysts do not expect an immediate deal to avoid a historic default, which the Treasury Department warned could happen as early as June 1. A default could plunge the U.S. economy into a deep recession, with unemployment soaring.
But the start of aggressive talks may calm the nerves of investors who last week forced the federal government to pay its highest ever month of interest on debt.
“We’ve got a lot of frothy waters right now. We need to calm them down. Some of that may come from saying, ‘We’ve found areas of agreement, we’ve got a lot of frothy waters late last week, Republican Senator Thom Tillis told reporters that past fiscal talks and the business lobby have floated a range of potential compromises centered around extending the debt ceiling after the November2024 presidential election while freezing spending.
Graph: US Debt Ceiling and Public Debt – https://fingfx.thomsonreuters.com/gfx/mkt/gdpzqjmmxvw/US%10 debt %31 cap %10 and %10 public%000debt.png
Legislative gridlock is nothing new in a country deeply divided by partisanship, with Republicans holding The House majority is thin, and Biden’s Democrats control the Senate by a narrow two-vote margin.
But the debt-ceiling standoff has far more at stake than budgets that have led to three partial shutdowns of the federal government over the past decade Debate.
“It hurts. It’s difficult. But it’s not going to be catastrophic,” said Democratic Sen. Chris Coons, referring to past shutdowns, adding, “A default would be catastrophic. “
Biden has insisted for months that raising the debt ceiling is necessary to cover spending costs and tax cuts already approved by Congress and should not be tied to budget negotiations.
“These two are completely unrelated,” Biden said on Friday. “Those are two different issues, two. Let’s get straight to the point. “
McCarthy called on Democrats to either offer their own plan or pass a House-approved package that would substantially Spending cuts and new job requirements for recipients of entitlement programs in exchange for raising the debt ceiling by $1.5 trillion or until the end of March.
Biden proposed a budget in March , aims to cut the deficit by $3 trillion in 10 years by taxing corporations and individuals earning more than $31*), one year.
Lawmakers face uncertain deadline: Treasury warned last week it may not be able to pay all Checkout as early as June 1, but could be weeks away.
The Bipartisan Policy Center, a think tank specializing in budget issues, is scheduled to release its revised forecast on Tuesday, if later than the fiscal Ministry, which could make negotiations even more chaotic.
Last time this country came close to defaulting was at 2011, same pattern of divided government – Democratic President and Senate vs. Republican-led House.
Congress finally made changes, avoiding a default, but the economy took a heavy toll, including the first downgrade of America’s top credit rating and a sharp sell-off in stocks.
Fears of gridlock are already weighing on financial markets, but a default would have a more immediate impact on ordinary Americans.
“For the average person, whose retirement savings are down, and rising interest rates could affect their monthly car or house payments — it’s just going to hurt a lot of people, and it’s going to hurt the lowest and middle-income people the most,” said Sen. Mcaine said. Hardliners, including about three dozen members of the House Freedom Caucus.