President Joe Biden expressed confidence that negotiators would reach an agreement to avoid a catastrophic default, seeking to reassure markets before he departs on a trip to Japan.
(Bloomberg) — President Joe Biden expressed confidence that negotiators would reach an agreement to avoid a catastrophic default, seeking to reassure markets before he departs on a trip to Japan.
“I’m confident that we’ll get the agreement on the budget and that America will not default,” Biden said Wednesday at the White House, shortly before he plans to depart to Hiroshima for a Group of Seven leaders summit.
The president said he would be in close contact with negotiators and House Speaker Kevin McCarthy. On Tuesday, Biden and congressional leaders agreed to a new narrower round of staff-level talks with hopes of reaching a bipartisan deal to avoid an unprecedented US default. The US president also announced he was canceling planned stops in Australia and Papua New Guinea, and would return to Washington by the beginning of next week for continued negotiations.
Both lawmakers and White House officials have expressed cautious optimism following the meeting, and stocks rose and Treasuries fell Wednesday on hopes of a breakthrough. Still, the Treasury Department has warned the US could breach the debt ceiling as soon as June 1. Economists have warned that a default would spike borrowing costs, rattle markets and prompt widespread job losses.
Biden said the smaller group had authority to make agreements in detail and hammer out differences between the two sides. The president said he did not anticipate the deal would be completed before he returns from Japan on Sunday.
“We’re going to continue these discussions with congressional leaders in the coming days until we reach an agreement,” Biden said.
The president also said he was unwilling to increase work requirements for safety net programs providing Americans with health insurance, though notably did not draw the same red line on other programs. House Republicans have also sought to toughen access to federal grocery assistance.
Biden’s remarks came shortly before Senate Majority Leader Chuck Schumer is slated to meet with executives from some of the largest US banks, including JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon and Citigroup Inc. CEO Jane Fraser. Corporate leaders have urged Biden and congressional leaders to act quickly, reflecting Wall Street’s broader unease about the damage a default would unleash on markets and the economy.
Read more: Dimon, Fraser, Other Bank CEOs to Meet Schumer on Debt Limit
Dimon told Bloomberg Television in an interview that JPMorgan had set up a “war room” to prep for the possibility of a breach.
An open letter on Tuesday from more than 140 top business executives, including Goldman Sachs Group Inc. Chairman and CEO David Solomon, warned that the economy is already seeing stress from the debt-limit brinkmanship.
Stocks rose Wednesday on hopes that the smaller group of negotiators will be able to break the deadlock. The S&P 500 advanced for the second time in three days and treasuries fell, with the yield on two-year notes topping 4.1%.
Read more: Stocks Advance on Hopes for US Debt Breakthrough: Markets Wrap
There are sizable obstacles remaining for negotiators with Republicans digging in on spending cuts, clawing back unspent Covid-19 funding, easing permits for energy and other projects and expanding work requirements on federal aid to the poor.
“At the end of the day, we do not have a debt default,” now that the president has agreed to negotiate, McCarthy said in an interview with CNBC Wednesday morning. He also highlighted that narrowing the number of negotiators was helpful.
Staff-level talks are being led by senior White House adviser Steve Ricchetti, legislative affairs director Louisa Terrell and budget director Shalanda Young representing Democrats and Representative Garret Graves of Louisiana and aides to House McCarthy joining from the GOP side.
The three White House negotiators met Tuesday evening with McCarthy’s representatives and are slated to resume negotiations Wednesday.
(Updates with additional details starting in paragraph 5)
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