Biden ready to restart debt talks but won’t budge on conditions

The new calculation drastically raised the stakes of the ongoing standoff over the nation’s debt limit, turning what officials expected would be a monthslong political fight into a brutal four-week brawl with the fate of the U.S. economy on the line.

Biden has now invited the top four congressional leaders to a meeting on May 9, setting the stage for his first substantial talks with Republicans on the issue since Feb. 1. Yet, while the timetable may have changed, Biden officials said the president’s message to the GOP will not.

“If you need to hear again that it’s your responsibility to address the debt ceiling without conditions and a ransom,” said a senior administration official who spoke about internal thinking on condition of anonymity, “then he can say that again.”

The stance reflects the West Wing’s belief that they can not set a template for having the debt ceiling serve as a point of political leverage for the opposition. It also reflects continued confidence that Biden still holds the stronger hand in a debt ceiling staredown, and that it was always a matter of when — not if — the two sides reached a crisis point.

Biden has vowed for months not to negotiate over the debt ceiling, deriding Republicans’ demands for concessions as “hostage taking” that risks tanking the country’s global reputation and economic stability.

House Speaker Kevin McCarthy similarly dug in. After passing a Republican-only bill of spending cuts tied to a debt limit increase through the House last week, he declared that “no clean debt ceiling” increase would ultimately make it through the chamber. On Monday, he gave no sign of backing down, arguing Biden had “refused to do his job” by failing to negotiate.

For months, the business community has watched with relative nonchalance as the two sides stared each other down. But that may now change with Yellen’s letter.

Mark Zandi, chief economist for Moody’s Analytics, said a stock market tumult may be what forces either side of the Biden-McCarthy standoff to give. “It may take a thousand points off the Dow before they actually move,” he said. “There’s going to be a lot of drama, for sure.”

But even as the warnings on Wall Street grew more alarmist, they also put a spotlight on major logistical hurdles back in D.C.: There is painfully little time when everyone needed to solve this problem will actually be together, or when the government will be in session.

McCarthy and Biden will not both be in Washington at the same time for the majority of May, with McCarthy currently in Israel leading a congressional delegation while the House is out of session. The chamber will return on May 9, leaving only a week before Biden is slated to leave for Japan to attend the G-7 summit — and return just before the House leaves for Memorial Day recess.

Even if McCarthy and Biden could reach some kind of rapid agreement, it would take several days to get legislation through both chambers of Congress and raise the risk of disaster if it encountered any opposition.

The White House has nevertheless insisted that time — and politics — are on its side. The West Wing’s strategy to this point has been simple: point to the scores of times when it has been resolved in a bipartisan fashion with little drama, including under Biden’s predecessor, Donald Trump.

Biden and aides have refused to engage with McCarthy on his hope to link budget talks with the debt ceiling, deeming it a non-starter. And until House Republicans passed their own debt ceiling legislation last week, Biden hadn’t even been willing to talk with McCarthy.

The White House had signaled a softening of that stance in recent days, allowing that it would be open to talks — but not one-on-one, and only on the broader federal budget, not the debt ceiling. The senior administration official said Biden would continue to insist that these matters were separate tracks and scoffed at the notion that because House Republicans had passed their own bill (with no bipartisan support) that they could simply sit tight until Biden and congressional Democrats responded.

Still, as recently as this past weekend, the West Wing had believed it still had time to play the waiting game, according to three senior aides not authorized to speak publicly about internal deliberations. Pointing to other standoffs, they noted that Congress only works on a deadline and believed that McCarthy — trying to hold his conference together — would eventually blink.

The White House has leaned on polling suggesting Republicans will take the lion’s share of the blame if the worst should happen, according to the senior aides. Aides are confident that their messaging about important programs that the Republicans want to cut will resonate with voters — and that they will be able to link the collapse to Republican “extremism” on the economy and their out-of-step stances on other issues like abortion and guns.

Shortly after the Treasury letter, the top Democrats on Capitol Hill — Sen. Chuck Schumer and House Minority Leader Hakeem Jeffries — locked hands in a joint response, asking Republicans to not allow “right-wing extremism to hold our nation hostage.”

Schumer also began a process to allow Senate votes on the House Republicans’ debt limit and a separate bill to lift the debt limit without conditions through the end of 2024. Still, Biden will need to manage rising anxiety outside the West Wing from Democrats eager for a deal — as well as worries that winning the public opinion battle on the debt ceiling won’t mean much for the party if it wrecks the economy at the center of Biden’s case for reelection.

“I hope President Biden’s invitation to Congressional leaders is sincere and he is genuinely willing to negotiate because the country cannot afford a failed negotiation,” Sen. Joe Manchin (D-W. Va.) said in a statement. “I urge President Biden to show true leadership and finally put politics aside and the well-being of our nation first.”

Some Biden allies and Democratic lawmakers privately acknowledged even before the Treasury letter that the president will ultimately need to cut a deal, with much of the speculation so far focusing on the potential for a joint budget-and-debt-ceiling agreement later this year that offers Republicans minor concessions on spending — and crucially allows both sides to walk away claiming that they won.

But on Capitol Hill and in the administration, there’s been no consensus on what exactly that compromise might look like, or even how to thaw the bitter standoff to the degree it was possible to reach a deal — much less in four weeks.

“This clearly sends off a red flare that lawmakers need to get going here,” Zandi said. “The economy is so fragile that it wouldn’t take much turmoil in markets to upend it and push us into recession.”

Sam Stein contributed to this report.

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