Biden meets Republican leaders in bid to resolve US debt limit impasse

A significant meeting took place between President Joe Biden and Republican leaders yesterday, with the hope of breaking the deadlock over the US debt limit, which could have repercussions in the upcoming presidential election. The key gathering had President Biden, House Speaker Kevin McCarthy, and Senate Republican leader Mitch McConnell discussing the national debt ceiling, which currently stands at US$31.4 trillion. The decision to raise or maintain this borrowing limit has been a contentious issue recently, with Republicans advocating for reduced spending and a smaller budget deficit.

A similar impasse in 2011 led to the US losing its AAA debt rating, reflecting the potential consequences of the present situation. The Republican Party has expressed that it will not agree to a debt ceiling increase unless the Democrats first accept significant budget cuts. Necessary time-sensitive action is required to avoid financial and economic chaos, as warned by Treasury Secretary Janet Yellen on Sunday.

The meeting also included top Democrats from Congress, House Minority Leader Hakeem Jeffries and Senate Majority Leader Chuck Schumer. While President Biden has called for an unconditional “clean” lifting of the US borrowing limit, such a quick and easy resolution is not expected. The Senate, controlled by the Democrats, faces resistance from 43 Republicans who want to impose legislative obstacles to any attempt to raise the debt ceiling unless substantial fiscal and budget reforms are introduced.

The exact date when the government may run out of funds is uncertain, with the Treasury issuing caution that it could happen as early as June 1. Failure to resolve the debt limit impasse may not only cause turmoil on Wall Street but may also impact Biden’s political aspirations for re-election. Following Moody’s Analytics projections, Treasury payments could face disruption for a few days in early June, with consequences on the financial markets. Nevertheless, lawmakers are expected to negotiate a compromise bill if the stalemate still persists when the debt limit is at risk of being breached, reports Channel News Asia.