US economy inches toward default amid Biden-McCarthy debt ceiling deadlock

theguardian.com:

President Joe Biden and top lawmakers agreed on Tuesday to further talks aimed at breaking a deadlock over raising the $31.4tn US debt limit, with just three weeks before the country could be forced into an unprecedented default.

After about an hour of talks in the Oval Office, Biden, a Democrat, and House of Representatives speaker Kevin McCarthy, a Republican, deputized their aides to hold daily discussions about areas of possible agreement as a default looms as soon as 1 June.

Biden, McCarthy and three other top congressional leaders were set to meet again on Friday.

Biden called the talks “productive” and appeared to offer Republicans some possible compromises, including taking a “hard look” for the first time at clawing back unspent coronavirus relief funds to reduce government spending.

But he repeated that Republicans must take the threat of default off the table. And he did not rule out eventually invoking the 14th amendment to the US constitution, an untested approach that would seek to declare the debt limit unconstitutional. Doing so would require litigation, he said, but is an option he may study in the future.

“There’s a lot of politics and posturing, and that’s going to continue for a while,” Biden said, but political leaders are “getting to work”.

“Everyone in the meeting understood the risk of default,” Biden said.

McCarthy emphasized a lack of progress after the meeting. “I didn’t see any new movement,” McCarthy told reporters, complaining that Biden didn’t agree to talks until time was running out. “That’s not a way to govern,” he said.

But he did say Biden indicated that he was open to discussing reforms to the permitting process for new energy projects as part of the talks.

Economists warn that a lengthy