McCarthy suggests Biden has a hidden strategy for debt ceiling.

House Speaker Kevin McCarthy Suggests Biden May Have a “Secret Plan” to Avoid Debt Default

The debt ceiling standoff in Washington continues to grip the nation, with House Speaker Kevin McCarthy (R-Calif.) suggesting that President Joe Biden may have a “secret plan” to avoid a debt default. McCarthy made the remarks during a press conference on Capitol Hill, stating that if Biden has a plan, he is all for it. While McCarthy’s comment may have been made in jest, it comes as no clear solution has emerged for resolving the deadlock, and speculation has grown that Biden may have to accept some spending cuts to strike a deal.

Republican Demands for Spending Cuts in Exchange for Lifting Debt Cap

Republicans have demanded spending cuts in exchange for agreeing to lift the $31.4 trillion debt cap. McCarthy referred to the Republican legislative proposal that pairs lifting the ceiling by $1.5 trillion with $4.5 trillion in spending cuts over a decade. Biden has insisted on a “clean” bill to raise the cap and vowed to veto the GOP bill if it reaches his desk, drawing criticism from Republicans that he’s ignoring the problem and could “bumble his way into a default” on the nation’s debt obligations.

White House Officials Believe Biden is Prepared to Compromise

A recent Reuters report cited anonymous sources claiming that White House officials believe that Biden is prepared to compromise with Republicans to some extent on some of their spending demands. The president also appeared to hint at possible cuts himself while speaking at an event last week: “We should be cutting spending and lowering the deficit without a needless crisis, in a responsible way.”

Time is Running Out to Avert a Debt Ceiling Crisis

A number of prominent figures from the Biden administration, including Treasury Secretary Janet Yellen and White House National Economic Council director Lael Brainard, have said a default would be “catastrophic.” Yellen warned recently that the country could breach the statutory $31.4 trillion debt ceiling as soon as June 1, which would require the government to postpone some bill payments if a deal isn’t reached before then. The Congressional Budget Office (CBO) recently released revised guidance indicating that “there is a significant risk that at some point in the first two weeks of June, the government will no longer be able to pay all of its obligations” if the debt ceiling isn’t lifted.

Finance Leaders on Wall Street Growing Increasingly Nervous

Besides growing default risk as reflected in the credit default swap spreads, finance leaders on Wall Street have been growing increasingly nervous amid the deadlock. Citigroup CEO Jane Fraser said recently that the negotiations on raising the ceiling are “more worrying” than previous episodes. JPMorgan Chase CEO Jamie Dimon said the bank is convening weekly meetings to prepare for what could be a major event that shakes markets. Biden has said he’s “absolutely certain” that the country will avert a default, but time is running out to find a solution.

• McCarthy suggests Biden may have a “secret plan” to avoid debt default
• Republicans demand spending cuts in exchange for lifting the debt cap
• White House officials believe Biden is prepared to compromise with Republicans
• Time is running out to avert a debt ceiling crisis
• Finance leaders on Wall Street growing increasingly nervous