Biden Cuts G7 Trip Short Amid Debt-Limit Negotiations

(Update 1558ET): President Biden has decided to shorten his trip to Asia for the G7 meeting, NBC reports, citing the need to return early to continue debt limit negotiations with Republicans.

The White House had emphasized how Biden’s attendance at a summit of the Group of Seven major industrial countries in Japan this week would shore up optimism that the U.S. is able to resolve its differences at home. The president had next planned to travel to Australia for a “Quad” meeting on May 24, with China’s provocative actions in the region expected to be front and center in meetings with the leaders of Australia, India and Japan. -NBC

Biden will also cancel a trop to Papua New Guinea, where he was planning to stop on his way to Sydney to discuss regional security, as well as economic and climate support, whatever that means.

On Tuesday afternoon he will meet with congressional leaders before departing on Wednesday.

According to the report, Biden, Senate Majority Leader Chuck Schumer (D-NY), and House Minority Leader Hakeem Jeffries (D-NY) have insisted that they will only accept a bill that raises the borrowing limit with no strings attached, while House Speaker Kevin McCarthy (R-CA) says Republicans will only agree to lifting the limit if it’s paired with spending cuts.

Instead of all the breathless apocalyptic commentary on a US default, can we just agree on how much stocks have to drop to get a deal done in Congress

— zerohedge (@zerohedge) May 11, 2023

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(Update 1022ET): McCarthy has reportedly stressed the need for unity among House Republicans, while members say they ‘feel unified,’ according to PBS‘s Lisa Desjardins, who adds that McCarthy told his party that “talks could get rough now,” and that “it is clear there is no end game plan.”

DEBT CEILING – House Republicans. From sources in the conf mtg this am:
– McCarthy stressed need for unity. And members said they feel unified.
– And he told them talks could get rough now.
– Talking w GOP house members, it is clear there is no end game plan.

— Lisa Desjardins (@LisaDNews) May 16, 2023

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House Speaker Kevin McCarthy (R-CA) said on Monday that negotiations over the debt limit with Democrats and President Joe Biden are “not in a good place,” and that Biden had delayed talks for 100 days.

“We only have so many days left,” McCarthy said on Monday – reiterating today that there had been ‘no progress’ in the talks. “The president decided to wait 100 days before he would negotiate. He treated this the same way he treated the border [crisis]—he wanted to ignore the problem.”

McCarthy and Biden are scheduled to meet at 3pm ET on Tuesday.

Complicating matters is a Biden’s scheduled trip to Japan on Wednesday to attend the Group of Seven meetings.

According to McCarthy, Democrats “would have to get serious about negotiating” before he considers any progress to have been made. “They would have to really talk about where they’re going to go.”

“I don’t think we’re in a good place, I know we’re not. This ignoring the problem, thinking it will go away … he could bumble his way into a default just like he did on the border.“

McCarthy has sought to use the threat of defaulting on the nation’s debts to force Democrats to limit their spending. “Save, and grow,” he said of the GOP’s economic strategy.

“Time is of the essence,” was McCarthy’s message for Biden on Monday. He has argued that the government can’t continue to spend money at the pace it is now.

An increase in the debt limit would not authorize new federal spending. It would only allow for borrowing to pay for the policies and legislation what Congress has already approved. –Epoch Times

“I’m really concerned that the Senate hasn’t passed anything. I’m really concerned that the president waited 100 days before he’d even talk to us. I’m really concerned about the president’s continued spending, of what it will do to Medicare and social security,” McCarthy said on Monday. “I’m really concerned about … instead of the Democrats sitting down, realizing we have a division in government, and being honest and adult and discussing this but simply lying about what we’re doing.”

Treasury Secretary Janet Yellen echoed McCarthy’s warning on Monday, saying that “time is running out” to avert an economic catastrophe, and that default could see financial markets “break” with worldwide panic that triggers margin calls, bank runs and fire sales.

“We are already seeing the impacts of brinksmanship: investors have become more reluctant to hold government debt that matures in early June,” Yellen said in remarks prepared for delivery to a banking conference on Tuesday, Bloomberg reports. “The impasse has already increased the debt burden to American taxpayers.”

The Treasury chief issued a fresh letter to congressional leaders Monday restating that the Treasury risks running out of sufficient cash for all federal obligations as soon as June 1. The livelihoods of millions of Americans “hang in the balance,” she said in excerpts of her speech to the Independent Community Bankers of America Capital Summit released by the Treasury.

“Every single day that Congress does not act, we are experiencing increased economic costs that could slow down the US economy,” Yellen said.

Biden and McCarthy have been at an impasse since January over raising the government’s $31.4 trillion borrowing limit. Economists have cautioned that US default risks triggering a market selloff, a surge in borrowing costs and a blow to the global economy that could rival the 2008 crash.

According to people familiar with the meetings, the White House has pushed to exclude elements of a bill passed by House Republicans last month – including the elimination of Biden’s student-loan forgiveness program, as well as several legislative accomplishments.

Republicans, meanwhile, have rejected a Democratic proposal that would seek to raise revenue by altering a dozen provisions of the tax code, including a cryptocurrency loophole which allows investors to claim losses on assets that they then purchase. Another proposal from Democrats would be the elimination of a loophole that allows large real estate investors to effective receive interest-free government financing, Bloomberg reports.

According to Rep. Dusty Johnson (R-SD), the GOP has three red lines; no clean debt increase, no tax increase, and the bill must reduce the deficit.

Yellen also addressed recent banking turmoil, reiterating that US deposits remain safe.

“Recent banking troubles including the resolution of First Republic are not a sign of any shift in the fundamental health of the US banking system,” she said, adding “Americans should rest assured that their deposits are safe. Their deposits will be there when they need them.”