Biden says still believes U.S. would be able to avoid default

HIROSHIMA, Japan, May 20 (Reuters) – President Joe Biden said on Saturday he still believed the United States would be able to avoid default after the White House said there were serious differences remaining with Republican negotiators about the debt ceiling. 

Biden was speaking in Hiroshima, Japan, where he is attending the Group of Seven summit meeting.

A second meeting on Friday between White House and Republican congressional negotiators on raising the federal government’s $31.4 trillion debt ceiling broke up with no progress cited by either side and no additional meeting set.

That came at the end of a day of acrimonious talks that were broken off for several hours, with less than two weeks to go before June 1, when the Treasury Department warned that the federal government could be unable to pay all its debts. That would trigger a calamitous default.

Republicans are pushing for sharp spending cuts in exchange for the increase in the government’s self-imposed borrowing limit, a move needed regularly to cover costs of spending and tax cuts previously approved by lawmakers.

Republicans control the House of Representatives by a 222-213 margin, while Biden’s Democrats have a 51-49 Senate majority, making it difficult to thread the needle with a deal that will find enough votes to pass both chambers.

Democrats have been pushing to hold spending steady at this year’s levels, while Republicans want to return to 2022 levels. A plan passed by the House last month would cut a wide swath of government spending by 8% next year.

That plan does not specify what spending would be cut, but some Republicans have said they would shield military and veterans programs. Democrats say that would force average cuts of at least 22% on domestic programs like education and law enforcement, a figure top Republicans have not disputed.

Some Republicans have criticized Biden for taking the trip to Japan at a key point in the talks.

The last time the nation got this close to default was in 2011, also with a Democratic president and Senate alongside a Republican-led House.

Congress eventually averted default, but the economy endured heavy shocks, including the first-ever downgrade of the United States’ top-tier credit rating and a major stock sell-off.

Photo: Photo: The US Capitol Building and Washington Monument, as seen from the Lincoln Memorial Reflecting Pool before dawn on the National Mall in Washington, DC, USA. EPA-EFE/MICHAEL REYNOLDS