Biden, McCarthy have 'productive' debt ceiling meeting, but still lack deal as default looms

WASHINGTON - President Joe Biden and House Speaker Kevin McCarthy appeared to make progress but did not reach an agreement during a pivotal White House meeting Monday evening on raising the debt ceiling 10 days before a potential default.

“I felt we had a productive discussion," McCarthy told reporters following the roughly one-hour meeting. "We don’t have an agreement yet.”

The high-stakes Oval Office meeting, which lasted about an hour, came after negotiations took a step backwards over the weekend amid long-standing disagreements on spending cuts sought by Republicans.

McCarthy commended the "professionalism" and "honesty" in the meeting but it wasn't immediately clear which areas produced headway. McCarthy said he's unwilling to consider tax increases on the wealthy, which Biden supports, or defense cuts pushed by some liberal Democrats.

"The problem is not revenue. The problem is spending," McCarthy said.

Biden 'optimistic' as McCarthy applauds 'better' tone

Biden is racing to reach a budget deal with House Republicans so they will take action to raise the debt ceiling before June 1, when the Treasury projects the U.S. could run out of money and default. But Republicans want spending cuts that Biden slammed Sunday as "unacceptable" for a deal.

Biden, in a statement after the meeting, also described a "productive" discussion. "We reiterated once again that default is off the table and the only way to move forward is in good faith toward a bipartisan agreement," he said.

Kicking off the meeting, Biden told reporters he was "optimistic" about making progress. "We still have some disagreements but I think we may be able to get where we have to go," he said. "We both know we have a significant responsibility."

It was the third time Biden and McCarthy have met in less two weeks but their first one-on-one gathering in more than 100 days when they kicked off debt ceiling talks in February. Other recent meetings included other congressional leaders from both parties.

"I think the tone tonight was better than any other time we've had discussions," McCarthy said. "I believe we can get it done."

Sticking points in debt ceiling negotiations

McCarthy said he believes he and Biden will speak every day until a deal is done. Earlier Monday, White House and House Republican negotiators met at the Capitol. Biden said their staffs will continue to discuss a path forward.

• Talks have centered on Republicans proposals for stricter work requirements for recipients of food stamps and other welfare benefits, annual caps on future discretionary spending, expedited permitting for oil and gas projects and rescinding COVID-19 funds. The White House has been open to components of each, but won't go as far as Republicans want.
• Over the weekend, Republicans proposed a new cut to the Supplemental Nutrition Assistance Program that Biden opposes, according to a White House official who discussed talks on the condition of anonymity. Republicans have also insisted on six years of annual spending caps − down from a prior demand for 10 years − while the White House will only agree to two years.
• The White House is now trying to flip the debate by pushing a key piece of the Democratic agenda: Tax increases on the wealthiest Americans and corporations by not renewing tax cuts passed under the Trump administration in 2017.
• Biden said the White House put forward a proposal that includes more than $1 trillion in spending cuts, but as part of the same proposal, Democrats want the tax overhaul. Republicans have balked.
• Republicans also called for an increase in defense spending, which the White House said would result in further cuts to domestic programs in education and health care.

Yellen reiterates June 1 deadline for default

Treasury Secretary Janet Yellen, in a Monday letter to McCarthy, reiterated the U.S. will be unable to fulfill its spending obligations as early as June 1 and warned that waiting until the last minute to raise the debt ceiling "can cause serious home to business and consumer confidence."

For months, Biden insisted he wouldn't negotiate over raising the debt ceiling. But that's effectively what he is doing after Republicans successfully used the moment to force the White House into entertaining Republican proposals for spending cuts in parallel budget negotiations.

Talks have been dominated by Republican proposals for spending cuts. But after negotiations fizzled over the weekend, Biden went on the offensive Sunday by demanding that Republicans "move from their extreme positions" and agree to tax increases on the wealthiest Americans in exchange for Democrats backing some cuts.

Whether Biden can strike a deal with McCarthy is a major test of Biden's commitment to brings bipartisanship back to the White House.

Biden has questioned the motives of "MAGA Republicans" in Congress, suggesting Sunday they might be trying to benefit politically by causing a default.

Biden hasn't ruled out invoking the 14th Amendment

If he can't reach a deal with McCarthy, Biden has not ruled out challenging the legality of the debt limit by invoking the 14th Amendment, which says “the validity of the public debt of the United States … shall not be questioned.”

Under a legal theory that several constitutional law experts support, Biden could continue having the Treasury issue new debt to fulfill its financial obligations without congressional action to raise the debt ceiling.

Biden has said he believes the 14th Amendment gives him the authority to bypass Congress to work around the debt ceiling. But he has raised concerns about litigation that could compromise the June 1 deadline.

Reach Joey Garrison @joeygarrison and Francesca Chambers at @fran_chambers