President Joe Biden says he is talking to Republican House Speaker Kevin McCarthy but that the latest Republican demands on the US debt ceiling are 'unacceptable'

Washington (AFP) - Anxiety grew in Washington Monday as President Joe Biden prepared to meet again with Republican House Speaker Kevin McCarthy for negotiations on raising the US debt ceiling, 10 days before a key deadline to avoid a disastrous default.

After a weekend of near deadlock, Biden arrived back in Washington late Sunday, cutting short a trip to Asia to resume talks ahead of the US Treasury’s June 1 cutoff date for Congress to authorize more borrowing.

Stock indexes opened no clear direction, with the Dow Jones adding 0.02 percent as Wall Street focused on the standoff.

Biden and McCarthy spoke as the president flew back to the United States from the G7 summit in Japan on Air Force One.

“It went well,” Biden told reporters of the phone call as he arrived at the White House Sunday night. “We’ll talk tomorrow.”

And earlier in the day, McCarthy had said the conversation was “productive” – in contrast to the sharp words exchanged in a previous round of negotiations.

US President Joe Biden boards Marine One at Joint Base Andrews in Maryland on May 21, 2023, as he travels back to the White House in Washington, DC

Still, the two sides seemed far from a final compromise, as Biden said Republicans’ latest demands for spending cuts as a condition for raising the US government borrowing authority were “frankly unacceptable.”

“It’s time for the other side to move from their extreme positions,” he said at a press conference before leaving the G7 summit in Hiroshima.

McCarthy said his own position remained unchanged.

“Washington cannot continue to spend money we do not have at the expense of children and grandchildren,” he said on Twitter after talking to Biden.

- ‘Something outrageous’ -

US House Speaker Kevin McCarthy speaks to members of the media following a meeting with US President Joe Biden at the White House in Washington, DC, on May 16, 2023

Biden said he was looking into an obscure constitutional clause in the 14th Amendment, which states that the validity of public debt “shall not be questioned” – and potentially authorizing the president to circumvent Congress and raise the debt ceiling himself.

“I think we have the authority. The question is could it be done and invoked in time,” he said, noting the likelihood of legal challenges to this and the rapidly approaching debt deadline.

The Treasury Department says the government could run out of money and default on payments on its $31 trillion debt as early as June 1 if Congress, where Republicans control the House of Representatives, does not authorize more borrowing.

Treasury Secretary Janet Yellen said Sunday that June 1 remains a “hard deadline,” adding: “My assessment is that the odds of reaching June 15th, while being able to pay all of our bills, is quite low.”

Biden had planned to travel from Japan to Papua New Guinea and Australia but cut short the Asia trip due to the debt talks.

This added to the impression that he limped into the G7 summit as a weakened leader of a divided country stumbling from one crisis to the next as the world looked on in dismay.

- Spending and taxing -

The debt ceiling raise is usually an uncontroversial annual procedure but this year the increasingly hard-right Republican Party has turned the threat of default into a powerful lever to try and force Biden to accept spending cuts.

Chart showing the US debt ceiling since 2006

More borrowing is required imminently by the US government just to meet expenditures already agreed to in the current budget.

Failure to strike a debt ceiling deal would leave Washington unable to pay its bills and trigger an array of economic shock waves worldwide – including, the White House says, a US recession.

With the 2024 election campaign underway and Biden potentially facing Donald Trump again, Republicans have seized the opportunity to paint Democrats as responsible for the country’s gargantuan debt – which in reality has built up over decades.

Republicans say the debt ceiling can no longer be raised without harsh measures to reduce the deficit. These include slashing social spending and restricting access to Medicaid, the subsidized program providing health care for the poor.

Biden has countered with a plan to reduce some spending but also to raise new revenue by increasing taxes on the richest Americans and corporations currently enjoying huge tax breaks. Republicans refuse to accept tax increases as part of a deal.

“That’s what we continue to have a significant disagreement on, on the revenue side,” Biden said.