Talks to avoid a US debt default were on a knife’s edge on Saturday as President Joe Biden warned he would not accept “extreme” Republican demands but said he remained optimistic.
“I still believe we’ll be able to avoid a default and we’ll get something decent done,” he said to reporters at the G7 summit in Hiroshima, Japan.
With the Treasury Department warning that the US government could run out of cash as early as June 1 – causing massive economic damage to the world’s largest economy and possibly the rest of the world – the political battle in Washington is not over. clear indication. in the resolution.
Republicans, who control the House of Representatives, have demanded steep budget cuts as a price for allowing an extension of the government’s borrowing authority. The White House has sought to downplay the Republican demands, while arguing that the traditionally uncontroversial annual increase in the debt ceiling is being weaponized for political gain.
Hopes for a settlement were dashed Friday when Republicans pulled out of the negotiations, declaring a “pause.”
However, talks resumed hours later, leading White House Press Secretary Karine Jean-Pierre to say “we are very optimistic.”
Biden, on the other side of the world for a gathering of wealthy democracies, was briefed on the situation on Saturday, which was still Friday night in Washington, the White House said.
Biden’s communications director Ben LaBolt said “Republicans are holding the economy hostage and pushing us to the brink of default, which could cost millions of jobs and plunge the country into recession after two years of steady work and salary growth.”
While Biden won’t accept “extreme” Republican policies, “there remains a path to reach a reasonable bipartisan agreement if Republicans come back to the table to negotiate in good faith,” LaBolt said.
Taxes and spending
The US government would need to borrow more just to meet the spending already done, meaning Republicans’ refusal to lift the debt ceiling would leave Washington unable to pay its bills, causing more shockwaves in the economy. .
Republicans argue that the more than $31 trillion in US national debt is too high to accept and that there should be an agreement to get the books more balanced, rather than simply allowing a higher debt allowance.
Democrats have said they are willing to discuss the budget but must first raise the debt ceiling unconditionally to pay existing bills and preserve US financial credibility.
Briefly canceling the talks on Friday, House Speaker Kevin McCarthy said: “We have to stop,” because “we can’t spend more next year.”
But Biden’s team says the raft of spending cuts demanded by Republicans is fueled by the agenda of the party’s more dominant right wing.
In his statement, LaBolt said the Republican budget cuts would lead to more job losses and weakening social safety nets, while extending tax breaks for the wealthy. The counter-proposal from the White House is to raise taxes on the wealthy to boost revenue and to accept more limited spending cuts.
In his talks with reporters, Biden expressed a willingness to be patient.
“It’s a negotiation. It’s going on in stages,” he said. Asked if he was worried, he replied: “Not at all.”
The US president left Japan for Washington on Sunday, cutting short a trip that was set to take him to Papua New Guinea and Australia next week.