McCarthy sees no progress on debt limit after Biden meeting, as US default looms

House Speaker Kevin McCarthy said there was no progress in efforts to avert a first-ever US default during an hour-long meeting with President Joe Biden and other congressional leaders.

“I didn’t see any new movement,” McCarthy told reporters on Tuesday afternoon at the White House following his first meeting with Biden on the debt ceiling since February 1. He said they would meet again on Friday.

The Oval Office meeting came hours after both made clear they are not interested in a short-term debt-limit extension.

Markets have shown early signs of strain as the deadline nears, and Tuesday’s continued stalemate threatens to have reverberating effects.

Even as McCarthy lamented what he saw as a lack of progress, Senate Republican leader Mitch McConnell sought to assure investors that there would be agreement.

“The United States is not going to default. It never has and it never will,” McConnell said.

The lack of progress described by McCarthy is likely to increase market anxiety ahead of June 1 – the date Treasury Secretary Janet Yellen has warned the nation could exhaust its ability to meet all payment obligations without action.

A short-term extension or an increase to the debt limit would be the most expedient way to delay a crisis but both sides took that off the table before the meeting.

Yellen warns US may default on June 1 without debt ceiling hike

“Why continue to kick the can down the road?” McCarthy told reporters Tuesday at the Capitol, when asked about extending the ceiling until September 30. “Let’s solve it now.”

Ahead of the meeting, White House Press Secretary Karine Jean-Pierre likewise said a short-term extension is not Biden’s “plan” but took a dig at the speaker, who has demanded deep domestic spending cuts in exchange for Republican votes to raise the nation’s borrowing limit.

Yields on four-week Treasuries reached record highs last week as the prospect of any early June default increased. But so far equity markets have not registered a large drop attributable to the stand-off.

That marks a difference from the 2011 debt stand-off, during which the S&P 500 fell more than 16 per cent in the five weeks before an August 2 increase in the ceiling. S&P ultimately downgraded the US credit rating on August 5.

The Republican-led House last month passed a bill that would raise the debt ceiling by US$1.5 trillion in exchange for US$4.8 trillion in budget deficit cuts over 10 years. It contains a litany of conservative priorities, including cancelling green energy subsidies and tax enforcement spending from Biden’s signature legislation enacted last year.

The White House has said it will only accept a “clean” no-strings-attached debt ceiling increase, although Biden is open to separate talks on the budget levels for fiscal 2024.

Just before the meeting, McConnell said Biden must negotiate a deal with McCarthy on spending and debt. “Either he drives the country into default or he comes to the table,” he said of the president.

Senate Majority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries, both New York Democrats, also attended the meeting.

Biden began the meeting on a lighter note. “We’re going to get started and solve all the world’s problems,” Biden quipped.