President Biden, lawmakers postpone debt ceiling talks as default date looms closer

Yahoo Finance political correspondent Kevin Cirilli discusses the postponement of talks between President Biden and Congressional leaders on raising the national debt ceiling as the default date looms closer.

Video transcript

- Well, the meeting on the debt ceiling between President Biden and congressional leaders may have been postponed today. But talks are ongoing through the weekend, especially among aides. Washington is on the clock with a new CBO report saying the US could be unable to pay its bills in the first two weeks of June.

Let's bring in Yahoo Finance's contributor Kevin Cirilli with the very latest. And Kevin, it appears as though there's a few items that have emerged as potential compromises.

KEVIN CIRILLI: Yeah, I think the one that based upon my reporting that I can tell you are these clawbacks to unspent COVID-19 pandemic money. That cash went out, that money went out to the states. And a lot of it went unspent. And so House Speaker Kevin McCarthy, a part of his proposal is to be able to get that back in order to offset some of these costs.

There is a huge factor, especially if you're looking from an investment standpoint, a trading standpoint as to when this X date is going to happen. And you just alluded to it with this CBO report. Secretary Yellen, who's at the G7, she's meeting with the Banking Policy Institute folks next week. But she's been really out there pushing that the X date is going to be on June 1st.

It might not actually be precisely on June 1st. And that's what we're getting from the CBO, from the Bipartisan Policy Center as well. It might be in the first half of June. That would buy congressional leaders-- you know, Chuck Schumer, Senate Majority Leader, Speaker McCarthy, McConnell, Hakeem Jeffries-- it would buy them a couple of more days on the Congressional calendar to get to some type of a deal in that X date. So if you're carefully watching that X date and the trading around that X date, you might have a little bit-- I caution this-- a little bit of more time.

So that June 1st isn't an arbitrary deadline. Separately from that as it relates to the X date, tax receipts. We got to talk about how many Americans paid their taxes this year. And if there were many Americans who paid them and we have a lot of tax receipts, that would give the government more money to pay and utilize extraordinary measures to pay the $31.4 trillion debt with that debt ceiling. It would buy them some more time.

So keep an eye on that. And Yellen's assessment of June 1st was in part-- key word, in part-- based upon that there would be fewer Americans who paid their taxes. It's looking like according to the reports that I'm reading, and I'm sure you guys are reviewing as well, it's looking like that there might be a little more time than just June 1st.

- Kevin, what's the feeling down there on the ground just in terms of the conversations that you're having. How optimistic lawmakers are that we are going to reach some sort of agreement before whatever that X date ends up being?

KEVIN CIRILLI: You know, it's such a good point. And it's truthfully-- I know there's been a lot of political theater, to use some neutral words, coming out of Washington and cable news this week. Of course, I'm alluding to former President Donald Trump's CNN Town Hall. But let's focus on the policy, right? Let's actually hone in on this, because what he said in that Town Hall was that if it meant a default in order to get cuts to government spending, that he would be in favor of a default.

There are two very important points based off of that assessment. The first is from a practical matter. Senate Republicans-- I'm thinking of Senators Mitt Romney, Lisa Murkowski, John Thune, and others, John Cornyn have come out and said that they disagree with that. So some top Senate Republicans are saying that they disagree with Trump saying that there should be a default and that they all feel that they've got to get to a compromise before the X date. So the Senate Republicans are saying they don't want to default. And that's a key thing to focus in on, which is notable.

Secondly, Trump's the front runner right now. And there are two missing pieces to his economic advising team. I'm thinking of former treasury secretary Steven Mnuchin. He's missing in action. He's not advising this 2024 campaign like he did in the past two cycles for Trump. Gary Cohn, another sort of force who would have been in favor of getting to a deal, not advising Trump 2024.

So the impact of Trump's rhetoric is that those two forces and those two networks that they represent aren't advising Trump in 2024. Finally, everyone is saying at least who I'm talking to from Speaker McCarthy to Jim Jordan, the Head of the Freedom Caucus, on the Republican side, that they feel ultimately the debt ceiling will get raised. But the question is, will there be a technical default?

That's why this ambiguity around the June 1 X date-- the June 1 X date that Yellen said, that ambiguity is so incredibly important to monitor over these next couple of weeks as these talks intensify. But Speaker McCarthy came out and said they want to have another principal meeting next week. Look to see if there's a framework agreement. If there's a framework agreement that's met, that means that there's going to be a deal.

All of this, of course, means Kevin's going to be a busy few weeks for you moving ahead.

KEVIN CIRILLI: You know what, though? This is like-- this is what we do, you know? I mean, this is it, folks, right here. If you're trying to build wealth, I mean, and trying to figure out Washington's impact, this right here, it's all happening in DC. What do I know?

- All right, follow Kevin Cirilli. That's the bottom line of all this. Yahoo Finance contributor, Kevin, thanks so much for that.

KEVIN CIRILLI: Thank you.