Debt ceiling talks to resume as McCarthy warns big gaps remain on some issues

Republican negotiators will return to the White House to “try to complete negotiations” on the debt ceiling, Kevin McCarthy said Wednesday morning, although he cautioned that the two sides are “still very far apart” on a number of issues.

The Speaker of the House’s remarks to reporters on Capitol Hill came with just over a week to go until the crucial June 1 deadline. US Treasury Secretary Janet Yellen has repeatedly warned lawmakers that if Congress does not raise the debt ceiling in a few days, the federal government risks defaulting on its obligations as early as June and by June 1.

Yellen reiterated her prediction on Wednesday morning. Speaking at an event with The Wall Street Journal, he said uncertainty over the debt ceiling was already causing “some stress in financial markets”, adding that the Treasury bill due in mid-June “will impact business”. were . . . remarkably high rates”.

Investors have been avoiding bonds maturing in early June, which has caused the price of those securities to drop dramatically. In early May, the Treasury Department was forced to auction four-week bills at the highest ever yield to attract buyers.

The stress is not limited to the debt market. Stocks have tumbled this week, with both the blue-chip S&P 500 and the tech-heavy Nasdaq Composite down about 2 percent each.

“I think it’s a reminder of the importance of reaching agreement in a timely manner,” Yellen said, warning that even in the run-up to a final agreement there could be a “substantial financial market crisis.”

McCarthy sat down with Joe Biden on Monday for talks that both leaders described as “productive” after the US president cut short travel abroad for G7 meetings to stay in Washington for debt limit talks Was.

But the apparent standoff in subsequent days has raised concerns in Washington and in financial markets about whether the two sides can reach an agreement in time to prevent an unprecedented default, with economists warning that the global economy could collapse. But will wreak havoc.

Any deal struck between the White House and congressional Republicans would need to be approved by a majority in both the House of Representatives – which Republicans control by a narrow margin – and the Senate, which Democrats control by an equally slim amount. Both Biden and McCarthy are under increasing pressure from the left and right flanks of their parties, respectively, to reject calls for a compromise.

McCarthy nevertheless insisted Wednesday that a deal was possible — and that he might be able to steer it through the lower chamber of Congress.

“I think we can make progress today. I hope we can make progress.”

White House press secretary Karine Jean-Pierre told reporters on Wednesday that a deal was still possible. “We believe there is still an opportunity here for a reasonable bipartisan agreement that Republicans and Democrats can advance in the House and Senate,” she said, as negotiators met Wednesday afternoon.

The most hardline members of McCarthy’s conference have shrugged off the fear of a default and suggested the Treasury might simply prioritize debt payments.

But Yellen dismissed those claims on Wednesday: “Our payment system is designed to pay our bills, not to decide which bills to pay and which bills not to pay.” Is.

“As a general matter, prioritization is not really something that is operationally feasible. And so there will be some difficult choices to make.

In a new Brookings report, Wendy Adelberg, a senior fellow, warned that costs could rise if market stress persists as the debt ceiling impasse continues.

Given the Treasury market’s position as the safest haven in the global financial system, the US government has benefited from lower borrowing costs than other countries, which Adelberg said could cover more than $750 billion in interest over the next decade. Saved.

“If a portion of this benefit was lost by allowing the debt limit to be bound, the cost to the taxpayer could be significant,” she wrote with her colleague Noadia Steinmetz-Silber.

He noted that premiums have already increased on debt maturing in June, and that if it eventually extended to all maturities, the interest cost to finance federal debt could rise by more than $4tn.

Republican negotiators will return to the White House to “try to complete negotiations” on the debt ceiling, Kevin McCarthy said Wednesday morning, although he cautioned that the two sides are “still very far apart” on a number of issues.

The Speaker of the House’s remarks to reporters on Capitol Hill came with just over a week to go until the crucial June 1 deadline. US Treasury Secretary Janet Yellen has repeatedly warned lawmakers that if Congress does not raise the debt ceiling in a few days, the federal government risks defaulting on its obligations as early as June and by June 1.

Yellen reiterated her prediction on Wednesday morning. Speaking at an event with The Wall Street Journal, he said uncertainty over the debt ceiling was already causing “some stress in financial markets”, adding that the Treasury bill due in mid-June “will impact business”. were . . . remarkably high rates”.

Investors have been avoiding bonds maturing in early June, which has caused the price of those securities to drop dramatically. In early May, the Treasury Department was forced to auction four-week bills at the highest ever yield to attract buyers.

The stress is not limited to the debt market. Stocks have tumbled this week, with both the blue-chip S&P 500 and the tech-heavy Nasdaq Composite down about 2 percent each.

“I think it’s a reminder of the importance of reaching agreement in a timely manner,” Yellen said, warning that even in the run-up to a final agreement there could be a “substantial financial market crisis.”

McCarthy sat down with Joe Biden on Monday for talks that both leaders described as “productive” after the US president cut short travel abroad for G7 meetings to stay in Washington for debt limit talks Was.

But the apparent standoff in subsequent days has raised concerns in Washington and in financial markets about whether the two sides can reach an agreement in time to prevent an unprecedented default, with economists warning that the global economy could collapse. But will wreak havoc.

Any deal struck between the White House and congressional Republicans would need to be approved by a majority in both the House of Representatives – which Republicans control by a narrow margin – and the Senate, which Democrats control by an equally slim amount. Both Biden and McCarthy are under increasing pressure from the left and right flanks of their parties, respectively, to reject calls for a compromise.

McCarthy nevertheless insisted Wednesday that a deal was possible — and that he might be able to steer it through the lower chamber of Congress.

“I think we can make progress today. I hope we can make progress.”

White House press secretary Karine Jean-Pierre told reporters on Wednesday that a deal was still possible. “We believe there is still an opportunity here for a reasonable bipartisan agreement that Republicans and Democrats can advance in the House and Senate,” she said, as negotiators met Wednesday afternoon.

The most hardline members of McCarthy’s conference have shrugged off the fear of a default and suggested the Treasury might simply prioritize debt payments.

But Yellen dismissed those claims on Wednesday: “Our payment system is designed to pay our bills, not to decide which bills to pay and which bills not to pay.” Is.

“As a general matter, prioritization is not really something that is operationally feasible. And so there will be some difficult choices to make.

In a new Brookings report, Wendy Adelberg, a senior fellow, warned that costs could rise if market stress persists as the debt ceiling impasse continues.

Given the Treasury market’s position as the safest haven in the global financial system, the US government has benefited from lower borrowing costs than other countries, which Adelberg said could cover more than $750 billion in interest over the next decade. Saved.

“If a portion of this benefit was lost by allowing the debt limit to be bound, the cost to the taxpayer could be significant,” she wrote with her colleague Noadia Steinmetz-Silber.

He noted that premiums have already increased on debt maturing in June, and that if it eventually extended to all maturities, the interest cost to finance federal debt could rise by more than $4tn.