President Biden invites House Speaker McCarthy, congressional leaders for negotiation over US debt

The United States President, Joe Biden, on Monday (May 1) called for a meeting with the top four congressional leaders at the White House after Treasury Secretary Janet Yellen warned that Washington could run short of cash to pay all of the government’s bills as soon as June without a debt limit increase. The lack of funds to pay US’ debt obligations could trigger a catastrophic default. 

What does Biden plan on doing?

A brief statement by the White House said that the president has invited House of Representatives Speaker, Kevin McCarthy and Democratic leaders of Congress “to a meeting at the White House on May 9.” 

Meanwhile, a person familiar with the plans told Reuters that Biden has invited House Democratic leader Hakeem Jeffries, Senate Majority Leader Chuck Schumer and Republican leader Mitch McConnell to talk about the debt ceiling and federal spending.

This comes after the Republican-led House of Representatives passed a bill, in April, that would raise the debt ceiling in exchange for budget cuts to healthcare for the poor, transportation, and so on. The Department of Transportation has warned that the move would shut hundreds of air traffic control towers.

Additionally, the Republican bill would implement $4.5 trillion in spending cuts in exchange for a $1.5 trillion increase in the US debt limit. However, it is very unlikely to pass the Democrat-controlled Senate while the White House has previously said that the president would veto the legislation. 

Notably, as the speaker of the House McCarthy has primary control over US budget issues and while Biden has said he would not accept these deep cuts, the impasse has raised the possibility of Congress and the White House overseeing the first national debt default. 

Furthermore, if the debt ceiling is not raised or suspended by Congress the government risks defaulting on payment obligations which would have a significant impact on the US economy. This also comes as the US hit its $31.4 trillion borrowing limit in January. 

In a letter addressed to the House speaker and other lawmakers, on Monday, Yellen said, “Our best estimate is that we will be unable to continue to satisfy all of the government’s obligations by early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time.” 

She added, “Given the current projections, it is imperative that Congress act as soon as possible to increase or suspend the debt limit in a way that provides longer-term certainty that the government will continue to make its payments.” 

The early June date has more or less remained unchanged from the previous estimate issued in January which said that the government could run out of cash on June 5. She also urged Congress to act quickly to raise the limit. 

Yellen said that federal receipts and outlays are “inherently variable” and that the Treasury might exhaust its “extraordinary measures” a number of weeks later than these estimates. 

“It is impossible to predict with certainty the exact date when Treasury will be unable to pay the government’s bills, and I will continue to update Congress in the coming weeks as more information becomes available,” Yellen wrote in the letter. 

(With inputs from agencies) 

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