Negotiations between the White House and Republican congressional negotiators regarding raising the federal government’s $31.4 trillion debt ceiling have stalled. The second meeting on Friday ended with no progress cited by either side, and no additional meetings have been scheduled. The talks were broken off for several hours on Friday, with less than two weeks to go before June 1, when the Treasury Department warned that the federal government could be unable to pay all its debts, which could trigger a calamitous default.
Sharp Spending Cuts Required for Republican Approval
Republicans, who control the House of Representatives, have demanded sharp spending cuts in exchange for approving an increase in the federal government’s borrowing limit. However, the White House has acknowledged that “serious differences” remain between the two parties. Democrats have been pushing to hold spending steady at this year’s levels, while Republicans want to return to 2022 levels. A plan passed by the House last month would cut government spending by 8% next year, but it does not specify what spending would be cut.
Biden’s Meeting with World Powers Affected
The talks have hung over President Joe Biden’s meeting with world powers in Japan. A second Republican negotiator, Representative Patrick McHenry, said he was not confident the two sides could meet House of Representatives Speaker Kevin McCarthy’s goal of reaching a deal this weekend, which could then be presented to Congress for passage in coming days. U.S. stocks closed the week on a soft note after news of the stalled negotiations. Some Republicans have criticized Biden for taking the trip to Japan at a key point in the talks.
Congress eventually averted default in 2011, but the economy endured heavy shocks, including the first-ever downgrade of the United States’ top-tier credit rating and a major stock sell-off.
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