Nearly two hours after the end of what appeared to be a fruitless meeting between President Biden and Republican leaders this week over raising the federal debt limit, Biden finally hinted at how the administration could avoid catastrophic bankruptcy.
Actually, it was two hints, contained in an impromptu press conference in the Roosevelt Room. For the first time, Mr Biden signaled his willingness to reclaim some unused stimulus money included in the economic rescue bill he signed in 2021 during the pandemic. That suggested a possible starting point for a compromise between the president and Republican lawmakers, who have refused to raise the country’s borrowing limit without major cuts, and who have pushed for some stimulus funds to be withdrawn.
Republicans estimate those chargebacks could save the government between $50 billion and $70 billion, a relatively small amount in the context of their $4.8 trillion proposal to cut spending and scrap clean energy tax breaks in exchange for increasing the debt limit. Asked about the idea on Tuesday, Mr. Biden did not rule it out.
“We don’t need everything,” Biden said, referring to the unused coronavirus money. “But the question is what obligations have been entered into, commitments made, money not paid, etc.? I have to look, look closely. It is on the table.”
The second clue was not about a possible compromise – it was the opposite. The president acknowledged that he is considering what would effectively be a constitutional challenge to the existence of the debt limit. It is a one-sided path that Mr Biden admitted could run into legal hurdles. But his comments suggested that if Congress couldn’t find a deal to raise the debt limit on terms acceptable to Mr Biden — and before the country runs out of money to pay its bills — the president might be willing to try prevent his debts from being paid. own.
“I am considering the 14th Amendment,” Mr Biden said, referring to a clause in the constitution that states “the validity of public debt” issued by the US government “shall not be questioned.” Some constitutional scholars argue that the clause requires the government to continue issuing new debt to pay bondholders, effectively exceeding the country’s legal borrowing limit, which is controlled by Congress.
Still, Mr Biden noted, “the problem is that it needs to be litigated.”
Neither route comes close to being a safe bet to avoid what economists on Wall Street and in the White House say would be a job-destroying financial crisis and a recession in the event of a prolonged bankruptcy. The Treasury Department has estimated that it could exhaust its ability to pay all its bills on time — including payments to U.S. lenders — as early as June 1 if the debt limit is not raised.
Together, however, those options could form the basis for Mr. Biden telling reporters that “I am absolutely confident” that the default threat can be defused in time.
Republicans have previously forced confrontations over the debt limit under Biden and former President Barack Obama. But current and former government officials, corporate lobbyists in Washington and even progressive economists say this impasse is different — and could carry significantly greater risks of the country defaulting.
Speaker Kevin McCarthy has only a narrow majority in the House. It includes a large group of money wasters who have pushed for confrontation over the debt limit. They insisted he link spending cuts, a rollback of the president’s climate agenda and new job requirements for government aid recipients to a bill passed by the House late last month to raise the debt ceiling, which has been capped at $31.4 trillion.
Mr Biden negotiated a last-minute deal to raise the limit and avoid default in 2011, as vice president. But as president, he has said he will not negotiate the basic responsibility of Congress to allow the government to keep borrowing money to pay its bills — which is necessary because lawmakers have spent more than two decades spending more than the government receives in tax revenue. .
That dynamic could make it significantly more difficult for the country than it was in 2011 to escape bankruptcy. Coming out of the White House meeting on Tuesday, Mr. McCarthy immediately tried to blame Mr. Biden and the Senate Democrats for the threat of default.
“I did everything I could to default,” he said. “We passed a bill that increases the debt limit. I haven’t seen that in the Senate yet. So I do not know.”
Mike Konczal, a director of the liberal Roosevelt Institute, said this week he was concerned investors and others might conclude from history “that a solution will come at the last minute.”
“That seems much less likely now,” he said.
Still, corporate groups and some current and former government officials have described publicly and privately what they believe could be the possible outlines of a compromise to avoid default. It would most likely involve an agreement to cap federal discretionary spending for at least two years. It could perhaps include other areas of mutual interest to Mr Biden and the Republicans – such as streamlining the permitting process to develop wind, oil, gas, solar and other energy projects.
Such a deal could be aided by a plunge in the stock market as a potential default approaches and investors panic, Democrats and Republicans say.
A spending compromise would be easy enough for congressional staff to draft in hours. Mr. Biden and New York Senator Chuck Schumer, the majority leader, said on Tuesday that staffers from both parties would meet for two days to discuss spending issues. “We need to sit down and figure it out,” Schumer told reporters on Tuesday. “But it would be best to take the default off the table now.”
However, until Mr Biden was willing to reclaim some coronavirus spending, it was unclear whether urgent tax talks could coexist with his insistence that he not negotiate the debt limit. Now it seems more likely that Mr. Biden and his team will be willing to discuss some Republican spending proposals on an accelerated timeline, whether they call it a negotiation or not.
It is also clearer that Mr. Biden would be willing to act alone if those discussions fail to bear fruit, invoking the 14th Amendment and continuing to borrow money to pay the government’s bills. “I don’t think this solves our problem,” he said, unless a court rules in favor of the government on the matter.
But Mr. Biden said the move was being considered regardless, and he emphasized that thought at the end of his remarks about a possible default. “I will do everything I can to prevent it,” he said.
Catie Edmondson reporting contributed.
