An optimistic President Joe Biden has declared he is confident the US will avoid an unprecedented and potentially catastrophic debt default, saying talks with congressional Republicans have been productive.
Biden's upbeat remarks came on Wednesday as a select group of negotiators began meeting to try and hammer out the final contours of a budget spending deal to unlock a path for raising the debt limit as soon as June 1.
That is when the Treasury Department says the US could begin defaulting on its obligations and trigger financial chaos.
"I'm confident that we'll get the agreement on the budget and America will not default," Biden said from the Roosevelt Room of the White House.
Democrat Biden and Republican House Speaker Kevin McCarthy have traded blame for a debt-ceiling impasse for weeks, but Biden said of the latest White House session with congressional leaders that "everyone came to the meeting, I think, in good faith".
The president said the budget talks were still separate from the debt limit issue, but the speaker said Biden had "finally backed off" his refusal to negotiate.
"Keep working — we'll work again tonight," McCarthy told reporters later. "We're going to work until we can get it done."
Biden said that every leader at Tuesday's Oval Office meeting — Vice President Kamala Harris, McCarthy, House Minority Leader Hakeem Jeffries, D-NY, Senate Majori ty Leader Chuck Schumer, D-NY, and Senate Minority Leader Mitch McConnell, R-Ky. — agreed the US must not default on its obligations.
"It would be catastrophic for the American economy and the American people if we didn't pay our bills," Biden said. "I'm confident everyone in the room agreed … that we're going to come together because there's no alternative. We have to do the right thing for the country. We have to move on."
Biden and McCarthy tasked a handful of representatives to work swiftly to try and close out a final deal. They include Steve Ricchetti, counsellor to the president; legislative affairs director Louisa Terrell and Office of Management and Budget Director Shalanda Young for the administration, and Rep. Garret Graves, R-La., a close McCarthy ally, for the Republicans.
Agreement by the negotiators would still leave any deal needing approval by Democratic Senate and Republican House.
The national debt currently stands at $31.4 trillion. An increase in the debt limit would not authorise new federal spending; it would only allow for borrowing to pay for what Congress has already approved.
In exchange for lifting the debt limit to keep paying the bills, newly majority House Republicans are trying to extract steep budget caps of no more than 1 percent growth a year over the next decade, alongside bolstered work requirements.
Negotiators are preparing to claw back some $30 billion of unspent Covid-19 aid, now that the government has lifted the pandemic emergency, and they are working on a potential agreement for permit changes that would speed the development of energy projects that both Republicans and Democrats want, though the details remain daunting.
But Democrats are not at all willing to accept the 10-year cap on spending that Republicans approved in their own House bill, and the Democrats are instead pushing for a shorter window of budget cuts.
'The only way to go'
Biden is facing fierce blowback from progressive Democrats after he opened the door to tougher work requirements, but he insisted on Wednesday any new work requirements would be of "no consequence" and that he's not willing to impact health programmes, presumably referring to Medicaid.
Asked about that, the Republicans behind McCarthy — who support more work requirements on Medicaid, food stamps and cash assistance programs — broke out in laughter at the Capitol.
The Republicans scoffed aloud as helicopters with the presumably departing Biden flew overhead.
Former President Trump has encouraged Republicans to "do a default" if they don't get everything they want from Biden.
"Bipartisanship is needed," Schumer said Wednesday. "It's the only way to go."
As backup on Wednesday, House Democratic leader Hakeem Jeffries launched a process that would force a vote on raising the debt limit.
It's a cumbersome legislative discharge procedure, but Jeffries urged House Democrats to sign on to the measure in hopes of gathering the 218 majority backers including Republicans needed to put it in motion.
"Emerging from the White House meeting, I am hopeful that a real pathway exists to find an acceptable, bipartisan resolution that prevents a default," Jeffries said in a letter to colleagues.
"However, given the impending June 1 deadline and urgency of the moment, it is important that all legislative options be pursued in the event that no agreement is reached."