Biden and McCarthy Both Assure "No US Default"... Willingness to Negotiate (Comprehensive)

Amid growing concerns that the United States could face an unprecedented debt default as early as this June, both President Joe Biden and House Speaker Kevin McCarthy, a Republican, have expressed strong intentions to negotiate, emphasizing that a default must be avoided.

On the 17th (local time), before departing for Japan to attend the Group of Seven (G7) summit, President Biden stated at a press conference, "I am confident that we can reach an agreement to prevent the United States from defaulting (by raising the debt ceiling)." The day before, President Biden held a second meeting on the debt ceiling with congressional leaders, including Speaker McCarthy, but they did not find the breakthrough they had hoped for. However, both sides agreed that a default must be avoided and decided to continue discussions.

[Image source=Reuters Yonhap News]

Regarding the meeting the previous day, President Biden emphasized, "All the leaders present know that if we fail to pay our bills, it would have catastrophic consequences for the U.S. economy and the American people," and "Everyone agreed that we will not fall into default." Currently, President Biden has even shortened his overseas trip schedule to focus on the debt ceiling negotiations. Originally, he was scheduled to depart for Japan on this day to attend the G7 summit and then visit Papua New Guinea and Australia, but after completing the Japan schedule, he plans to return on the 21st.

On the same day, Speaker McCarthy also drew a line against concerns over a default related to raising the federal government's debt ceiling. Appearing on CNBC's Squawk Box, he said, "In the end, we believe there will be no default," and "We believe that ultimately the president agreed to negotiate." He emphasized, "The only thing I am certain of is that we now have a structure that allows us to find a way to reach a conclusion."

Speaker McCarthy described President Biden's willingness to negotiate as "encouraging." This marks a tonal shift compared to his previously negative stance before the second meeting. While acknowledging the tight deadline for negotiations, McCarthy expressed a willingness to find a solution together. However, he also reiterated concerns about the severity of the federal government's debt level. The Republican Party, which holds the majority in the House, has long insisted on large-scale government spending cuts as a precondition for raising the debt ceiling.

[Image source=AP Yonhap News]

Democratic House Majority Leader Hakeem Jeffries also described the previous day as "a very positive meeting" in a separate interview with Squawk Box, saying, "It was calm. The discussions were frank. I am optimistic that we can find common ground within the next one to two weeks." However, he dismissed proposals to increase mandatory work hours for low-income individuals receiving government support such as food purchases as a "nonstarter." Local media, including The Washington Post (WP), reported the day before that the White House and Republicans were discussing this proposal. It is reported that both sides' aides are currently focusing on finding common ground in areas such as recovering COVID-19 budgets, streamlining energy project approval procedures, and setting government spending caps.

The United States exhausted its $31.4 trillion debt ceiling on January 31 and is currently relying on special measures to hold on. Treasury Secretary Janet Yellen has indicated that the X-day, when cash runs out, will be on the 1st of next month. Earlier, Secretary Yellen cited an analysis by the White House Council of Economic Advisers warning that if a default lasts more than three months, the stock market could plunge by 45% and up to 8.3 million jobs could be lost, cautioning that it could lead to a severe recession akin to the Great Depression.

In the market, even if the worst-case scenario of default is avoided, there is a growing consensus that the closer the X-day approaches, the more inevitable the repercussions such as a sharp stock market decline will be. Over 140 top U.S. CEOs publicly urged politicians in a letter the day before to promptly raise the debt ceiling.

Meanwhile, the Democratic Party is preparing an emergency plan to immediately bring a debt ceiling increase bill to a vote in the House of Representatives in case negotiations between President Biden and Speaker McCarthy ultimately fail. Majority Leader Jeffries also stated in a letter to lawmakers that it is important to explore all legislative options in preparation for a possible negotiation breakdown.

This content was produced with the assistance of AI translation services.