WASHINGTON (AP) — White House negotiators were back at the U.S. Capitol on Tuesday for another day of discussions with House Republicans over raising the nation's debt ceiling. Time is short: there are just days left before the government could run out of cash to pay its bills.
The two sides are working to reach a budget compromise before June 1, when Treasury Secretary Janet Yellen has said the country could default. The possible outcomes range from bad to apocalyptic, depending on how long the standoff drags on.
White House estimates say a prolonged default could cause 8.3 million job losses and a world-shaking recession, while a brief default could lead to 500,000 fewer jobs. Moody’s Analytics has estimated that a default of no longer than a week would lead to the loss of 1.5 million jobs.
President Joe Biden and House Speaker Kevin McCarthy met Monday after a weekend of on again, off again negotiations. Speaking to reporters after Monday's meeting, McCarthy said the two sides had not yet reached an agreement but the meeting was “productive.” In his own statement following the Oval Office sit-down, Biden echoed those sentiments. There was no word yet on whether the two would speak Tuesday.
McCarthy and Republicans are insisting on spending cuts in exchange for raising the debt limit. Biden has come to the negotiating table after balking for months but says the GOP lawmakers will have to back off their “extreme positions.”
A look at the negotiations and why they are happening:
WHAT IS THE DEBT CEILING FIGHT ALL ABOUT?
Once a routine act by Congress, the vote to raise the debt ceiling allows the Treasury Department to continue borrowing money to pay the nation's already incurred bills.
The vote in more recent times has been used as a political leverage point, a must-pass bill that can be loaded up with other priorities.
House Republicans, newly empowered in the majority this Congress, are refusing to raise the debt limit unless Biden and the Democrats impose federal spending cuts and restrictions on future spending.
The Republicans say the nation's debt, now at $31 trillion, is unsustainable. They also want to attach other priorities, including stiffer work requirements on recipients of government cash aid, food stamps and the Medicaid health care program. Many Democrats oppose those requirements.
Biden had insisted on approving the debt ceiling with no strings attached, saying the U.S. always pays its bills and defaulting on debt is non-negotiable.
But facing the prospect of the government running out of money to cover all its bills, Biden launched negotiations with Republicans.
IS IT CLOSE TO BEING RESOLVED?
The talks have been a see-saw of positive signs and rocky moments, and Tuesday was looking rocky again.
While Biden and McCarthy both said that Monday's talks had been productive, there was no agreement - or even a hint of one.
Each side praised the other’s seriousness, but basic differences remain. They are at odds over how to trim annual budget deficits. Republicans are determined to cut spending while Biden’s team offered to hold spending levels flat. Biden wants to increase some taxes on the wealthiest Americans and some big companies, but McCarthy said early on that that is out of the question.
But reaching an agreement is only part of the challenge. Any deal would also have to pass the House and Senate with significant bipartisan support. Many expect that buy-in from the White House and GOP leadership will be enough to muscle it over the finish line.
WHAT ARE THE HANGUPS?
Republicans want to roll back spending to 2022 levels and cap future spending for the next decade.
Democrats aren't willing to go that far to cut federal spending. The White House has instead proposed holding spending flat at the current 2023 levels.
There are also policy priorities under consideration, including steps that could help speed the construction and development of energy projects that both Republicans and some Democrats want.
Democrats have strenuously objected to a Republican push to impose stiffer work requirements on people who receive government aid through food stamps, Medicaid health care and the cash assistance programs.
Biden, though, has kept the door open to some discussion over work requirements.
WHAT IS THE TIMELINE FOR ALL THIS?
Treasury says it will run out of money as soon as June 1. It's hard to pinpoint an exact date the government would start missing payments, because tax revenues and expenditures vary from day to day.
McCarthy has promised that he will allow 72 hours for lawmakers to look over any proposed deal before it is brought for a vote, so the soonest they could vote in the House at this point is Friday. It would then have to go to the U.S. Senate next week, where Senate Majority Leader Chuck Schumer, D-N.Y., has said it could pass more quickly.
But it's a crunch time. And before the legislative text can be reviewed, it needs to be written and a deal needs to be made.
WHAT HAPPENS IF THEY DON’T RAISE THE DEBT CEILING?
A government default would be unprecedented and devastating to the nation's economy. Yellen and economic experts have said it could be "catastrophic."
There isn't really a blueprint for what would happen. But it would have far-reaching effects.
Yellen has said it would destroy jobs and businesses and leave millions of families who rely on federal government payments to “likely go unpaid,” including Social Security beneficiaries, veterans and military families.
More than 8 million people could lose their jobs, government officials estimate. The economy could nosedive into a recession.
“A default could cause widespread suffering as Americans lose the income that they need to get by,” she said. Disruptions to federal government operations would impact “air traffic control and law enforcement, border security and national defense, and food safety.”
IS THERE A BACKUP PLAN IF TALKS FAIL?
Some Democrats have proposed that they could raise the debt ceiling on their own, without help from Republicans.
Progressives have urged Biden to invoke a clause in the Constitution’s 14th Amendment that says the validity of the public debt in the United States “shall not be questioned.” Default, the argument goes, is therefore unconstitutional.
Supporters of unilateral action say Biden already has the authority to effectively nullify the debt limit if Congress won’t raise it, so that the validity of the country’s debt isn’t questioned. The president said Sunday that it's a "question that I think is unresolved,” as to whether he could act alone, adding he hopes to try to get the judiciary to weigh in on the notion for the future.
In Congress, meanwhile, House Democratic leader Hakeem Jeffries has launched a process that would “discharge” the issue to the House floor and force a vote on raising the debt limit. That, however, is an unlikely option as a handful of Republicans would have to defy McCarthy and their leadership to join the Democrats’ effort.