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Tense White House Debt-Limit Meeting Ends With No Agreement

Top U.S. lawmakers emerged frustrated and empty-handed after a tense Tuesday meeting with President Joe Biden over the nation’s debt limit. Biden sought to calm global financial jitters, saying he thought the meeting was “productive” and that the group would meet again Friday as the U.S. stares down the possibility of defaulting on its financial obligations for the first time in history.

Biden met Tuesday afternoon with Republican House Speaker Kevin McCarthy and Senate Minority Leader Mitch McConnell, as well as Democratic House leader Hakeem Jeffries and Senate Majority Leader Chuck Schumer, in a bid to ensure the government can borrow more money to pay for spending it has already incurred.

Afterward, Biden expressed optimism over a future deal. However, he reiterated that he will continue to insist that Congress lift the debt ceiling.

“I made it clear during our meeting that default is not an option,” he said. “I repeated that time and again, ‘America is not a deadbeat nation.’”

Republicans are insisting that the federal government reduce spending before they will agree to raise the debt ceiling. Meanwhile, Biden is adamant that Congress has a duty to pay its bills and that the two issues should be addressed separately. The two sides blame each other for the impasse, and Biden said “a default would be disastrous.”

“Everyone in the meeting understood the risk of default: our economy would fall into a significant recession, it would devastate retirement accounts, increase borrowing costs,” Biden said. “According to Moody’s, nearly 8 million Americans would lose their jobs, and our international reputation would be damaged in the extreme.”

But McCarthy emerged from the meeting clearly disappointed that no progress had been made.

“I didn’t see any new movement,” McCarthy said. He added: “I asked him numerous times, ‘Are there some places we could find savings?’ He wouldn’t give me any.”

However, McConnell sought to assure Americans that the U.S. will continue to pay its debts. Even with the Treasury taking “extraordinary measures” to pay the government’s bills, Treasury Secretary Janet Yellen told lawmakers last week that the Treasury’s ability to pay the government’s bills could run short as early as June 1.

“The United States is not going to default,” he said. “It never has and it never will.”

Default a ‘gift’ to adversaries

Earlier in the day, the White House warned that the United States defaulting on its debts would be “a gift” to adversaries, including China and Russia, and would lead to a recession that could send shock waves across the global economy.

“Default would create global uncertainty about the value of the U.S. dollar and U.S. institutions and leadership, leading to volatility in currency and financial markets and commodity markets that are priced in dollars,” White House press secretary Karine Jean-Pierre said during a press briefing on Tuesday.

Director of National Intelligence Avril Haines previously made a similar point to the Senate Intelligence Committee about the national security consequences of the U.S. teetering on the edge of a fiscal cliff.

The Treasury debt limit, which caps the amount of outstanding debt the country can have and thus Treasury’s ability to issue securities to fund the government’s obligations, was reached on January 19.

Ceiling raised 3 times under Trump

Lifting the debt ceiling was once a routine vote. Congress has raised it 78 times since 1960, 29 times under Democratic presidents and 49 times under Republican presidents, including three times under former President Donald Trump.

Policy analyst Arianna Fano of the Bipartisan Policy Center said even this verbal sparring will impact markets. A default, she said, would be especially rough for nations with high levels of external debt.

“Given the costs of this brinkmanship alone, we know the economic impacts of an actual default would range from damaging to catastrophic,” Fano said. “Treasury securities are viewed as one of the safest assets in the world, but in a default scenario investors could look to minimize their risk exposure by pulling investments from developing countries, thus reducing access to capital and hampering economic growth.”

How would a US default affect the world?

The U.S. economy is the largest in the world, and the dollar is considered the world’s reserve currency, meaning that many countries’ central banks and other monetary authorities hold U.S. dollars as part of their foreign exchange reserves as a backup in case their own currency fails.

A debt event in the United States would have serious consequences not only for the U.S. but also for the global economy and for world financial markets.

Should the U.S. fail to pay its debts, in addition to creating havoc in global stock markets and sending the American economy into recession, it would trigger a sell-off in U.S. Treasury bonds, weakening the dollar and raising interest rates. This would affect foreign currency reserves held by other countries and make the costs of borrowing more expensive, potentially leading countries with already high levels of borrowing into a debt crisis.

“If interest rates in the United States go up, it’s going to take all other interest rates up with it. It’s going to make all other risk assets look very shaky,” said Desmond Lachman, former deputy director at the International Monetary Fund who is now a fellow at the American Enterprise Institute.

He agreed with Yellen’s view that a U.S. debt default would be an economic catastrophe that must be avoided.

Lachman told VOA the world can ill-afford such financial turbulence, especially with the regional banking crisis that began with the collapse of Silicon Valley Bank in March, followed by the toppling of two other U.S. banks — Signature Bank and First Republic.

Safest investment

U.S. Treasury bonds are traditionally considered the safest investment that global financial investors turn to in times of distress, said Heidi Crebo-Rediker, former chief economist of the U.S. Department of State and adjunct senior fellow at the Council on Foreign Relations.

“It is the deepest, most liquid, solid and reliable market in the world,” she said.

Crebo-Rediker added that countries and investors need not be overly concerned about an actual U.S. default.

“This is a question of willingness to pay, not ability to pay,” she said. “And that is a very big distinction.”

Chris Hannas contributed to this report.
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US Rep. George Santos Facing Federal Charges, Sources Say

U.S. Representative George Santos, who faced outrage and mockery over a litany of fabrications about his heritage, education and professional pedigree, has been charged with federal criminal offenses, two people familiar with the matter told The Associated Press.

The charges against Santos, filed in the Eastern District of New York, remain under seal.

The people could not publicly discuss specific details of the case while it remains under seal and spoke to The AP on condition of anonymity.

Reached on Tuesday, Santos said, “This is news to me.”

“You’re the first to call me about this,” he said in a brief phone interview.

The charges were first reported by CNN.

The New York Republican has admitted to lying about having Jewish ancestry, a Wall Street background, college degrees, and a history as a star volleyball player. Serious questions about his finances also surfaced, including the source of what he claimed was a quickly amassed fortune despite recent financial problems, including evictions and owing thousands of dollars in back rent.

Santos has resisted calls to resign and recently announced he was running for reelection. He said his lies about his life story, which included telling people he had jobs at several global financial firms and a lavish real estate portfolio, were harmless embellishments of his resume.

Pressure on him to quit, though, has been intense. Reporters and members of the public hounded him. He was mocked on social media and late-night television. Fellow New York Republicans demanded he resign, saying he had betrayed voters and his own party with his lies.

Nassau County prosecutors and the New York attorney general’s office had previously said they were looking into possible violations of the law.

In addition to questions about his life story, Santos’ campaign spending stoked scrutiny because of unusual payments for travel, lodging and other items.

The nonpartisan Campaign Legal Center lodged a complaint with the Federal Election Commission and urged regulators to investigate Santos. The “mountain of lies” Santos propagated during the campaign about his life story and qualifications, the center said, should prompt the commission to “thoroughly investigate what appear to be equally brazen lies about how his campaign raised and spent money.”

In his filings with the FEC, Santos initially said he loaned his campaign and related political action committees more than $750,000 — money he claimed came from a family company.

Yet, the wealth necessary to make those loans seems to have emerged from nowhere. In a financial disclosure statement filed with the clerk of the U.S. House in 2020, Santos said he had no assets and an annual income of $55,000.

His company, the Devolder Organization, wasn’t incorporated until spring 2021. Yet last September, Santos filed another financial disclosure form reporting that this new company, incorporated in Florida, had paid him a $750,000 salary in each of the last two years, plus another $1 million to $5 million in dividends. In one interview, Santos described the Devolder Organization as a business that helped rich people buy things like yachts and aircraft.

Court records indicate Santos was the subject of three eviction proceedings in Queens between 2014 and 2017 because of unpaid rent.

Some Republicans, including those in his district, have sharply castigated Santos for his dishonesty. The Nassau County Republican Committee, which had supported his candidacy, said it would not support him for reelection.

Santos lost his first race for Congress in 2020 but ran again in 2022 and won in a district that is in the suburbs of Long Island and a sliver of Queens.

A local newspaper, The North Shore Leader, had raised questions about Santos’ background before the election, but it was not until a few weeks after the election that the depth of his duplicity became public.

Beyond his resume, Santos invented a life story that has come under question, including claims that his grandparents “fled Jewish persecution in Ukraine, settled in Belgium, and again fled persecution during WWII.”

During his campaign, he referred to himself as “a proud American Jew.”

Confronted with questions about that story, Santos, a Roman Catholic, said he never intended to claim Jewish heritage.
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How China, Russia Might Capitalize on US Debt Limit ‘Chaos’

US officials are warning that China and Russia would capitalize on the ‘chaos’ that would ensue if the United States defaulted on its debt. The warnings come amid a monthslong standoff between President Joe Biden and Republicans in securing congressional approval to raise the nation’s debt limit. White House Bureau Chief Patsy Widakuswara has the story.
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