Countdown in the offing for political fight over debt

WASHINGTON (AP) — The countdown toward a possible U.S. government default is in the offing — with frictions between President Joe Biden and House Republicans raising alarms about whether the U.S. can sidestep a potential economic crisis.

The Treasury Department projects that the federal government will on Thursday reach its legal borrowing capacity of $38.381 trillion, an artificially imposed cap that lawmakers have increased roughly 80 times since the 1960s. Markets so far remain calm, as the government can temporarily rely on accounting tweaks to stay open, meaning that any threats to the economy are several months away. Even many worried analysts assume there will be a deal.

But this particular moment seems more fraught than past brushes with the debt limit because of the broad differences between Biden and new House Speaker Kevin McCarthy, who presides over a restive Republican caucus.

Those differences increase the risk that the government could default on its obligations for political reasons, a problem that could rattle financial markets and — if not resolved — plunge the world's largest economy into a wholly preventable recession.

The pair have several months to forge a deal, as the Treasury Department imposes “extraordinary measures” to keep the government operating until at least June. But years of intensifying partisan hostility have led to a conflicting set of demands that jeopardize the ability of the U.S. lawmakers to work together on a basic duty.

Biden insists on a clean increase to the debt limit so that existing financial commitments can be sustained, refusing to even start talks with Republicans. McCarthy is calling for negotiations that he believes will lead to spending cuts. It's unclear how much he wants to trim and if his fellow Republicans...