US President Joe Biden looks on during a meeting with US Speaker of the House Kevin McCarthy (R-CA) in the Oval Office of the White House in Washington, DC, on May 9, 2023. AFP
There are seven days until June 1 -- the earliest possible point when the government estimates it could run out of money to service its debts -- and missed loan repayments would likely spark a recession, roiling world markets.
But members of the House of Representatives began hitting the road for the Memorial Day recess after their final vote Thursday morning and are not due to return until June 4.
"There will be no default," Biden said at the White House, adding that his negotiations with Republican Speaker Kevin McCarthy, who leads the narrow majority in the House of Representatives, had been "productive."
But Democratic minority leader Hakeem Jeffries slammed the Republicans from the House floor, accusing them of having abandoned their jobs in Washington to "risk a dangerous default in a crisis that they've created."
"And these Republicans, they're going to say that Joe Biden refused to sit down with them," he added. "That's a fake narrative that they've continued to try to put into the public domain."
House Republicans are demanding cuts of up to $130 billion, with spending next year capped to 2022 levels in return for their votes to raise the borrowing cap. They also want tightened work requirements for benefits claimants and a clawback of unspent pandemic aid dollars.
Democrats reject the proposed cuts and want the Republicans to sign off on a no-strings-attached hike, as they have dozens of times in the past.
Economists have spent months raising the prospect of economic catastrophe should the government default, and top military brass added their own dire assessment Thursday, warning that the crisis would have a "significant negative impact" on troops.
"Readiness clearly would be impacted. So our large-scale exercises that we do at various training centers would probably either slow down or come to a halt in many, many cases," Mark Milley, the chairman of the Joint Chiefs of Staff, told journalists at the Pentagon.
McCarthy has said lawmakers will get 24 hours' notice if they are required to return for a vote during the recess, with negotiators representing the Republicans and the White House reportedly closing the gap on their differences.
Speaking on Fox News Thursday, the speaker rejected demands for a "clean" bill and added that he would not agree to tax increases on corporations or the rich as an alternative to cuts for reducing the nation's $31 trillion-plus debt burden.
He pointed to a CNN poll out this week in which 60 percent of respondents said a debt ceiling hike should be accompanied by cuts, although 51 percent of respondents in a new Monmouth University survey said they want the two issues to be de-linked.
"We know where our differences are, and we will continue to be at the table to try to solve this problem," McCarthy said.
White House chief of staff Jeff Zients suggested Republican protestations over out-of-control government spending were disingenuous, pointing to their plan to extend Donald Trump-era tax cuts, which Democrats say would add $3.5 trillion to the debt.
"Apparently no concerns about blowing up the deficit as long as it's for the top 0.1% of households in America," he tweeted.
Raising the permitted national debt level -- which is the job of bureaucrats rather than politicians in many countries -- has no implications for future spending; it simply enables the government to make repayments on loans that have already been approved and carried out.
Deputy Treasury Secretary Wally Adeyemo told investors at a conference in Washington the default threat was a "manufactured crisis" that was already making borrowing more expensive and costing Americans money.
Without efforts to speed up the normal process, any agreement would require at least 10 days to be formalized into legislative language, pass the House and Senate and get to Biden's desk.
A batch of Social Security payments worth about $25 billion is scheduled to go out on June 2 and those payments could be halted if the Treasury Department is unable to cover loan repayments.
An estimated 27 million Americans would fall into poverty without Social Security.