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There's 'still a lot to do' on a debt ceiling agreement with economic catastrophe as soon as 2 weeks away , Kevin McCarthy says — but 'it is possible to get a deal by the end of the week'

President Biden Holds Second Meeting With Congressional Leaders On Debt Limit Talks
  • Biden with the top four lawmakers for a second time to discuss raising the debt ceiling.

  • Kevin McCarthy said they are still far apart on a deal, but he thinks an agreement could be reached this week.

  • The US could default on its debt as soon as early June.

It's another day closer to the US breaching the debt ceiling and tumbling into an entirely preventable economic catastrophe — and key lawmakers still haven't figured out a path forward.

On Tuesday, President Joe Biden met with Speaker of the House Kevin McCarthy, House Minority Leader Hakeem Jeffries, Senate Majority Leader Chuck Schumer, and Senate Minority Leader Mitch McConnell for the second time to attempt to reach a deal on raising the debt ceiling.

Leading up to this meeting, both parties appeared split on how they viewed the direction of the negotiations. While Biden told reporters on Sunday that he was "optimistic" a deal would be reached before a default — which Treasury Secretary Janet Yellen said could happen as soon as early June — McCarthy was nowhere near as confident in the way the talks have been progressing.

"It doesn't seem to me yet they want a deal, it just seems like they want to look like they are in a meeting but they aren't talking anything serious," McCarthy, who has narrowly pushed through a bill to raise the ceiling for one year coupled with sweeping spending cuts, said. Democrats have said McCarthy's legislation is dead on arrival.

Following Tuesday's meeting, not much changed.

"Lot of work to do in a short amount of time," McCarthy told  reporters following the meeting. "It's unfortunate that we are where we are."

However, he noted that "it is possible to get a deal by the end of the week," and he said that negotiations are now in a "better process" because Biden has "changed the scope of who is all negotiating."

Schumer told reporters following the meeting that it was a "good and productive meeting. Everyone agreed default would be the worst outcome."

"We also agreed we have to pass a bipartisan bill with bipartisan support in both chambers," Schumer said.

Even a short default could be disastrous for hundreds of thousands of Americans. Moody's Analytics has estimated that the country could shed nearly a million jobs in that scenario, alongside plunging into a mild recession, while a prolonged default could lead to millions more jobs lost. In that case, the country could plunge into a recession on par with the Great Recession, according to the White House — but without a funded government to help ease the economic pain.

The country could hit the X-date — the date its debt outweighs its funding — as soon as June 1, according to Treasury Secretary Yellen. Mark Zandi, the chief economist at Moody's Analytics, previously told Insider that his projected X-date is June 8.

The slow progress with negotiations is bringing the US dangerously close to an unprecedented default, and while there are alternative routes to avoid this crisis and the congressional drama that comes with it, administration officials have not been on board. For example, Biden recently said he had been "considering" using the 14th amendment to address the debt ceiling. A clause in the amendment would declare the debt ceiling unconstitutional and get rid of the issue forever, but Biden said it's not the best path right now due to potential litigation.

Additionally, a $1 trillion platinum coin could solve the problem. This would allow the Treasury to deposit a coin at the Federal Reserve and allow the country to continue paying its bills until it finds a more permanent solution. Still, Yellen has been dismissive of that idea on numerous occasions, previously calling it a "gimmick."

It's unclear where negotiations will go from here — McCarthy told reporters on Tuesday that he wants to continue discussions with the White House as soon as possible. And Biden has remained adamant that Congress must reach a solution to prevent economic devastation through a default.

"A default on America's debt would be catastrophic for working families: 8 million jobs gone. A recession triggered. Retirement accounts devastated. Social Security checks delayed," Biden wrote on Twitter on Monday. "It's beyond me why MAGA House Republicans would ever think this is an appropriate threat to make."

Read the original article on Business Insider