The uncertainty surrounding raising the debt ceiling has worried economists and the markets, with some of them out with doomsday predictions.
What Happened: Unperturbed by the dire consequences a default can have on the global economy and the U.S. in particular, the Biden administration and the Republicans continue to wrangle over the specifics of a potential deal.
After an unsuccessful meeting with key Republicans, including House Speaker Kevin McCarthy (R-Calif) and Senate minority leader Mitch McConnell (R-KY) on Tuesday, President Joe Biden dropped at least two hints that he is amenable to a solution, New York Times reported.
The president suggested for the first time that he was open to reclaiming some of the unspent COVID-19 stimulus funds which were allocated as part of the 2021 economic rescue bill. He reportedly conveyed this at an impromptu news conference in the Roosevelt Room.
But the question is what obligations were there made, commitments made, money not disbursed, etc.? I have to look, take a hard look at it. It's on the table," the president reportedly said.
This, according to the report, will likely pave the way for a compromise with the Republican lawmakers, who are fixated on deep spending cuts as a precondition for raising the debt ceiling.
The Republicans argue that the clawback of COVID-19 funding would result in cost savings of $50 billion to $70 billion, the report said. This is a small portion of the $4.8 trillion cuts GOP members have been clamoring for.
The second positive indication from the president isn't exactly a compromise but an extreme action of posing a constitutional challenge to the debt ceiling's existence, the report.
Biden is reportedly considering the 14th amendment — a clause in the Constitution that stipulates that "the validity of the public debt" issued by the government "shall not be questioned."
The president suggested that even this option "would have to be litigated."
What's Next: Treasury Secretary Janet Yellen has been warning that if Congress does not raise the debt ceiling or suspend it, the government could default as early as June 1.
If the impasse continues, "it's widely agreed that financial and economic chaos would ensue," she said.
Amid these developments, Biden came down hard on the Republicans for this intransigence in this regard.
MAGA Republicans in Congress should do what every Congress has done for the past 200 years: Pay our bills," he tweeted late Wednesday. "This is a manufactured crisis. It should not be a debate," he said.
MAGA Republicans in Congress should do what every Congress has done for the past 200 years:
Pay our bills.
This is a manufactured crisis.
It should not be a debate.— President Biden (@POTUS) May 11, 2023
Instead of cutting programs, the focus should be on cutting wasteful spending on special interests and ensuring the wealthy pay their fair share, he added.