White House Considers Debt-Limit Fallback Options as It Fumbles to Avoid Default – WASHINGTON—After months of impasse over raising the nation’s borrowing limit, the Biden administration and Capitol Hill leaders are frantically trying to avert the first-ever government default that may occur as early as June 1. As time passes, Republicans and Democrats alike continue to hold fast to their demands in public.
While Democrats continue to call for an increase in the debt limit without any other conditions on policy, Republican lawmakers are attempting to compel cuts to federal spending in exchange for their support of raising the debt ceiling. According to persons familiar with the situation, however, Biden administration officials and lawmakers have begun to consider potential alternatives to their negotiating position, including a temporary rise in the borrowing limit that would afford them time to negotiate a compromise.
According to the sources, officials in the Biden administration are also reexamining experimental options for how the United States might continue to pay its debts even if Congress doesn’t lift the debt ceiling. The United States might default as early as June 1, Treasury Secretary Janet Yellen warned this week, shocking Washington and prompting authorities to focus on a problem that many had anticipated wouldn’t be a priority for several more months. The United States government faces severe financial and economic repercussions if it doesn’t make its payments on time.
Mr. Biden has called key lawmakers to a meeting May 9 at the White House on the matter, which is likely to be the first time he has met with House Speaker Kevin McCarthy (R., Calif.) to discuss spending and debt since February. Ms. Yellen shortened a planned trip to Japan next week because of the debt limit, according to sources familiar with her preparations. But the new, accelerated timeline means lawmakers may not have the time to negotiate a broad agreement on contentious budget questions.
One method to meet the rapidly coming deadline would be to raise the debt-limit sufficiently to allow the government to keep paying its debts for a few more months, rather than a longer-term solution. As Republicans have pushed for spending cuts, Mr. Biden has said in public that he would negotiate with them over spending and deficits, but only separately from the debt-limit increase. The White House offered a budget earlier this year that would decrease deficits over a decade mostly by increasing taxes.