White House Considering Short-Term Debt Ceiling Extension

White House Considering Short-Term Debt Ceiling Extension

The White House is reportedly considering a short-term extension of the debt ceiling to prevent an economic crisis. According to five sources familiar with the matter, officials are aware of the risk to markets, businesses, and consumers as the June 1st deadline approaches, and while the Biden administration prefers a long-term deal, aides are discussing fallback options. These include invoking the 14th Amendment and a short-term extension, which has been enacted six times since 1993 to provide more time for a broader package to take shape.

An extension into the fall would give parties several months to negotiate a more fulsome spending deal and could coincide with the September 30 deadline to agree on next year’s government funding. Moderate Democrats in Congress have signaled willingness to vote for a short-term extension, but both Republican and Democratic sources acknowledge that a short-term extension is likely unhelpful unless negotiations between the White House and Congress are more productive.

Despite robust hiring, the US economy grew just 1.1 percent in the first quarter of 2023, leading analysts to suggest that a debt ceiling debacle on top of the Federal Reserve’s recent interest rate hikes could trigger a recession. The White House Council of Economic Advisors published research this week showing that the economy would contract 0.3% if the debt ceiling debate pushes right up to the deadline. Two consecutive quarters of negative economic growth are considered a recession, as determined by the National Bureau of Economic Research.

The White House remains committed publicly to its position pushing for a long-term solution and remains open to a two-track process to negotiate spending separately from the debt ceiling. However, the administration does not need any more drama and uncertainty in the economy and is not necessarily pushing for a shorter-term deal. The White House spokesperson said that “Default is not negotiable,” and the party hasn’t unilaterally opposed a longer extension if Republicans get something in return.

Rep. Dusty Johnson, a close ally of Speaker Kevin McCarthy, pointed out that a House-passed bill included a number of Republican requests to cut spending. He said that if the White House understands how important it is for them to unlock American energy and cut unobligated Covid funds, they’re going to find Republicans receptive if the White House understands the party’s values.

In conclusion, the US economy is on the edge, and a short-term extension may be considered to buy more time for a more fulsome spending deal to take shape. The parties need to negotiate spending separately from the debt ceiling to avoid an economic catastrophe, and the administration remains committed to finding a long-term solution.

US

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