President Joe Biden invited the “big four” congressional leaders to a meeting at the White House next week after the federal government’s debt managers warned Congress on Monday that lawmakers may have even less time than they thought to raise the statutory borrowing cap.
The government may be unable to pay its bills by early June if Congress doesn’t raise the statutory debt limit before then, Treasury Secretary Janet L. Yellen said Monday. In a letter to Speaker Kevin McCarthy, R-Calif., Yellen urged lawmakers to lift or suspend the debt ceiling “as soon as possible” to avoid causing “severe hardship” to families and businesses.
“After reviewing recent federal tax receipts, 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,” Yellen wrote.
The shortened timeframe means the White House and congressional leaders have just a few weeks to come up with a solution to a thus-far intractable problem: Democrats have refused to entertain anything but a “clean” debt limit increase, while Republicans say spending restraints or other policy concessions also need to be attached.
The new Treasury forecast moves up the timetable somewhat from what Yellen described in January when her department first invoked “extraordinary measures” to stay within the $31.4 trillion debt limit.
Back then, Yellen wrote that debt managers couldn’t say with certainty they’d be able to finance all U.S. obligations beyond early June; since then, a parade of independent number crunchers have said the “x date” is more likely to be in July or later.
One of those — the Congressional Budget Office — updated its own forecast on Monday, bringing it into line with Treasury’s. “Because tax receipts through April have been less than the Congressional Budget Office anticipated in February, we now estimate that there is a significantly greater risk that the Treasury will run out of funds in early June,” CBO Director Phillip L. Swagel wrote in a blog post.
To be sure, Yellen wrote that estimates remain uncertain and that the real deadline could be “a number of weeks later” than the start of June.
But the Treasury secretary’s missive is likely to light a fire under lawmakers to try to get something done before Memorial Day, which falls on May 29 this year. The House is currently scheduled to be in session through May 25 before taking a one-week recess, while Treasury’s timing update may mean changes to the Senate’s previously announced recess the week of May 22.
Biden’s invitation to top congressional leaders, including McCarthy while he was leading a delegation of lawmakers in Israel on Monday, seems timed to try to prompt some kind of movement on the debt limit.
But it wasn’t immediately clear whether the president and top Democrats, including Senate Majority Leader Charles E. Schumer and House Minority Leader Hakeem Jeffries, were ready to drop their no-negotiation stance.
“We do not have the luxury of waiting until June 1 to come together, pass a clean bill to avoid a default and prevent catastrophic consequences for our economy and millions of American families,” the two New York Democrats said in a joint statement Monday. “Republicans cannot allow right-wing extremism to hold our nation hostage.”
The limited time left this month to strike a deal has sparked some rumblings of a short-term patch to buy more time. A GOP aide said such a fallback likely could only materialize towards the end of the month once it becomes clear a deal won’t be reached in time but Democrats are still at the table.
Carping from the Rose Garden to Jerusalem
Even as Yellen was preparing to shatter lawmakers’ quieter week in Washington with the House out, the partisan standoff showed no signs of easing earlier Monday.
Neither side wants to see the government run out of borrowing authority and risk an economic crisis. But each side insists the other is at fault, either by refusing to negotiate or by holding the economy “hostage” to severe spending cuts.
“America is not a deadbeat nation,” Biden declared at a Rose Garden ceremony Monday ostensibly to celebrate National Small Business Week. “We pay our bills and we should do so without reckless hostage-taking from some of the MAGA Republicans in Congress.”
The House passed a Republican bill last week that would raise the debt limit by $1.5 trillion or through next March, whichever comes first. But it would also require more than $3 trillion in discretionary spending cuts over the next decade and other policy changes that Democrats roundly reject.
While the House passed the measure in a 217-215 squeaker, the Democratic-controlled Senate has no intention of taking it up.
“The only way you solve problems is you negotiate,” McCarthy said Monday on a visit to Jerusalem to mark Israel’s 75th anniversary. “And I’m looking forward to the president changing his mind and negotiating with us.”
After the Treasury timing update and White House meeting invitation, McCarthy stuck to his position.
“House Republicans did their job and passed a responsible bill that raises the debt ceiling, avoids default, and tackles reckless spending,” McCarthy said in a statement. “Meanwhile, President Biden has refused to do his job — threatening to bumble our nation into its first ever default — and the clock is ticking.
‘The president knows how to do this’
Rep. Ro Khanna, D-Calif., a leading progressive voice, said the most likely route out of the standoff is for Senate Minority Leader Mitch McConnell, R-Ky., to weigh in with Biden. The president has insisted on a “clean” debt limit increase, while expressing a willingness to discuss spending cuts on a separate track.
“I think that Sen. McConnell understands this and I think the president will sit down with Sen. McConnell,” Khanna said on CBS’s “Face the Nation” program Sunday. “He knows that we can’t default.”
But McConnell has refused to engage, saying it was up to Biden and McCarthy to strike a deal that could pass the closely divided House.
“The president knows how to do this,” McConnell told reporters last week. “Until he and the speaker of the House reach an agreement, we’ll be at a standoff. We have divided government. The president and the speaker need to come together and solve the problem.”
Senate Democrats, too, see no point in negotiating now.
“I have not seen the Republicans sincere on this,” said Maryland Sen. Benjamin L. Cardin, a centrist Democrat who announced Monday he would not seek reelection next year. “What they passed [in the House] is ridiculous.”
Schumer, in a letter to colleagues Monday, said the House GOP bill “locks the House into an unacceptable and extreme position that pulls us even further apart.” Schumer said the Senate will begin holding hearings “to show the public what this bill truly is.”
The first such hearing comes Thursday, when the Senate Budget Committee convenes a session entitled “The Default on America Act: Blackmail, Brinkmanship, and Billionaire Backroom Deals.”
Among the witnesses scheduled to testify are:
- Mark Zandi, the Moody’s Analytics chief economist who has warned the House GOP plan could cost 780,000 jobs.
- Solar Energy Industries Association President and CEO Abigail Ross Hopper, who said last week she was “deeply disappointed” in the House bill, which would repeal solar and other clean energy tax credit expansions.
- Environmental Defense Fund President Fred Krupp, whose group denounced the GOP legislation last week as a “reckless debt ceiling package that would hobble America’s flourishing clean energy economy.”
Senate Budget Chairman Sheldon Whitehouse‘s hearing notice said additional witnesses could be added, though it wasn’t immediately clear whom Republicans might invite.
Two-pronged strategy
On Monday night, Schumer began the process of bringing two debt limit measures directly to the floor. One would suspend the borrowing cap until after the 2024 elections, with no strings attached. The other is the House-passed bill.
A Schumer spokesperson said that since the House bill is “dead on arrival,” the Democratic plan would “ensure that once a clean debt ceiling is passed, the House bill is available for a bipartisan agreement on spending and revenue as part of the regular budget process.”
A problem with that process, however, is Senate Republicans have said a clean bill can’t get the necessary 60 votes in that chamber, either. So what comes next is anyone’s guess.
Sen. Mike Rounds, R-S.D., said the Senate will have a role to play in shaping a bipartisan debt limit deal. But not yet.
“At this point, all we do is muddy the waters,” Rounds said last week. “There is nothing irresponsible at all at trying to figure out a path forward where we can actually pay our bills in the future. And that’s exactly what the House is saying.”
Rounds, like other Republicans, called on Biden “to come to the table and have an honest negotiation with the House speaker.”
When that happens, he said, “it’ll be time for the Senate to lock in and weigh in. But not until then.”
Laura Weiss and Lindsey McPherson contributed to this report.
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