US economy on the verge of collapse, time running out to avoid debt | CNN Politics (2023)

US economy on the verge of collapse, time running out to avoid debt | CNN Politics (1)

President Biden and Speaker of the House of Representatives Kevin McCarthy.

Washington CNN

America is collapsingA self-inflicted economic disasterThe Republican-led House refuses to pay the country's debt unless President Joe Biden agrees to cut current and future spending and impose new restrictions on social programs.

The US could lose its reputation as a pillar of global economic stability unless a compromise is reached within days that increases the government's borrowing capacity. Millions could put retirement and veterans benefits on hold once the government becomes insolvent due to limits on borrowing set by Congress.

A US bankruptcy would reverberate in the financial markets, potentially triggering a recession that would lead to major job losses and undermine the already fragile sense of economic security for many households.

Biden will meet with House Speaker Kevin McCarthy on Monday after a weekend of bitter rows between House GOP negotiators and the White HouseCritical conversation about the recovery of the economyfrom the cliff. The president had just returned to the United States from Japan, where he found himself in the pitiful position of not being able to reassure world leaders that Washington would not shake up the global economy.

Pressure on the meeting was immense, as Treasury Secretary Janet Yellen warned that the government would not be able to meet its commitments unless Congress raises the debt ceiling by June 1. But serious damage could be done before doing so, as the mere suggestion that the crisis has not been resolved could create panic in the financial markets and damage confidence in America's credibility.

Biden has backed out of his stance that he will not negotiate the debt ceiling — which must be raised to pay for spending that Congress has approved and enacted by him and previous presidents. His officials said it was irresponsible for the GOP to hold the country "hostage" over such a critical issue. Republicans, however, say the administration is overspending and see the threat of financial disaster as their main lever against Biden.

During Biden's stay in Japan, the only stop on a long journey he was forced to cut short, negotiators on both sides seemed to be making progress before talks stalled, one pointing the finger at the other. The president said extremists in the House of Representatives who support Donald Trump are on the verge of sabotaging the economy in an attempt to derail his re-election bid.

“I think there are some MAGA Republicans in the House who know it will hurt the economy, and because I'm the president and the president is responsible for everything, and Biden will take responsibility, that's a way to make sure make sure Biden doesn't. not be re-elected," he said in Japan.

McCarthy said Sunday morning that Biden switched positions under pressure from his own party. "So I think he needs to break away from the socialist wing of the Democratic Party and represent America," the spokesman told reporters.

Biden and McCarthy meet Monday

However, the rhetoric softened after Biden and McCarthy spoke as the president flew home aboard Air Force One. "I believe this has been a productive call," McCarthy said, adding that his surrogates, Representatives Garrett Graves and Patrick McHenry, are resuming talks with the White House.

Roller coaster negotiations, deadlocked talks and vicious accusations are part of every Washington spending confrontation. When the haggling reaches the breaking point for the final deal, the screeching voices are often the loudest. Both McCarthy and Biden have a political interest in showing members of their own party that they are tough on the other.

But there's reason to believe it's not like the previous president's feud with Congress — a factor that made the current situation so dire.

First, there is no guarantee that a Biden-McCarthy deal will get through Congress. McCarthy has passed a bill that raises the debt ceiling in exchange for a wish list of Republican demands. Even the measure, which had no chance in the Democratic-led Senate, was passed by just one vote. Any deal Biden can live with will, by definition, be much less appealing to Republicans — casting doubt on McCarthy's ability to pull through.

Given his majority in the House, the Californian is oneweakest speaker of modern timesTo land the job in January, he made a number of concessions to Republican hardliners, including reinstating the rule that any member could vote on his resignation. That means he could once again be held hostage by the right wing of a party whose members consider compromise a failure.

There may be nothing wrong with some pro-Trump parties willing to risk economic disaster if Biden ruins his presidency and helps his predecessor win a non-consecutive second term. Trump fueled those doubts during a CNN town hall earlier this month by suggesting that a US debt burden may not be so serious.

In any case, the Republican demands are getting stricter. A source with direct knowledge of the matter said the Republican budget proposal over the weekend included at least two items that were not in the original Republican bill: an immigration provision and additional changes to food stamp requirements.

McCarthy won the endorsement of Louisiana Republican Senator Bill Cassidy, who told CNN's Jake Tapper, "union statesSunday: “The president has increased spending for the first two years of his presidency. Now he wants Republicans to accept that as the new yardstick. "

"I think the Republicans and the American people have a reason to say, 'Mr. President, by the way, just because you artificially inflated your spending for the first two years of your presidency and gave us all kinds of inflation, that goes to Is is this the new baseline?"

Republicans have every right to push for spending cuts -- they won the House despite a narrow victory last year on a platform partly rooted in the issue. But House Republicans are willing to use the debt ceiling to cut spending, at the risk of turning the country into an economic nightmare, an example of House majority activism.

McCarthy could have chosen to seek concessions during lower-stakes budget negotiations. The GOP has also been accused of hypocrisy after it was willing to raise the debt ceiling as Republicans entered the White House, especially under Trump, a major moneylender.

Yellen on Sunday pushed back on Republicans' suggestion that the administration could extend the deadline for raising the borrowing ceiling to June 15, saying the chances of public finances lasting that long were very slim.

"My assumption is that without raising the debt ceiling, it's going to be hard to decide which bills are unpaid," Yellen said on NBC's "Meet the Press."

dangerous blame game

The impetus of the deadlock rests on the assumption on both sides that the other will pay the highest political price if the economy collapses from bankruptcy.

It is doubtful whether the Republicans in the House of Representatives have so far refused to reach a compromise with Biden that fully meets the wishes of the Americans. While they controlled the House by a narrow majority – McCarthy could only lose four votes to pass a bill – the Democrats controlled the Senate (by an even smaller majority) and controlled the White House.

It's a balance of power that should drive both sides to compromise, but extremists in the House Republican Party may make that impossible.

How that showdown plays out is crucial to the power dynamic in Washington, because if Biden pulls out, the GOP will definitely have him back on the debt ceiling before the next election. The confrontation is also critical to Biden's legacy as Republicans seek to undermine some of the president's early achievements, including his efforts to fight climate change.

Like McCarthy, Biden is under political pressure within his party after some progressive Democrats expressed concern that he would overbid the speaker on any deal. Democrats are especially angry about Republican attempts to impose new job requirements for Medicaid and supplemental food benefits for poor families.

Pennsylvania Representative Summer Lee accused Republicans of "brutalism," telling Tapper in "State of the Union" that the Republican proposal would push people further into poverty.

Some Democrats are calling on Biden to quotePowers granted by the 14th AmendmentThe Constitution mandates a unilateral increase in the debt ceiling - a mandate given to Congress by law. In Japan, the president said he believed he had the right to do so, but questioned whether such a move would be possible within a limited period of time and whether it would hold up in a legal challenge stretching all the way to the United States. could go. States. High Council.

But in addition to protecting his legacy, Biden must also be mindful of his party's discomfort. Any final agreement with McCarthy would require Democratic support in the Senate. Polls already show little enthusiasm within the party for his re-election, which will depend on a huge turnout in the November 2024 Democratic vote.

While the main victims of bankruptcy will be millions of Americans, the fraught politics of the moment means the careers of Biden and McCarthy may depend on the outcome of their confrontation in the days to come.

Meanwhile, the United States is heading for an economic disaster of its own making.

"We're in a crazy situation," Sen. Chris Van Hollen, D-Md., said on ABC's "This Week."

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