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Biden and McCarthy Aim for Debt Ceiling Deal to Prevent U.S. Default

President Joe Biden and top congressional Republican Kevin McCarthy expressed their commitment to advancing talks on raising the $31.4 trillion debt ceiling. Both leaders are eager to avoid an economically catastrophic default, working towards a deal after months of standoff.

Joe Biden and Kevin McCarthy
Joe Biden and Kevin McCarthy

Direct Negotiations and Tight Timeline

The Democratic president and the House speaker agreed on direct negotiations, which must result in a deal passed by both chambers of Congress before the federal government runs out of money to pay its bills, potentially as early as June 1. Biden emphasized that the negotiations are focused on the budget's outline, not on whether the U.S. will pay its debts.

Republican Stance on Spending Cuts

Republicans, who hold a 222-213 majority in the House, have insisted that Democrats agree to spending cuts in exchange for a deal to raise the debt limit. In a CNBC interview, McCarthy vowed to avoid a default and expressed optimism about the newly established negotiation structure.

Streamlined Two-Way Conversation

The new two-way conversation format between Biden and McCarthy streamlines the previous five-way format, which involved the three other top congressional leaders. Biden plans to continue speaking with top lawmakers by phone during the G7 summit in Japan and meet with them again upon his return.

Market Reaction to Debt Ceiling Talks

Financial markets seemed to respond positively to Tuesday's discussions, with U.S. stocks rising on Wednesday as investors cautiously anticipated progress in the ongoing talks.

Negotiators Racing Against Treasury Deadline

With the U.S. Treasury potentially running out of funds as early as June 1, negotiators aim to reach an agreement before Biden's scheduled return to Washington on Sunday. Congress will then need to act swiftly to avoid a potential recession.

Debating Work Requirements and Spending Caps

The ongoing negotiations also involve discussions on the duration of the deal, work requirements for aid programs for the poor, and spending caps. While the White House has not provided details on these issues, Republicans are pushing for the inclusion of expanded work requirements as part of the agreement.

Disagreements on Taxes and Revenue Generation

McCarthy defended conservatives' call for work requirements, asserting their potential to help the economy and boost the workforce. However, he also vowed to exclude any discussion of taxes, a key aspect of Biden's 2024 budget. Biden expressed disappointment that Republicans will not consider ways to raise revenue by increasing taxes on the wealthy and corporations.