Biden is Biding, Yellen is Yelling, As U.S. Default Looms

To avoid “catastrophe,” Congress has to do just one thing: its job.

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Despite ongoing talks, the debt ceiling battle is not going swimmingly for either side.

President Biden met with Congress’s Big Four in the Oval Office on Tuesday in an attempt to get Congress to raise the debt ceiling limit to $31.4 trillion. 

But as of this writing Wednesday, they remained at an impasse, with House Republicans demanding trillions of dollars in spending cuts in exchange for their approval. The Oval Office talks included U.S. House of Representatives Speaker Kevin McCarthy, a Republican from California; Senate minority leader Mitch McConnell, a Republican from Kentucky; and Senate Majority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries, both Democrats from New York. (For full backgrounder of the unfolding events — and Wall Street’s chagrin — check out Power Corridor’s Big Read from Friday.)

So far, the group has been unable to cobble together a plan that would pass both chambers of Congress. Speaking after the meeting, Biden seemed open to compromises, characterizing the talks as “productive,” although they remain deadlocked. He insisted “default is not an option” and that the U.S. cannot be a “deadbeat” in paying the debt it already owes.

He cautioned that Republicans must back off their threat of defaulting the U.S. economy, underscoring that if Congress does not raise the debt ceiling before the U.S. Treasury hits what is being called the “X-date” – the moment when it runs out of funds to pay its bills – the nation’s economy will “fall into significant recession,” shredding retirement accounts and raising borrowing costs for Americans.

U.S. Treasury Secretary Janet Yellen has stated the X-date could come as soon as June 1. Over the weekend, she stepped up her warnings while doing the rounds on television, saying, “It’s Congress’s job to do this. If they fail to do it, we will have an economic and financial catastrophe that will be of our own making.” 

She added that the negotiations should not be undertaken “with a gun to the head of the American people.”

If the higher debt ceiling limit is not approved in time, the federal government may not be able to make wage, welfare, health benefit, or other payments. 

Biden says his staff will continue to meet with Republican staff daily and talks among the Big Four will reconvene this Friday. “Obviously, this is the single most important thing on the agenda,” he said.