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Just six days remain before America could run out of money to pay its bills in a calamity that could trigger a recession and global economic turmoil. Deep divisions remain between the White House and House Republicans over a potential deal under which Congress would vote to raise the government’s borrowing limit in exchange for capping spending.
Even as negotiators from both sides Thursday worked to narrow the gaps, the first signs of potential damage to the economy – like the early bands of rain before a major hurricane – began to sweep into Washington.
Credit ratings agency Fitch placed the top-ranked US credit on a negative watch, effectively warning it could downgrade US debt if lawmakers cannot pass a bill – a move that could permanently raise the cost of federal borrowing and reverberate through the economy. And the 30-year fixed mortgage rate rose to 6.57% because of uncertainty over the looming debt crisis. The reality is also beginning to dawn that if the US is unable to borrow more money on or around June 1, Social Security payments for millions of seniors could be quickly disrupted.
As the early warning signs increased, it also became clearer how complex it would be to get any deal reached by Biden and House Speaker Kevin McCarthy through Congress at all – let alone in time to avert an economic disaster. In a new complication, far-right Republicans warned they would not vote for any deal that watered down their wish list of demands already passed by the House, which are unacceptable to Biden and the Democrats who control the Senate. This is a significant threat since McCarthy can only afford to lose four votes to pass a bill given the GOP’s narrow majority in the chamber.
In a letter to the speaker, a bloc of 35 hardliners issued new demands – including provisions to beef up border security and a halt to a plan for new headquarters for the FBI, which pro-Donald Trump conservatives accused of persecuting the former president for political reasons.
Republican Rep. Byron Donalds of Florida warned that his could be a hard vote to get if a final agreement didn’t line up closely with previous GOP demands. “What I am trying to really stress is at some point, the American people do need to understand exactly what’s happening in this room because if a deal is made just to try to save face on both sides of the aisle, history tells us that is a terrible thing,” Donalds said.
Some House Democrats, meanwhile, are registering dismay at the White House’s strategy, making clear that they believe Biden may get rolled in the talks after previously refusing to negotiate with Republicans he accused of holding the economic well-being of millions of Americans hostage.
