House Speaker Kevin McCarthy has agreed to meet with President Biden at the White House on May 9 to discuss the debt ceiling.

The high-stakes meeting comes as the United States faces a potential economic disaster if lawmakers fail to raise or suspend the nation's borrowing authority. This encounter will be the first between Biden and McCarthy since February.

Yellen Warns of Looming Default

In a recent letter, Treasury Secretary Janet Yellen warned that the U.S. government could default on its obligations as early as June 1 if Congress does not act to raise or suspend the debt limit.

McCarthy responded to Yellen's warning: "The clock is ticking." Yellen's warning comes after a review of recent federal tax receipts, which led her to conclude that the government will only be able to satisfy some of its obligations by early June.

Biden and McCarthy to Discuss Debt Ceiling

Following the release of Yellen's letter, it was revealed that President Biden had called House Minority Leader Kevin McCarthy's team to meet to discuss the nation's $31.4 trillion borrowing limit.

Biden has requested a meeting with the "big four" congressional leaders, including McCarthy, Democratic leader Hakeem Jeffries, Senate GOP Leader Mitch McConnell, and Senate Majority Leader Chuck Schumer, scheduled for May 9. However, it remains to be seen if all of them will attend.

Biden and McCarthy have been at odds over the debt ceiling, with Republicans insisting on spending cuts and Democrats demanding a clean increase.

On Monday, Schumer's office announced the majority leader scheduled votes on a clean, two-year suspension of the federal debt ceiling, extending beyond the 2024 elections, and on the House-passed GOP debt-limit bill, which could be significantly amended as part of a negotiated agreement.

CBO Confirms Shortened Timeline

The Congressional Budget Office (CBO) has also confirmed the shortened timeline for the U.S. to run out of funds, stating that the country will be unable to pay all of its bills in early June. This is a departure from their previous estimation, which placed the deadline between July and September.

CBO director Phil Swagel emphasized the uncertainty surrounding the Treasury's ability to fund ongoing government operations using cash balances and remaining extraordinary measures throughout May, even if it runs out of funds in early June.

Yellen has urged Congress to act quickly to increase or suspend the debt limit, providing longer-term certainty that the government will continue to make its payments. She highlighted the imprecise nature of the deadline due to the variability of federal tax receipts.

Biden is expected to push for a temporary increase or suspension of the debt limit in his meeting with McCarthy, allowing both sides more time to negotiate a longer-term budget.

The House recently passed debt ceiling legislation that Senate Democrats have declared dead on arrival.

Republicans Stand Firm on Spending Cuts

Republicans claim their plan would save $4.5 trillion in exchange for lifting the nation's borrowing cap by $1.5 trillion, insisting that the ball is now in Biden's court to negotiate.

Some House Democrats have also publicly stated that it is time for Biden to engage in negotiations.

Challenges for McCarthy

McCarthy, who faced difficulties getting his conference on board with a party-line bill, now faces the challenge of getting his caucus to agree to a less conservative bill.

When asked how he would achieve this, he stated that one party has already addressed the debt ceiling and that it is now up to the Democrats and the President to sign the bill.

Last week, Biden indicated his willingness to meet with McCarthy, but only if the debt limit was not used as leverage, stating, "That's not negotiable."