Joe Biden has cancelled a planned visit to Australia and Papua New Guinea to focus on debt limit talks as Washington stares into the abyss of a potentially catastrophic default.
Biden still plans to head to Hiroshima, Japan, on Wednesday for the Group of Seven (G7) summit with leaders from some of the world’s leading economies. But he called off what was to be the first visit by a sitting US president to Papua New Guinea and a stop in Australia, where he was to meet with other leaders of the so-called Quad.
The move came as Biden hosted a fresh round of talks with congressional leaders at the White House in an effort to break the deadlock – and faced criticism from his left flank over rumored concessions to Republicans.
Although the meeting ended in less than an hour, there were expressions of cautious optimism from both sides.
Republican Kevin McCarthy, speaker of the House of Representatives, told reporters: “I think we set the stage to carry on further conversations … We’ve got a lot of work to do in a short amount of time.”
McCarthy acknowledged the two sides were still far apart but added: “It is possible to get a deal by the end of the week. It’s not that difficult to get to an agreement.”
Chuck Schumer, the Democratic majority leader in the Senate, said: “It was a good and productive meeting. Everyone agreed that default would be the worst outcome – a horrible situation for America and America’s families.”
The leaders have just 15 days to strike a deal to raise the US government’s $31.4tn debt ceiling and avert the first default in the country’s history.
The treasury department on Monday reiterated its warning that it could run short of money to pay all its bills as soon as 1 June, which would trigger a default that economists say would be likely to cause a calamity while delighting geopolitical rivals such as China and Russia.
More than 8 million people could lose their jobs, officials estimate. Millions of social security beneficiaries, veterans and military families could lose their monthly payments. Vital federal services including border and air traffic control could be disrupted if workers cannot get their government wages.
Ilhan Omar, a Democratic congresswoman from Minnesota, told the Guardian: “It would plunge a lot of American families into economic depression. It would create an economic crisis not just in the United States but globally.
“We have to be able to keep our promise and pay our bills and then we can come back and obviously negotiate a budget that can be agreed upon by both parties. But to hold our economy hostage on a wishlist that creates economic devastation for so many of the people that we represent is just unthinkable, cruel and dangerously stupid.”
Republicans, who control the House of Representatives by a 222-213 majority, have for months demanded that any increase in the government’s self-imposed borrowing cap be linked to spending cuts. Last month they narrowly passed a bill to raise the debt ceiling while cutting spending by nearly 14% over a decade.
In the past week Biden and McCarthy’s aides have reportedly discussed issues including spending caps, tightening work requirements for food and other benefit programs for low-income Americans and changes to energy permitting in exchange for votes to lift the limit. This worries some Democrats, particularly on the left.
Pramila Jayapal, chair of the Congressional Progressive Caucus, tweeted on Tuesday: “Democrats cannot give ground on work requirements in the debt ceiling talks. All work requirements do is limit the availability of food aid for families and hurt poor, marginalized communities – the very people we were elected to defend.”
John Fetterman, a Democratic senator for Pennsylvania, said in a statement: “I sure didn’t come to Washington to take vital assistance away from working people at the same time big bank CEOs nearly crash the economy and get to jet off to Hawaii scot-free.”
Officially, the White House has repeatedly insisted that Republicans must rule out default and consider budget issues separate from the need to raise the nation’s debt limit, which it describes as Congress’s constitutional duty.
But some observers suspect its real position is less clear cut.
Bill Galston, a senior fellow at the Brookings Institution thinktank in Washington, said: “If this crisis is to be resolved, it will be resolved through a spending deal that will be linked in some way to the debt ceiling and I have sense – I can’t prove it – that Rubicon has already been crossed.”
A similar standoff in 2011 between Barack Obama and a new generation of Tea Party House Republicans led to a historic downgrade of the US’s credit rating, which sparked a selloff in stocks and pushed its borrowing costs higher. Some Democrats argue that Obama made compromises he later regretted and Biden, vice-president at the time, should avoid a repeat.
The current impasse has rattled investors, sending the cost of insuring exposure to US government debt to record highs.
Adding to the challenge of striking a deal, McCarthy agreed to a change in House rules that allows for just one member to call for his ouster as speaker, which gives greater power to hardliners, including the roughly three dozen members of the House Freedom Caucus.
William Howell, a political scientist at the University of Chicago Harris School of Public Policy, said: “The Republicans consist of a lot of different factions. There are some who are fiscal conservatives who are generally concerned about the debt and excessive spending and there are some, particularly the populist wing of the party, that’s interested in just blowing things up. For them, the disruption and the defiance and is politically advantageous.
“For Biden to find a productive way forward, he doesn’t have to get all the Republicans. He’s going to have to get some of them. The question is, to the extent that he needs Republican support, who can he win over?”
