Time running short to raise US debt ceiling as Biden, McCarthy meet

By David Morgan and Jarrett Renshaw

WASHINGTON (Reuters) -Democratic President Joe Biden and top congressional Republican Kevin McCarthy will sit down on Tuesday to try to make progress on a deal to raise the U.S. government’s $31.4 trillion debt ceiling and avert an economically catastrophic default.

They have little time to reach an agreement. The U.S. Treasury Department on Monday reiterated its warning that it could run short of money to pay all its bills as soon as June 1, which would trigger a default that economists say would be likely to spark a sharp economic downturn.

House of Representatives Speaker McCarthy on Tuesday told reporters that his party, which controls the chamber by a 222-213 margin, would only agree to a deal that cuts spending.

“We can raise the debt ceiling if we limit what we’re going to spend in the future,” McCarthy told reporters.

Both parties agreed on the need for urgent action. Tuesday’s White House meeting, which will include Biden, McCarthy, Democratic Senate Majority Leader Chuck Schumer, top Senate Republican Mitch McConnell and top House Democrat Hakeem Jeffries, is due to begin at 3 p.m. EDT (1900 GMT).

In the past week, staffs for both sides have discussed a range of issues, including spending caps, new work requirements for some benefit programs for low-income Americans and changes to energy permitting in exchange for votes to lift the limit, according to people briefed on the talks.

“Time is running out. Every single day that Congress does not act, we are experiencing increased economic costs that could slow down the U.S. economy,” Treasury Secretary Janet Yellen told a group of bankers. “There is no time to waste.”

A similar 2011 standoff led to a historic downgrade of the United States’ credit rating, which sparked a selloff in stocks and pushed the government’s borrowing costs higher.

The current standoff has rattled investors, sending the cost of insuring exposure to U.S. government debt to record highs, and a Reuters/Ipsos poll completed on Monday found that three-quarters of Americans fear that a default would take a heavy toll on families like theirs.

“Nobody should use default as a hostage,” Schumer said in a Senate speech on Tuesday. “The consequences would be devastating for America.”

‘TOO MANY COOKS’

Some observers have raised concerns that the five-party talks are too unwieldy to make progress.

No. 2 Senate Republican John Thune told reporters that the talks appear to have “too many cooks.”

“As we’ve said all along, it is Biden and McCarthy,” Thune said. “So, whoever can actually speak on behalf of the president needs to get in the room, and get McCarthy’s best people in there, and get it done.”

McCarthy himself said he would prefer one-on-one talks with Biden.

“If the president comes to an agreement, the Democrats in the Senate will vote for it. The House will pass it, if we are all in agreement,” McCarthy said. “Why do we waste more time going around and around, not solving any of the real problems? I think you’re putting the country in jeopardy when you do that.”

Adding to the challenge of striking a deal, McCarthy agreed when he became speaker early this year to a change in House rules that allows for just one member to call for his ouster as leader of the chamber, which gives greater power to hardliners, including the roughly three dozen members of the House Freedom Caucus.

(Reporting by David Morgan and Jarrett Renshaw, additional reporting by Jeff Mason, Richard Cowan and Moira Warburton; Editing by Scott Malone, Andrew Heavens and Jonathan Oatis)