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By Daniel Bush
White House Correspondent
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As President Biden and House Speaker Kevin McCarthy prepare to square off over the debt ceiling Tuesday at the White House, it's clear something will have to give in order for the government to avoid a financial crisis.
The question is, who will blink first?
Both sides remain far apart on a deal with just three weeks to go before June 1, the date Treasury Secretary Janet Yellen has said the United States will default if the debt ceiling isn't raised.
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"A default would push the economy right over the edge," Dan North, a senior economist at Allianz Trade North America, told Newsweek. "Neither side wants to be seen as the party that created the default," he said, but "both sides are digging their heels in."
McCarthy enters the meeting with Biden in a difficult position. Last month House Republicans passed a bill on a party-line vote that would raise the debt ceiling but also slash federal spending, including cuts to some of Biden's prized health and climate programs.
The bill was a victory for McCarthy, who controls a slim majority in the House. But he has little wiggle room to negotiate a final agreement, since the far-right wing of his caucus is opposed to any debt ceiling deal that does not include spending cuts.
"McCarthy's got a problem here," said Thomas Patterson, a professor of government and the press at the Harvard Kennedy School. "It's going to be hard for him to back away from this."
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Biden and the Democratic leadership have refused to tie a debt ceiling increase to federal spending, insisting that Congress act without preconditions as it has done in the past.
Congress has voted to raise the debt limit dozens of times in the last several decades without cutting federal funding, including three times under former President Donald Trump.
A failure to raise the debt ceiling would be unprecedented. Interest rates would rise, the U.S. economy would likely slide into a recession, and a global financial crisis could follow. A default would also lead to a partial government shutdown, with some nonessential services put on pause until the borrowing limit gets raised.
If no deal materializes, recent history suggests McCarthy has more cause to worry than Biden.
After the government shutdowns that took place under former Presidents Bill Clinton, Barack Obama and Trump, polls found a majority of Americans blamed Congress, not the president, for failing to reach a deal.
"Congress almost always winds up with egg on its face on these sorts of things," said Bruce Oppenheimer, a political science professor at Vanderbilt University.
Clinton emerged as the political winner in his fiscal battles with then-House Speaker Newt Gingrich, which led to two government shutdowns in the winter of 1995-1996.
"The 1995-1996 shutdowns helped set the stage for Clinton's reelection," Patterson said. "They really worked to his advantage."
Congressional Republicans took another hit in the polls after forcing a government shutdown in 2013 by trying unsuccessfully to defund the Affordable Care Act, Obama's health care law.
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Trump and congressional Republicans suffered a similar setback during the last shutdown, in late 2018. That shutdown, the longest in U.S. history, ended when Trump relented and agreed to strike a deal that did not include funding for his border wall.
There is still time for congressional Republicans and the White House to strike a deal now, or at least to find a temporary solution.
Congress could suspend the debt ceiling, a move that would kick the can down the road a few months and force lawmakers to revisit the issue later this year as part of broader budget talks.
Biden has also faced calls to act on his own by invoking a clause in the 14th Amendment that some legal scholars say allows the president to raise the debt ceiling unilaterally without getting approval from Congress.
The White House has dismissed the notion, along with any other solution other than a "clean" debt ceiling increase.
The meeting Tuesday between Biden, McCarthy and the other three top congressional leaders will start the clock ticking on a drama-filled stretch-run to reach an agreement. Both sides need to show up ready to have a real negotiation, said a former senior House Republican official who asked not to be named in order to discuss the meeting.
"If these guys get in a room and all they do is recite their talking points, that is a failure and a waste of time and effort," the source said.
North, the Allianz Trade economist, said some sort of a deal to avoid a default remains the most likely outcome. But don't expect Congress to act until the last possible moment, he added.
"It'll come down to the last minute," he said.
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