Biden-McCarthy debt ceiling talks to set tone for divided Washington rule

[February 01, 2023]  By Trevor Hunnicutt

WASHINGTON (Reuters) - President Joe Biden and Republican House Speaker Kevin McCarthy are set to discuss the nation's $31.4 trillion debt ceiling on Wednesday, a meeting that will give a first sign of how the two will work together, or fail to, in a divided Washington.

The Oval Office talks come as Biden, a Democrat, and the Republicans, who won control of the U.S. House of Representatives in November's elections, are locked in a standoff over raising the federal government's borrowing cap. Failure to reach a deal by June could lead to a default that would shake the global economy.

Neither side is expecting a solution to emerge from just one meeting, and observers say the talks are most likely to serve as the opening bell for months of back-and-forth maneuvering.

House Republicans want to use the debt ceiling as leverage to exact cuts in spending by the federal government, though they have not united around any specific plan to do so. The White House contends that it will not negotiate over the increase, which is necessary to cover costs of spending programs and tax cuts previously approved by Congress.

The 80-year-old president, who served as vice president during a similar 2011 showdown that led to a historic downgrade of the federal government's credit rating, enters the talks with what some of his aides think is a strong hand, including a narrow Senate majority, a party that is unified on this issue, and a strong message for voters.

McCarthy, 58, leads a fractious House Republican caucus with a narrow 222-212 majority that has given a small group of hardline conservatives outsized influence.

Biden is expected on Wednesday to call for McCarthy to release a specific budget plan and to commit to supporting the nation's debt obligations, according to a White House memo seen by Reuters.

Biden has long-established relationships with both Democrats and Republicans in the Senate, where he served for decades. But he has far less personal history with McCarthy, who joined the Republican leadership on Capitol Hill under former Speaker John Boehner after Biden had already left to become Barack Obama's vice president.

U.S. House Speaker Kevin McCarthy meets with Jordan's King Abdullah II at the U.S. Capitol building in Washington, U.S., January 31, 2023. REUTERS/Leah Millis

Just one in four Republicans serving in the House today held their seats in 2011, and observers said they may not be fully aware of the risks of courting default, or the difficulties of negotiating in a divided government.

Unlike most other developed countries, the United States puts a hard limit on how much it can borrow, and Congress must periodically raise that cap because the U.S. government spends more than it takes in.

The 2011 crisis was resolved with a bipartisan deal that cut spending and raised the debt limit but left Obama administration officials smarting. Many felt that they had given up too much in negotiations and had still caused harm to the economy by letting talks persist.

McCarthy has less room to maneuver than his Republican counterpart in 2011 did. To win the speaker's gavel, he agreed to let any single member to call for a vote to unseat him, which could lead to his ouster if he seeks to work with Democrats. He also placed three hardline conservatives on the Rules Committee, which would allow them to block any compromise from even coming up for a vote.

Biden seemed to question McCarthy's ability to keep Republicans in line Tuesday at a fundraiser in New York, calling McCarthy "a decent man, I think," but noting the concessions he made to become speaker.

McCarthy, for his part, said Biden needed to be willing to make concessions to get a debt-ceiling hike though Congress, saying it would be "irresponsible" not to negotiate.

The Treasury Department has already started taking "extraordinary measures" to stave off a default until summer after hitting the borrowing limit earlier in January.

(Reporting by Trevor Hunnicutt; Editing by Scott Malone)

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