Speaker of the House Kevin McCarthy, R-Calif., (left) and President Joe Biden wait for a meeting about the United States's debt ceiling in the Oval Office of the White House on May 9, 2023. Biden and Republican leaders met in hopes of breaking an impasse over the debt limit.

Speaker of the House Kevin McCarthy, R-Calif., (left) and President Joe Biden wait for a meeting about the United States's debt ceiling in the Oval Office of the White House on May 9, 2023. Biden and Republican leaders met in hopes of breaking an impasse over the debt limit. BRENDAN SMIALOWSKI/AFP via Getty Images

Debt Ceiling Meeting Yields Little Progress, Though Biden and GOP Agree to Spending Talks

The House speaker has given the White House a two-week deadline to come up with a spending plan that would satiate his caucus and allow for a debt limit increase.

President Biden and congressional leaders failed to make substantive progress during a key debt ceiling meeting on Tuesday, leaving the country hurtling toward an deadline that, absent action, would have devastating impacts on the economy and government operations. 

The two sides slightly opened the door to a possible resolution, agreeing to staff-level meetings as soon as Tuesday evening on funding levels for the upcoming fiscal year. While the White House and congressional Republicans remain significantly divided on what would constitute an appropriate budget, an agreement could be paired for a debt ceiling increase that would stave off default and the resulting economic calamity. 

Still, despite those discussions, congressional leadership emerged from Tuesday’s much anticipated meeting without a rosy outlook.  

“Everybody in this meeting reiterated the positions they were at,”  House Speaker McCarthy, R-Calif., said. “I didn't see any new movement.” He added Biden did not identify any specific areas where he would be willing to cut spending in exchange for a debt ceiling increase. 

Leadership and White House staffers will meet this week to discuss a path forward on appropriations, with Biden, McCarthy, House Minority Leader Hakeem Jeffries, D-N.Y., Senate Majority Leader Chuck Schumer, D-N.Y., and Senate Minority Leader Mitch McConnell, R-Ky., themselves reconvening on Friday. The White House has at times struck deals to place caps on federal spending in exchange for a hike or suspension of the debt limit, such as in 2019 under President Trump. That followed an agreement in 2011 in which President Obama agreed to 10-year budget caps. 

McConnell said it was solely up to McCarthy and Biden to come up with a solution. Despite the lack of clear progress, he expressed confidence the two sides will do so. 

“The United States is not going to default,” McConnell said. “It never has and it never will.” 

House Republicans have demanded any debt ceiling increase be paired with dramatic cuts to spending at non-defense federal agencies and passed a bill to that effect last month. To date, President Biden and congressional Democrats have refused to negotiate and demanded a “clean” debt limit increase without conditions. The Senate is not expected to take up the House’s bill, and the White House has said Biden would veto it. The Biden administration has warned the Republican plan would force furloughs across federal agencies and, in at least some cases, layoffs of federal workers. 

Treasury Department Secretary Janet Yellen said last week the government could default on its debts as soon as June 1, though cautioned the actual deadline could be “a number of weeks later.” The Bipartisan Policy Center, a think tank that focuses on budget and debt ceiling issues, estimated this week that the “X date” on which the government will no longer have enough cash to meet its obligations will fall between early June and early August. A June timeframe would give lawmakers less time to work out a deal than was expected earlier this year. 

Jeffries after the meeting expressed slightly more optimism than his Republican counterpart, noting that a next step had been made clear. 

All sides agreed to “have a discussion about a path forward around the budget, and the appropriations process, and everyone agreed,” Jeffries said. “That's progress.”

Schumer suggested the meeting had yielded good news and bad news, noting that discussions will continue but that McCarthy “refused” to take a default off the table.  

“There are probably some places we can agree and some places we can compromise, hopefully,” Schumer said of the upcoming spending talks. 

Asked ahead of the meeting whether the White House would consider any spending caps in exchange for a debt hike, Press Secretary Karine Jean-Pierre reiterated the president was not looking to compromise.

“We're going to stay focused on what the Congress needs to be doing here, their congressional duty, which is to prevent a default,” Jean-Pierre said. “That's what we're going to be clear about.”

She added that the White House agreed with McCarthy that a short-term debt ceiling suspension is “not our plan either.” Sitting in the Oval Office with McCarthy, Jeffries, Schumer and McConnell, just before the meeting began, Biden said he would not take questions but that the group was “going to solve all the world’s problems.” Reporters were subsequently ushered out of the room. 

While economists and lawmakers have speculated about a range of outcomes if an unprecedented default were to occur, most have agreed the most likely scenario would require the Treasury to delay all government payments until it had enough money available to meet the demands of a given day. That would likely require federal employees to either face furloughs or work with only the promise of back pay once the situation was resolved. Agency payments to beneficiaries, states, grantees, contractors and, potentially, their own employees, would be disrupted. Treasury could pick and choose which payments to make each day, though officials have said that would present legal and operational challenges. 

By June 12, according to BPC, Treasury would face an obligation of $6 billion in federal employee salaries. It is scheduled to make tens of billions of dollars in additional payments to Medicare, Medicaid, Social Security, defense vendors and other accounts. 

Senate Minority Leader Mitch McConnell, R-Ky., showed no signs that he would chart a different course than his House colleagues. 

“The solution is clear,” McConnell said on the Senate floor ahead of the meeting. “It’s been clear for months. President Biden needs to negotiate on spending with Speaker McCarthy.” 

McCarthy, pointing to the logistical challenges of the congressional schedule, said he made clear to Biden that time is running short.

“We have now just two weeks to go,” McCarthy said.