Follow our live coverage of Biden and the debt ceiling negotiations.
With time running out to strike a deal to raise the debt limit, President Biden and congressional leaders are set to meet on Tuesday for pivotal face-to-face negotiations at the White House to avoid a default that economists say could eliminate jobs and cause a recession.
The meeting, at 3 p.m., comes a day after Treasury Secretary Janet L. Yellen reiterated that the United States could run out of money to pay its bills by June 1 if Congress does not raise or suspend the debt limit, the statutory cap on how much the government can borrow to finance its obligations.
Ms. Yellen warned on Tuesday that the United States faced “an economic and financial catastrophe” if it defaulted and said the standoff over the debt limit was already affecting financial markets and households.
“We are already seeing the impacts of brinkmanship,” Ms. Yellen said in remarks at the Independent Community Bankers of America summit meeting.
Families and businesses were being forced to consider the prospect of default as part of their financial plans, she said, noting that investors had become wary of holding onto government debt that matures in early June, when the United States could start running out of cash.
Republicans have said they want to slash federal spending in exchange for lifting the debt ceiling, a stance that Speaker Kevin McCarthy reiterated on Tuesday before the meeting.
“I’m in agreement with Limit, Save, Grow,” he said, referring to the plan he pushed through the House last month to slash spending in exchange for raising the borrowing cap. “We can raise the debt ceiling if we limit what we’re going to spend in the future.”
The president has maintained that Congress must raise the limit without conditions to avoid an economic disaster, even as he has said he is open to separate negotiations over future spending.
The White House projected cautious optimism over the weekend regarding a potential agreement, but on Monday, Mr. McCarthy expressed doubts.
“I don’t think we’re in a good place,” he said of the talks. “I know we’re not.”
The House speaker told reporters at the Capitol on Tuesday that any deal must tighten work requirements for safety net programs like food stamps, a proposal to which Mr. Biden showed some openness over the weekend but which progressives have declared unacceptable.
“Remember what we’re talking about: able-bodied people with no dependents,” Mr. McCarthy said. “It helps people get into a job, and what does it mean when somebody gets a job? They get better pay.”
Both sides privately signaled that they saw the session on Tuesday as a make-or-break moment in the talks — much more significant than a similar high-level White House gathering a week ago and more urgent as the number of legislative days Congress has left to act dwindles.
Democrats said they were awaiting the outcome of the session to determine how aggressively to push on an emergency plan they have been preparing for months to try to steer around opposition from Republican leaders and force a debt-limit increase vote.
They could begin as soon as Tuesday to round up signatures for a special discharge petition that would automatically prompt such a vote if they won support from a majority of members of the House. Democrats would need at least five Republicans to join them to reach the necessary threshold of 218, and winning them over would be extremely difficult unless the crisis was at its peak.
Lawmakers also said there was increasing talk of Mr. Biden invoking the 14th Amendment of the Constitution to raise the debt ceiling unilaterally, a move they acknowledged would draw a legal challenge — and which Ms. Yellen has questioned — but could still avert economic disaster.
With so much uncertainty, Senate Democrats were also weighing whether they would be able to take a weeklong recess scheduled to begin on Monday, before the Memorial Day weekend.
Some potential areas of compromise have emerged in recent days. Mr. McCarthy said on Monday that he wanted to negotiate some of the key provisions of the bill to raise the debt limit that House Republicans passed last month. Those include spending caps, permitting changes for domestic energy projects, work requirements for safety net programs like food stamps and clawing back unspent money allocated for pandemic relief programs.
“All of that I felt would be very positive,” Mr. McCarthy said.
In addition to the speaker, Senator Mitch McConnell, Republican of Kentucky and the minority leader; Senator Chuck Schumer, Democrat of New York and the majority leader; and Representative Hakeem Jeffries of New York, the Democratic leader, will join Mr. Biden at the White House.
The government reached the $31.4 trillion debt limit on Jan. 19, and the Treasury Department has been using accounting maneuvers to keep paying its bills. The president is scheduled to depart for Japan on Wednesday to attend the Group of 7 meeting, heightening the sense of urgency to make progress on the debt limit.
While Mr. McCarthy played down progress, Mr. Biden and his allies said the White House and congressional teams had productive talks in recent days.
“We welcome a bipartisan debate about our nation’s fiscal future,” Mr. Schumer said on Monday. “But we’ve made it plain to our Republican colleagues that default is not an option. Its consequences are too damaging, too severe. It must be taken off the table.”
Administration officials have said they will not roll back any of the president’s signature legislation, particularly on climate change, and the House Republicans’ bill is dead on arrival in the Democratic-led Senate.
The bill would make able-bodied adults without dependents who receive both federal food assistance and Medicaid benefits subject to work requirements until they are 55 years old, an increase from 49. It also would close a loophole that Republicans have claimed is abused by states, which allows officials to exempt food assistance recipients from work requirements.
Asked over the weekend whether he was open to tougher work requirements for aid programs, Mr. Biden noted that he had voted for such measures as a senator.
On Monday evening, however, his official Twitter account seemed to close the door on such a proposal.
“The House Republican wish list would put a million older adults at risk of losing their food assistance and going hungry,” Mr. Biden wrote. “Rather than push Americans into poverty, we should reduce the deficit by making sure the wealthy and large corporations pay their fair share in taxes.”
Toughening work requirements for programs like food stamps has long been anathema to many Democrats, and the proposal would face fierce resistance in the Senate.
“SNAP already has work requirements,” said Senator John Fetterman, Democrat of Pennsylvania, referring to the Supplemental Nutrition Assistance Program. “I didn’t come here to take food away from hungry kids, and that’s exactly what this proposal would do.”
Alan Rappeport contributed reporting.
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