With the United States heading towards defaulting on its debt in 10 days, President Joe Biden is set to resume talks with Speaker of the House Kevin McCarthy (R-CA) on Monday. But what needs to get done to stop default?
What needs to happen
The White House shared on Monday that the president and speaker will meet at 5:30 p.m. EST to resume talks that hit a stopping point last week and were halted as Biden participated in the G7 summit.
To avoid default, the House and Senate will need to reach an agreement and pass bipartisan legislation to extend the nation’s debt ceiling, which is currently at $31.4 trillion.
While it isn’t known exactly when the debt ceiling will be hit, the U.S. Department of Treasury is estimating that it could be unable to pay its bills as soon as June 1.
With Republicans in control of the House, holding a majority of 222-213, and Democrats holding the Senate, with a majority of 51-49, one party will need to buckle to the other’s demands in order to pass legislation.
Republicans are proposing several cuts to government spending, including looking to reduce discretionary and defense spending. McCarthy spoke with reporters on Monday, stressing the need to cut back on how much the government is spending.
“The underlying issue here is the Democrats, since they took the majority, have been addicted to spending, and that’s got to stop,” McCarthy said. “We’re going to spend less than we spent last year.”
In total, a Republican plan passed in the House would cut government spending by 8% next year.
Across the aisle, Democrats are calling for spending to be held steady at this year’s levels instead of returning to 2022’s.
Biden’s administration has called the latest Republican offers at the negotiating table “unacceptable,” as the White House says Republicans are looking to cut spending to programs providing food aid to low-income Americans and more.
Still, Biden has said he is willing to consider spending cuts and making tax adjustments if Republican demands are reasonable.
“So much of what Congressional Republicans have proposed during budget negotiations is simply unacceptable,” the president tweeted. “It’s time for them to move off their extreme position and act to avoid default.”
What will happen if the U.S. defaults?
The financial market in the U.S. and around the world could be in for a shake-up if the debt ceiling isn’t raised and the country defaults.
Jim Wilcox, a professor of financial institutions at Berkeley’s Haas School of Business and former economist for the Federal Reserve, shared with KCBS Radio earlier this month that the effects would be monumental.
“The ripples would be huge. Remember, approximately, the government spends about $100 billion a month more than it brings in,” Wilcox said
Wilcox says that Americans would bear the brunt of that estimated $100 billion every month, with cuts to things like Social Security payments, food stamps programs, the defense department, government contractors, and everything else the government is responsible for.
Bernard Yaros, assistant director at Moody’s Analytics, shared with Al Jazeera that defaulting could create a “cataclysmic scenario” resulting in the U.S. seeing a recession like that of 2008.
“This will be echoed around the world,” Yaros said. “This is not a good thing for anybody.”
What Americans think about the debt ceiling
A recent poll from The Associated Press-NORC Center for Public Affairs Research surveyed Americans to get their opinions on the current debt ceiling talks, finding that 6 in 10 would prefer it if the debt limit increase was paired with plans to reduce the federal budget deficit.
However, even though most are in favor of reducing spending and raising the ceiling, few reported a solid understanding of the ongoing negotiations between lawmakers.
Overall, around 20% of U.S. adults say they are following the negotiations very closely, while 4 in 10 say they are following somewhat closely.
When it comes to how Americans feel lawmakers are doing, only 27% approve of the job Biden is doing in the debt ceiling talks, while 26% approve of congressional Democrats and 22% approve of congressional Republicans. The poll found that close to half of respondents disapprove of each.
The poll was conducted May 11-15 and included the responses of 1,680 adults. There is a margin of error of plus or minus 3.4 percentage points.
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