With time running out to strike a debt limit deal, President Biden and congressional leaders are set to meet Tuesday for pivotal face-to-face negotiations at the White House to avoid a default that economists say could eliminate jobs and cause a recession.
The 3 p.m. meeting comes a day after Treasury Secretary Janet L. Yellen reiterated that the United States could run out of money to pay its bills by June 1 if Congress does not raise or suspend the debt limit.
Republicans have said they want to slash federal spending before lifting the debt ceiling. The president has maintained that raising the limit is a responsibility of Congress and should be done without conditions to avoid an economic disaster, even as he has said he is open to separate negotiations over spending.
Over the weekend, the White House projected cautious optimism regarding a potential agreement, but on Monday, Speaker Kevin McCarthy expressed doubts.
“I don’t think we’re in a good place,” Mr. McCarthy said. “I know we’re not.”
Some potential areas of compromise have emerged in recent days, however. Mr. McCarthy said on Monday that he wanted to negotiate some of the key provisions of the bill to raise the debt limit that House Republicans passed last month. Those include spending caps, permitting changes for domestic energy projects, work requirements for safety net programs like food stamps and clawing back unspent money allocated for pandemic relief programs. “All of that I felt would be very positive,” he said.
In addition to Mr. McCarthy, Senator Mitch McConnell, Republican of Kentucky and the minority leader; Senator Chuck Schumer, Democrat of New York and the majority leader; and Representative Hakeem Jeffries of New York, the Democratic leader, will join Mr. Biden at the White House.
The government hit the $31.4 trillion debt limit on Jan. 19, and the Treasury Department has been using accounting maneuvers to keep paying its bills. Mr. Biden is also scheduled to leave for Japan on Wednesday to attend the Group of 7 meeting, heightening the sense of urgency to make progress on the debt limit.
While Mr. McCarthy played down progress, Mr. Biden and his allies said the White House and congressional teams have had productive talks in recent days.
“We welcome a bipartisan debate about our nation’s fiscal future,” Mr. Schumer said on Monday. “But we’ve made it plain to our Republican colleagues that default is not an option. Its consequences are too damaging, too severe. It must be taken off the table.”
Ms. Yellen will warn on Tuesday that the standoff over the debt limit is already having an impact on financial markets and is increasing the burden of debt on American taxpayers. Investors, she will note, have become wary of holding onto government debt that matures in early June — when the government could start running out of cash.
“We are already seeing the impacts of brinkmanship,” Ms. Yellen will say at the Independent Community Bankers of America summit, according to excerpts from her prepared remarks.
Ms. Yellen, who warned lawmakers on Monday that the Treasury Department could run out of cash as soon as June 1, also lamented that households and businesses are now being forced to consider the prospect of default as part of their financial plans.
“Too many businesses — including yours — are having to spend your time planning around the potential risk of U.S. default, instead of thinking about longer-term investments that will grow your enterprises and boost the economy,” Ms. Yellen will say.
Biden administration officials have said they will not roll back any of the president’s signature legislation, particularly on climate change, and the House Republicans’ bill is surely dead on arrival in the Democratic-led Senate.
The bill would make able-bodied adults without dependents who receive both federal food assistance and Medicaid benefits subject to work requirements until they are 55 years old, an increase from 49. It also would close a loophole that Republicans have claimed is abused by states, which allows officials to exempt food assistance recipients from work requirements.
Asked if he was open to tougher work requirements for aid programs, Mr. Biden said over the weekend that he had voted for such measures as a senator.
On Monday evening, however, Mr. Biden’s official Twitter account seemed to close the door on such a proposal. “The House Republican wish list would put a million older adults at risk of losing their food assistance and going hungry,” Mr. Biden wrote on Twitter. “Rather than push Americans into poverty, we should reduce the deficit by making sure the wealthy and large corporations pay their fair share in taxes.”
Toughening work requirements for programs like food stamps has long been anathema to congressional Democrats, and the proposal would face fierce resistance in the Senate.
“SNAP already has work requirements,” said Senator John Fetterman, Democrat of Pennsylvania, referring to the Supplemental Nutrition Assistance Program. “I didn’t come here to take food away from hungry kids, and that’s exactly what this proposal would do.”
Alan Rappeport contributed reporting.
