The White House floated on Thursday the prospect of a short-term debt limit hike to give President Biden and Speaker Kevin McCarthy more time to negotiate a broader deal on spending and avoid a default on the government’s bills.
“I’m sure one of the things on the table we will have to work through is how long. I’m not going to take anything off the table,” said Office of Management and Budget Director Shalanda Young. “I would love to be in that part of the conversation. Because we’re at least in the positive — default is off the table.”
The idea of a short-term hike comes as Mr. Biden is set to meet with Mr. McCarthy at the White House next week to discuss the debt limit.
A senior GOP leadership aide told The Washington Times the prospect of a short-term deal could only be accepted if Mr. Biden did something to signal he was serious about entering negotiations on cutting spending. The president has accused the GOP of holding the nation’s credit hostage in their push for spending cuts and has repeatedly said he will not bargain over raising the debt limit.
“We’ve been asking the White House to negotiate for months,” said the aide. “There’s a feeling the president isn’t taking this seriously and is hoping the GOP will blink in the face of pressure.”
The GOP is worried that if they agree to a short-term hike, Mr. Biden will take the move as a sign of weakness and refuse to negotiate, setting up another fiscal crisis. Democrats, for their part, say there might not be enough time to hold a proper negotiation.
“Negotiating a giant budget cut like Republicans want, that would be really hard to get done in a few weeks even if we wanted to do it,” said Rep. Glenn Ivey, Maryland Democrat. “We know that because it took House Republicans three months to draft their proposal. A clean debt-ceiling bill is the only way.”
Treasury Secretary Janney Yellen has warned that Congress has until June 1 to raise the statutory limit on how much the federal government can borrow to meet expenses or risks defaulting on the more than $31 trillion debt, a move that could chaos in the financial markets and trigger a downgrading of the U.S. credit rating. There is already evidence that confidence among investors in public debt is shrinking.
On Thursday, the U.S. Treasury sold $50 billion of four-week securities at a record interest rate of 5.84%. That’s the highest interest rate seen on sales of U.S. debt since 2000.
The $50 billion bonds are set to mature on June 6 — five days after a potential default. For comparison, last week the Treasury sold bonds set to mature on May 30 at a rate of 3.83%.
“We are in a game of chicken and it may very well blow up the economy,” said Sen. Jeff Merkley, Oregon Democrat.
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