Debt ceiling deadlock continues with next meeting set for Friday

OAKLAND, Calif. - A critical meeting between President Biden and Congressional leaders ended Tuesday with no deal on the debt ceiling deadlock. 

The United States is on course to run out of funds in June if Congress doesn't raise the borrowing limit or dramatically scale back on payments or expenditures. 

The President's meeting at the White House with House Speaker Kevin McCarthy (R-CA), Senate Minority Leader Mitch McConnell (R-KY), House Democratic Leader Hakeem Jeffries (D-NY) and Senate Majority Leader Chuck Schumer (D-NY) lasted more than one hour.

"I made clear during our meeting that default is not an option," said President Biden at a press conference after the meeting, "Let's discuss what we need to cut, what we need to protect, what new revenue we can raise and how to lower the deficit to put our fiscal house in order, but in the meantime, we need to take the risk of default off the table."

House Speaker Kevin McCarthy says he wants immediate spending cuts before agreeing to raise the debt ceiling.

"I didn't find progress in this meeting. Staff will continue to meet, and we'll get back together on Friday," said Speaker McCarthy.

"The solution to this problem lies with two people: The President of the United States and the Speaker of the House," said Sen. McConnell.

The nation's debt limit is more than $31 trillion, and funds could run out as soon as June 1st.

A default on debt or a shortage of funds, could impact every American according to Jim Wilcox, a former Fed economist and UC Berkeley Haas School of Business Professor of Finance.

"If we do hit the ceiling, they're going to have to decide who gets paid, and more importantly, who does not get paid," said Wilcox.

Wilcox says that means payments to government employees, the military, social security recipients, welfare recipients, or government contractors could all be in jeopardy, and that could have an impact on the larger economy.

"If they're not getting their checks, they're not going to be spending as much in restaurants or clothing stores or anyplace else and that will ripple through the economy with great force," said Wilcox.

There also could be long-term impacts. If the U.S. defaults on its treasury bonds, that could impact people's money market and retirement accounts and make it even more expensive for the U.S. government to borrow in the future.

"If we don't make mortgage payments on time, the next time we go to get a loan, almost certainly we're going to have to pay a higher interest rate and the same thing is true for businesses or individuals and governments," said Wilcox.

President Biden did not rule out a short-term increase through September 30.

The president and four Congressional leaders are scheduled to meet again on Friday.