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Then-House Minority Leader Kevin McCarthy, Senate Majority Leader Chuck Schumer and U.S. President Joe Biden in the Roosevelt Room of the White House in Washington on Nov. 29, 2022.Andrew Harnik/The Associated Press

President Joe Biden and Republican House Speaker Kevin McCarthy held initial talks on Wednesday on raising U.S. government borrowing limits in a first test of how the two will work together, with the meeting ending on a positive note as McCarthy said the two found “common ground.”

“The President and I had a good first meeting,” McCarthy told reporters after the nearly one and a half hour meeting ended. “I shared my perspective with him and he shared his,” he said.

“I can see where we can find common ground,” he said.

The Democratic president and Republicans, who won control of the U.S. House of Representatives in November’s elections, are locked in a standoff over raising the federal government’s $31.4 trillion U.S. debt ceiling.

Just before the meeting, White House press secretary Karine Jean-Pierre told reporters: “The president is looking forward to working closely and trying to figure out how we can deliver with Republicans who are willing to work in a good faith, bipartisan way.”

The Oval Office talks may serve as the opening bell for months of back-and-forth manoeuvring. Neither side expects a solution to emerge from a single meeting. Without action, the government could lose its ability to pay all its bills as early as June.

McCarthy was optimistic, however, that such a scenario could be avoided.

“I believe if we’re able to get to an agreement, we could have a funding agreement for the next two years,” McCarthy said. “You’ll see the Senate and the House actually do the job the American public has elected us to do.”

Biden said earlier he will ask McCarthy for a specific budget plan and a commitment to supporting the nation’s debt obligations, the White House said, and he will discuss federal spending cuts with Republicans, but only after the debt ceiling is lifted.

House Republicans want to use the debt ceiling as leverage to exact cuts, though they have yet to unite around a specific plan. The increase covers the costs of spending programs and tax cuts previously approved by Congress, and is usually approved on a bipartisan basis.

The 80-year-old president, a long-time former senator who served as vice president during a similar 2011 showdown that led to a historic downgrade of the federal government’s credit rating, enters the talks with what some of his aides believe is a strong hand that includes a narrow Senate majority, a party that is unified on this issue and a strong message for voters.

Speaker for less than a month, McCarthy, 58, leads a fractious House Republican caucus with a narrow 222-212 majority that has given a small group of hardline conservatives outsized influence.

Despite years of mingling with other Washington lawmakers, Biden has little personal history with McCarthy, who joined the Republican leadership on Capitol Hill under former Speaker John Boehner after Biden had already left to become Barack Obama’s vice president.

Just one in four Republicans serving in the House today held their seats in 2011, and some may not be fully aware of the risks of courting default, or the difficulties of negotiating in a divided government.

Unlike most other developed countries, the United States puts a hard limit on how much it can borrow, and Congress must periodically raise that cap because the U.S. government spends more than it takes in.

Minutes before the White House meeting, Federal Reserve chair Jerome Powell told reporters: “There is only one way forward here and that’s for Congress to raise the debt ceiling.

“No one should assume that the Fed can protect the economy from the consequences of failing to act in a timely manner,” Powell said.

The 2011 crisis was resolved with a bipartisan deal that cut spending and raised the debt limit but left Obama administration officials smarting. Many felt they had given up too much and had still harmed the economy by letting talks persist.

McCarthy has less room to manoeuvre than his Republican counterpart in 2011 did.

To win the speaker’s gavel, he agreed to enable any single member to call for a vote to unseat him, which could lead to his ouster if he seeks to work with Democrats. He also placed three hardline conservatives on the Rules Committee, which would allow them to block any vote on a compromise.

Biden seemed to question McCarthy’s ability to keep Republicans in line at a fundraiser in New York on Tuesday, calling McCarthy “a decent man, I think,” but noting the concessions he made to become speaker.

McCarthy, for his part, said Biden needed to be willing to make concessions to get a debt-ceiling increase through Congress, saying it would be “irresponsible” not to negotiate.