Big bank bosses and the AARP join Biden’s push to raise the debt ceiling with 12 days before deadline
U.S. President Joe Biden delivers remarks on the U.S. debt ceiling from the State Dining Room of the White House in Washington, U.S. October 4, 2021.
Jonathan Ernst | Reuters
President Joe Biden will on Wednesday escalate his call for Congress to address the debt ceiling in a meeting with some of Wall Street’s top CEOs and stress that delaying an increase to the borrowing limit risks a first-ever U.S. default and near-certain economic calamity.
Nine CEOs are expected to attend, including JPMorgan Chase boss Jamie Dimon, Intel exec Pat Gelsinger, Nasdaq chief Adena Friedman and Raytheon leader Greg Hayes. AARP chief Jo Ann Jenkins, Citi CEO Jane Fraser and Deloitte exec Punit Renjen are also on the guest list.
Biden will be joined by Treasury Secretary Janet Yellen, Commerce Secretary Gina Raimondo and White House senior advisor Cedric Richmond.
The group will discuss the “urgent need for Congress to take immediate bipartisan action to address the debt limit and avoid default on the U.S. government’s financial obligations and the economic catastrophe that would follow,” according to a White House statement. The president will also pin blame for the drama on Republicans’ obstruction of a generally routine legislative process.
The White House meeting, which will include a mix of virtual and in-person attendees, marks a new level of urgency in the administration’s efforts to avoid what economists see as guaranteed economic turmoil. Congress has only 12 days—until October 18—to suspend or lift the debt limit before the U.S. defaults on its debt for the first time ever, according to Treasury Department estimates.
Yellen and other economists say a failure to pay even one interest payment could spark a dramatic rise in interest rates across the country, weaken the U.S. dollar and threaten the greenback’s status as the globe’s reserve currency.
“Financial markets would lose faith in the United States, the dollar would weaken, and stocks would fall,” the White House Council of Economic Advisors wrote Wednesday, adding that the U.S. credit rating would almost certainly be downgraded and interest rates would rise for many consumer loans, including auto loans and mortgages.
“These and other consequences could trigger a recession and a credit market freeze that could hurt the ability of American companies to operate,” the council wrote.
Default could also delay Social Security checks to some 50 million older adults and postpone income to members of the U.S. armed services.
Yellen told CNBC on Tuesday that she would “fully expect” a default to lead to a recession. Raising or suspending the debt limit allows the Treasury Department to resume its regular payments to U.S. bondholders for spending lawmakers have already authorized.
JPMorgan Chase said Dimon was expected to offer his thoughts during the meeting, but didn’t provide more detail. Representatives for Citi’s Fraser, Intel’s Gelsinger and AARP’s Jenkins did not immediately respond to CNBC’s request for comment.
Wednesday’s meeting also likely represents an opportunity for Biden to implore the private sector to keep pressure on congressional Republicans to back off their threat to filibuster a bill proposed via regular Senate procedure.
The president has in recent days intensified his criticism of the GOP for blocking a vote on the debt ceiling through their threat to filibuster any bill that seeks to raise or suspend the limit with the usual 60-vote margin. The White House said Wednesday that Biden plans to renew that criticism in his meeting with CEOs.
“The President will detail the Republican obstruction that has led us to this point, with the GOP refusing to do the right thing by fulfilling its bipartisan responsibility to address the debt limit,” the White House said. “The President will also reiterate the cost of any delay – with each day of Republican obstruction and political games increasing the risk that even a near-miss default would result in more costs for middle-class families.”
Republicans want Democrats to address the debt limit via a special budgetary process known as reconciliation that only requires a 50-vote majority and circumvents the need for GOP support.
That likely appeals to Senate Minor Leader Mitch McConnell, R-Ky., who is hoping to consolidate and expand Republican seats in the 2022 midterm elections. By saving any Republicans from voting for a debt-ceiling increase, McConnell can protect the caucus from primary challengers hoping to label incumbents as reckless spenders.
“I implore them one more time not to play Russian roulette with the American economy,” McConnell said during a press conference on Tuesday. “They need to do this, they have the time to do it and the sooner they get about it the better, to make sure the markets and the American people know that as usual, the American government will never, ever default.”
Asked how forcing budget reconciliation to raise the debt ceiling is easier than Republicans not filibustering and allowing the same 50-vote majority vote, McConnell said he couldn’t be sure that no member of his caucus wouldn’t object to unanimous consent.
“That would require getting consent from every single Republican to lower the threshold to 51. I can’t imagine that would happen,” he said. “And the reason that wouldn’t happen is we’ve been pointing out for two months that they ought to do it. And that’s the way to get the job done.”
If Republicans stand by their threat, Democrats may ultimately be forced to include a debt limit increase in a reconciliation bill.
Democrats are already trying to muster trillions in climate and anti-poverty spending through a reconciliation bill and would likely have to create a second such bill to pass a limit increase before the Oct. 18 deadline.
Democrats may dislike that option as reconciliation forces them to raise the limit instead of suspending it. Suspensions allow the government to issue new debt for a certain period of time instead of capping it at a certain dollar figure.
Linking the Democrats to a massive dollar figure — the product of spending and tax cuts approved by both parties — could make for bad optics during the 2022 midterm elections.