Speaker McCarthy has 'complicated path' in managing other promises amid debt limit: Semafor editor

Semafor Founding Editor-at-Large Steve Clemons joins the Yahoo Finance Live show to discuss what to expect from the latest debt ceiling meeting and the potential ramification if the U.S. defaults on debt.

Video Transcript

SEANA SMITH: Let's talk about the debt ceiling showdown. President Biden meeting with house speaker Kevin McCarthy and other top lawmakers this hour from both sides of the aisle. Joining us now to break it all down is Steve Clemons, Semaphore Founding Editor at Large. Steve, it's great to see you again.

So lots at stake here. Neither side seems to be backing down from their position. How much progress, or do you think any progress is going to be made today?

STEVE CLEMONS: I honestly don't think much progress is going to be made. I feel like we're in a Marvel movie and we need superheroes to swoop down and save us from ourselves. Because we see the cataclysm that will happen-- trillions of dollars of economic wreckage if they don't come to terms with each other.

And right now, we're still in a period of posturing on both sides of the aisle. I wish it would end and I wish I was wrong today, because it would be great if Kevin McCarthy, in particular, and Joe Biden-- but we have to remember it's the big four. So it's McCarthy, it's Hakeem Jeffries, Chuck Schumer, and Mitch McConnell in that meeting.

But the big negotiation is between biden and McCarthy. And if they came out with a deal, it would be great for the markets, great for the economy. But I don't think we're going to get there today.

SEANA SMITH: Steve, how do you see this potentially playing out here? Because neither side seems to be offering what the other side views as a realistic solution and how dire this potential situation could get over the next couple of weeks?

STEVE CLEMONS: Well, I think the big thing that could happen is is is one that would be scary. And that is where the markets began to digest the fact that there might, in fact, be a default, and that you have, like in any earthquake, foreshocks of that. And so foreshock may be the disciplining function here, I just don't know.

But another side of it is that at the end of the day, I think Kevin McCarthy has a complicated path here, because, of course, he became Speaker of the House by cutting a deal with certain members of his caucus and making promises about what he would bring forward and attach to a debt ceiling rise. So his exit strategy from that, or his possibilities of an exit, off ramp, are very limited politically.

Joe Biden has not met with Kevin McCarthy after McCarthy has been knocking at the door, clawing, whimpering, saying, meet me, meet me for about 100 days-- somewhere about that. So, basically, Biden is keeping the Republicans waiting to wait and see what they came forward and saying, I'm not going to pass anything but a debt ceiling.

But people watching this say that one of two things could happen if you avoided outright default. One is they may agree implicitly that they pass a debt ceiling increase, but that Joe Biden agrees to have separate talks on budget and potential budget cuts. That's one way out of this.

Another way out of it is Joe biden just decides to ignore all of this-- like Article 14 of the United States constitution that says, public debt will not be questioned, and just basically plays the constitutional play and makes a unilateral move. That would create a different kind of crisis. But I got to tell you, there are a lot of articles in the constitution that Republicans say are sacred, so they could basically make Article 14 sacred.

SEANA SMITH: Steve, what happens, though, if we do see what you just laid out as the first option, where they come to an agreement and President Biden does agree to additional talks here on potential cuts-- what's the backlash that McCarthy could then maybe face amongst members of his own party?

STEVE CLEMONS: Well, I mean, it depends on how extreme some of them are. I don't know all of the nature of the deals, but there may be people like representative Andy Biggs, you know, who've been basically saying, let's see how this plays out. But if they get-- they would like to see things like increase in worker requirements for food stamp programs.

They'd like to see a freeze in non-defense discretionary accounts down to 2022 levels. And so if they were to basically move somewhere along those lines, even in budget discussions, maybe Kevin McCarthy can hold together his caucus. But remember, he needs 218 votes. He did it with 217 before because of some vacancies, but he's got to maintain a majority of his caucus.

Or the Democrats need to come save him. And that's another interesting scenario we haven't talked about. I have talked to former leadership in the Democratic controlled House who said if push comes to shove to save the nation, some Democrats may come and save McCarthy and keep him from doing-- causing a default, but that McCarthy will have to pay a price for that to the Democrats.

SEANA SMITH: Steve, when it comes to President Biden, there was a new poll out from the "Washington Post" and ABC over the weekend-- President Biden's approval rating hitting a new low and also trailing Trump and DeSantis, if, in fact, DeSantis does decide to throw his hat in the ring for 2024. What do you think-- or what would your advice be to President Biden, just in terms of getting his message across to voters and getting more support, even from members within his own party?

STEVE CLEMONS: Well, look, I've been critical of President Biden's approach on this debt ceiling side. There's also a Gallup poll that shows only 35% of Americans have any faith or hope that the people making these economic decisions, in particular the President, are competent at what they're doing. We wrote about that in Semaphore today.

But I think the big thing that's been missing is a broader discussion with the American public about what the consequences of a debt default might be, what are the components of it, and also to ask some of the questions Joe Manchin has been asking about-- why has the debt gone basically from a very low level in 2000, and so now we're 20 years later and we're up to $31 trillion? What drove that?

And also, just to kind of look at how it got there-- whether it was COVID, whether it was wars, whether it was bad tax programs-- that we have, essentially, a gluttonous dimension to American politics that needs to be discussed. And I think if Joe Biden did that honestly and had that conversation with the nation, his numbers would be higher.

But right now, even though Donald Trump contributed enormously to the US debt, significantly, almost more than any other President, then you have him looking like the fiscal conservative at this moment, which is unusual, to say the least.

SEANA SMITH: Certainly is unusual. Steve Clemons, always great to have you. Thanks so much for taking the time to join us here today-- Semaphore Founding Editor at Large.