Kevin McCarthy, the Republican speaker of the House, said there will be no progress on debt ceiling talks until US President Joe Biden returns from the G7 summit in Japan on Sunday night, as tensions explode into a financial impasse that threatens the world’s largest economy.
Speaking to reporters at the US Capitol on Saturday afternoon, McCarthy accused the White House of “holding back” on budget deal negotiations, dashing hopes of a breakthrough that could calm markets before they open on Monday.
McCarthy said, “I don’t think we can move forward until the president can come home.”
Biden is not expected to return to the White House until 11 p.m. local time on Sunday.
The lack of any movement in the talks will be a concern as the government’s borrowing cap must be raised by June 1 or Washington faces an unprecedented default on US debt. Such a prospect could plunge global markets into turmoil and the US economy into recession.
Any debt ceiling agreement would take several days to pass through the House and Senate and be signed by the president. Even getting close to the deadline can scare away investors and lead to economic turmoil.
McCarthy’s downbeat tone was matched by pessimism from the White House, which blamed the state of negotiations on Republican hardliners who bowed to Donald Trump’s Make America Great Again movement.
White House press secretary Karen Gunn-Pierre said in a statement Saturday.
Given the negative economic fallout from the default, as well as the unexpected political impact, it is still expected that Biden and congressional Republicans will eventually reach an agreement. A setback in the talks, along with pressure not to give in from factions in the Democratic and Republican parties, may be a necessary precursor to a final agreement, not a sign that the talks have seriously derailed.
To agree to raise the debt ceiling, Republicans would push for deep spending cuts over 10 years, while Democrats would agree to limited budget cuts over a shorter period. They also clashed over imposing new labor requirements for social spending programmes. Both sides expressed more optimism about the talks from last week until Friday, when talks were halted for several hours before resuming.
Early Saturday in Japan, Biden said he still believes a default can be avoided and that “something decent” can be done — but he also said the talks are going through “phases.”
“The first meetings were not that progressive. The second was. The third was,” Biden said.
“Then what happens is…the carriers go back to the principles and say, ‘Here’s what we think.'” “Then people come up with new allegations,” said the US president.