House Speaker Kevin McCarthy on Tuesday offered a somewhat upbeat assessment on the second round of debt-ceiling talks, with his comments coming right after the conclusion of the latest discussions between President Joe Biden and the top four U.S. lawmakers.
The California Republican said he and Biden are still far apart, but he also said it’s possible to get a deal by the end of the week. He called Tuesday’s meeting “a little more productive.”
The Biden White House said in a statement after the meeting that it was “productive and direct.”
“The president emphasized that while more work remains on a range of difficult issues, he’s optimistic that there is a path to a responsible, bipartisan budget agreement if both sides negotiate in good faith and recognize that neither side will get everything it wants,” the statement said.
“The president directed staff to continue to meet daily on outstanding issues. He said that he would like to check in with leaders later this week by phone, and meet with them upon his return from overseas.”
Biden said in a speech at a separate White House event that he’s cutting an upcoming overseas trip short “in order to be back for the final negotiations with congressional leaders.” He said he’s postponing the Australia portion of the trip as well as his stop in Papua New Guinea.
Related: Biden to cut short upcoming trip due to debt-ceiling standoff: report
Senate Majority Leader Chuck Schumer sounded somewhat encouraged as well after Tuesday’s parley, saying it was a “much more cordial meeting.”
Ahead of the meeting, analysts had been predicting that a deal wasn’t imminent.
“Statements leading into the White House meeting this afternoon indicate a contentious stalemate dragging out over months,” said 22V Research’s Kim Wallace and Sandra Namoos in a note on Tuesday.
“We continue to see the likelihood of a series of short-term suspensions this month and through the summer to accommodate negotiations. Partisans on each side aren’t yet interested in quick settlement of differences.”
Other analysts also have been expecting short-term increases or suspensions of the federal borrowing limit in order to provide the Biden administration and Congress with more time to come up with an agreement.
Tuesday’s meeting began just after 3 p.m. Eastern.
“We’re having a wonderful time. Everything’s going well,” Biden joked as the meeting kicked off.
“I don’t have any comment to make. We’re just getting started,” the president also told reporters before they were ushered out.
McCarthy told reporters that the “structure of how we negotiate has improved,” as he said the president has appointed someone from the White House to talk with the speaker’s team, rather than involving all four top U.S. lawmakers.
Treasury Secretary Janet Yellen on Monday reiterated that June 1 could be the date when the U.S. may become unable to pay its bills in the absence of a debt-ceiling increase. She then issued a fresh warning Tuesday about the consequences if Congress fails to raise the borrowing limit, saying “the U.S. economy hangs in the balance” if lawmakers don’t act.
U.S. stocks
SPX,
DJIA,
closed lower Tuesday as investors tracked the debt-limit negotiations.
McCarthy and his fellow Republicans have been demanding spending cuts in exchange for raising the ceiling for federal borrowing, while Biden and his fellow Democrats have said the lift should be made without conditions.
While a breakthrough in the standoff hasn’t happened yet, there is increasing chatter about the potential for a bipartisan deal that ends the stalemate and avoids a market-shaking default.
See: Debt-ceiling standoff: Here’s what could go into a bipartisan deal
And read: Here’s where investors may hide as U.S. debt-ceiling deadline looms
In August 2011, lawmakers approved an increase to the limit just hours before a potential government default. Within days, the U.S. lost its triple-A credit rating from S&P for the first time in history, with the ratings agency saying the American political system had become less stable. Stocks plunged in August 2011 following that downgrade.
Analysts at Deutsche Bank are giving a low chance for a U.S. default.
“We see roughly 60% probability of a short-term extension pushing the X date to September 30 or slightly beyond, 30% probability of a resolution by early June, 8% probability of no action by Congress resulting in Biden invoking the use of the 14th Amendment, and 2% probability of an outright Treasury default,” said DB’s Steven Zeng and Brett Ryan in a note on Monday.
Related: Debt-ceiling solution? The 14th Amendment, explained.
And see: A U.S. debt-ceiling suspension could trigger a rally for the dollar
Besides Biden, McCarthy and Schumer, the other participants in Tuesday’s meeting were House Minority Leader Hakeem Jeffries, a New York Democrat; Senate Minority Leader Mitch McConnell, a Kentucky Republican; and Vice President Kamala Harris.
Now read: ‘This is an especially inopportune time to have a political debate over the debt limit,’ warns economist Mark Zandi
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