US: Biden, McCarthy hold first debt ceiling talks

House Speaker Kevin McCarthy on Wednesday said he and President Joe Biden had had a "good meeting" and that their talks on raising the US borrowing limit would continue.

McCarthy also said he could see "where we can find common ground." 

"No agreement, no promises except we will continue this conversation," McCarthy told reporters outside the White House. "We both have different perspectives on this, but I thought this was a good meeting."

Republicans are blocking the regular raising of the US borrowing limit, which is necessary by law in the United States, in a comparatively rare but not unprecedented standoff that could even lead to the country defaulting on some of its debt if left unsolved. 

McCarthy is thought to be seeking promises of reduced spending in exchange for authorizing the increase. 

Since November's mid-term elections, Republicans control the House of Representatives, the lower house of the US Congress, and the Democrats narrowly hold the Senate.

White House says avoiding default 'not negotiable'

The White House said after the meeting that Biden told McCarthy he was eager to work with Republicans "in good faith," but also tried to put the onus on the opposition to sign off government borrowing. 

"President Biden made clear that, as every other leader in both parties in Congress has affirmed, it is their shared duty not to allow an unprecedented and economically catastrophic default," the White House said in a statement. "It is not negotiable or conditional."  

According to the White House, Biden is asking McCarthy for a specific budget plan and a commitment to supporting the country's debt negotiations. The president has said he would only discuss federal spending cuts after the debt ceiling was lifted. 

A similar standoff took place when Barack Obama was president and Biden was vice president in 2011. It was resolved before the US technically defaulted but did lead to an unprecedented downgrade in the credit rating of some of its debt.

At that time, Obama's administration ultimately agreed to some spending cuts and a compromise was reached.

How high is the US debt ceiling? 

The debt limit is currently set at $31.4 trillion (roughly €29,000,000,000,000). That is more than the country's annual GDP, which stood in the region of $23 trillion in 2021, the last full year with available data.

Like most national governments around the world, US borrowing levels rose substantially during the COVID pandemic — and also in the decade following the 2008 financial crisis. At the end of 2019, US debt had stood at roughly $23 trillion. At the end of 2007, it was around $9 trillion.

By comparison, Germany's national debt of roughly €2.5 trillion is a little less than its annual GDP, but it too has been rising rapidly as a share of GDP in the last couple of years.

The Federal Reserve and the Treasury Department have both appealed to Congress saying that their power on the issue is limited without the green light.

When announcing "extraordinary measures" to alter spending and borrowing to avert a technical default because of the standoff, Treasury Secretary Janet Yellen estimated that her department's steps would work until roughly June. 

Before Wednesday's meeting at the White House, Federal Reserve chair Jerome Powell told reporters: "There is only one way forward here and that's for Congress to raise the debt ceiling. No one should assume that the Fed can protect the economy from the consequences of failing to act in a timely manner." 

msh/jsi (AP, AFP, Reuters)