US President Joe Biden and Republican leaders have begun talks to prevent a potential US debt default. Biden has had to cut short his upcoming Asia tour to deal with the crisis. The Treasury has warned of severe consequences if the country runs out of cash to pay its bills, which would cause a surge in interest rates and affect businesses, mortgages and global markets. The US could begin defaulting on its debts potentially as early as June 1, according to Treasury Secretary Janet Yellen.
The two parties remain divided, with Republicans insisting on significant spending cuts in exchange for their support to raise the debt ceiling. Democrats have been calling for a clean increase of the borrowing limit with no strings attached. Over 140 top US chief executives have signed a letter to Biden and congressional leaders stressing the need for an agreement.
Biden and the Republican speaker of the House of Representatives, Kevin McCarthy, have blamed each other for the lack of progress made in the first round of talks last week. Republicans are demanding cuts of $130bn from federal agencies and programs in exchange for lifting the debt ceiling. There are only three days remaining when the House and Senate are both in session before June 1.
Democrats in Congress have begun considering a range of alternatives, including using an arcane congressional procedure to bypass McCarthy or invoking the 14th Amendment to raise the debt ceiling unilaterally. However, such a move could be challenged in court. Biden has continued to call publicly for Republicans to support a clean increase to the debt ceiling.
