President Biden and House Speaker Kevin McCarthy held a one-hour meeting at the White House on Tuesday, where they discussed the debt limit increase and debt ceiling negotiations. However, both sides blamed each other for not reaching a deal, while McCarthy blamed Biden for refusing until now to hold a second meeting.
Another meeting was set to start Tuesday night and Friday, but there have been no ongoing talks between the two parties. Biden has refused to negotiate, arguing it is Congress's responsibility to raise the limit to pay for spending it already has authorized. On the other hand, McCarthy insisted that the new House Republican majority won't increase the $31.4 trillion debt limit without significant spending cuts and reassured that "the United States is not going to default".
The $31 trillion debt-ceiling fiasco could punish markets and further complicate an already complex economic outlook. Tuesday's Oval Office meeting with President Joe Biden and other congressional leaders produced nothing definitive as far as conclusions.
Bank of America's wealth management team said this time is likely no different from previous situations when policymakers eventually reached a solution on time. Treasury Secretary Janet Yellen cautioned that if left unresolved, "the government could run out of money as soon as June 1," leading to an economic crisis shortly after.
US stock futures fell early Wednesday in anticipation of April's consumer price index results which would indicate whether Federal Reserve rate hikes are working or not. Housing experts predict a downturn in sales lasting several years due to concerns over these uncertain times; investors also foresee house prices falling by up-to 15% for buyers.
Berkshire Hathaway recently cut its stake in EV maker BYD amid this uncertainty surrounding national financial stability issues.
A recent Wall Street Journal poll found many Americans do not favor Congress lifting the debt ceiling because doing so may involve cutting military budgets threatening border security or reducing Medicare and Social Security payments, which would be a breach of promise to Americans who paid into those systems.
Republicans demand spending cuts in exchange for raising the debt limit, while Democrats also call for deep spending cuts. The White House is counting on Republican leaders to soften their demands for these cuts; President Biden is launching a new effort to influence GOP lawmakers in districts with significant Democratic voters.
Despite ongoing disagreements between both parties and no immediate resolution in sight, it's clear that pressure is mounting from all sides as the June 1 deadline looms closer.