Biden, McCarthy hold productive call amid US debt ceiling crisis

In an effort to resolve the impasse over the US debt ceiling, President Joe Biden and top Republican Kevin McCarthy engaged in a productive phone conversation. The two leaders are scheduled to meet on Monday, with the deadline to lift the debt ceiling fast approaching. Failure to reach an agreement could lead to the US defaulting on its debt, causing chaos in financial markets and further rises in interest rates.

Biden, who was returning from the G7 summit in Japan, expressed that the Republicans’ proposals were “simply, quite frankly, unacceptable.” However, he also stated his willingness to cut spending to reach a deal. After the call, McCarthy told reporters the discussions had been positive, and a White House official confirmed that staff members from both sides would meet to “discuss remaining issues.”

Treasury Secretary Janet Yellen warned that June 1 remained a “hard deadline,” and failure to lift the ceiling could result in the US suspending social insurance payments and the salaries of federal and military employees. This could also wreak havoc on the global economy, affecting prices and mortgage rates in other countries.

Republicans are demanding budget cuts of US$4.5tn in exchange for their support to raise the debt ceiling, which includes scuppering several of Biden’s legislative priorities. The White House has called the Republican proposal “a blueprint to devastate hard-working American families,” although it has indicated that it may make some budgetary concessions.

Both Biden and McCarthy are under pressure from the left and right flanks of their respective parties to hold the line. With a one-seat Democratic majority in the Senate and Republicans in narrow control of the House, a deal has so far proven elusive.