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What to watch for in the Biden-McCarthy debt ceiling meeting

2023-05-09T09:08:13Z

U.S. President Joe Biden hands a copy of the speech to U.S. Speaker of the House Kevin McCarthy (R-CA) prior to delivering State of the Union address his State of the Union address at the U.S. Capitol in Washington, U.S., February 7, 2023. REUTERS/Evelyn Hockstein

U.S. President Joe Biden meets Republican House Speaker Kevin McCarthy and other congressional leaders at the White House on Tuesday afternoon for closed-door talks as a potentially catastrophic June default looms.

The 4 p.m. EDT (2000 GMT) meeting is not expected to produce anything close to a final agreement on raising the debt limit, but will be closely scrutinized by global investors, U.S. voters and Washington lawmakers.

Reuters spoke to political tacticians and advisers inside and outside the White House and Congress about tell-tale signals that could come from the meeting. Here’s what they will be looking for:

The meeting is set to include Biden, McCarthy, Senate Democratic Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell and House Democratic minority leader Hakeem Jeffries.

As invitees to the White House, they’re not expected to bring any other lawmakers. The people Biden brings, whether Cabinet members like Treasury Secretary Janet Yellen or congressional experts like legislative affairs Director Louisa Terrell, will signal what the president expects to get done in the meeting, experts said.

White House spokesperson Karine Jean-Pierre said on Monday that the meeting will likely be Biden and the four legislative leaders, but that details may change.

The bottom line is the fewer the people, the more serious the president is about getting down the nitty-gritty of a deal.

First meetings tend “not to be super productive,” said Rohit Kumar, co-leader of PwC’s national tax office in Washington, who participated in a number of Oval Office meetings while serving as a top McConnell aide. Instead, participants tend to restate their public positions.

He said the most productive outcome would be a decision on how they move forward with negotiations. “…They designate the people who will lead the negotiations for each side, and decide who’s going to make the first offer. And then you start the actual process of negotiating, trading paper – however you’re going to do it,” he said.

Heading into Tuesday’s meeting, Biden and McCarthy have cast one another as stubborn, misguided and, at times, dangerous.

Observers are wondering if that tone will change, as it did after McCarthy met with Biden in February

Biden will speak to reporters at the top of the meeting, and it’s common for lawmakers to talk to reporters outside the Oval Office at the White House following high-profile gatherings.

White House officials say they want this to be a productive meeting, not just Washington theater. But they aren’t sure if McCarthy will feel the need to play to the conservative base and stand firm, or act as a flexible dealmaker seeking resolution.

House and Senate Republicans have repeatedly said they would not vote for the “clean” debt-ceiling hike that Biden has called for.

Biden will travel to New York’s Hudson Valley on Wednesday to once again pressure Republicans to pass a clean debt ceiling hike and highlight that a House Republican plan would cut veterans’ health care visits, support staffs at schools and Meals on Wheels for seniors.

The event will take place in a politically competitive region that saw Republicans make gains in 2020, a sign that the White House believes Republican cuts are a winning issue for Democrats.

Biden is not currently expected to tour battleground states in the weeks ahead, and he heads to Asia for a diplomatic trip late in the month. He may reconsider if he thinks it will help to ratchet up the pressure on McCarthy and Republicans, advisers say.

The meeting is set to begin just as the U.S. stock market closes for the day.

That means whatever news comes out of the discussions can’t send U.S. markets plunging, but Asian markets, which will be open, have historically moved on debt ceiling fears, too.

The market price of insurance against a U.S. default has jumped, with one-year credit default swaps trading 157% higher than three months ago. A severe market reaction to any post-meeting messaging would draw investor anger and may accelerate pressure on both sides for a resolution.