The National  Memo Logo

Smart. Sharp. Funny. Fearless.

Monday, December 09, 2019 {{ new Date().getDay() }}

Tag: debt ceiling

McConnell Sends Biden Another Debt Ceiling Hostage Note

Reprinted with permission from DailyKos

The day after Senate Majority Leader Mitch McConnell blinked and scraped together 11 Republican senators to prevent a global economic meltdown, he was back to making threats to blow it all up in December. Next time, Senate Minority Leader Mitch McConnell said in a typically obnoxious letter to President Joe Biden, next time Republicans are really going to blow up the global economy. Oh, and he took credit for not blowing up the global economy. Because of course he did.

Never mind that it was essentially a face-saving exercise on his part because being dragged into doing the right thing did not go over well with his fellow Republicans. "Republicans are folding here," Sen. Lindsey Graham of South Carolina railed. "This is a complete capitulation."

"The reason the Republican leadership took the deal is because Democrats threatened […] to nuke the filibuster," Sen. Ted Cruz said. "Unfortunately, Republican leadership blinked in the face of the Democratic threat to nuke the filibuster." That's Cruz, by the way, trying to deflect attention from his own self, because the Republicans were ready to agree to letting a simple majority pass the debt ceiling hike in a voice vote. It was Cruz who refused to go along with that, and insisted on a recorded vote. Meaning every Republican had to go on record on their willingness to blow up the economy.

While we're talking filibuster, though, yes. That. And while we're at it, get rid of the filibuster and the whole concept of the debt ceiling in one go.

There's no guarantee that McConnell is going to capitulate again on or before December 2. He remains intent on forcing Democrats to include hiking or suspending the debt ceiling in their reconciliation bill that will include President Biden's Build Back Better human infrastructure and climate initiatives. Lumped together, he believes, the debt and the new package will provide a message for the Republicans who, frankly, need it. Because all they've got right now is "Trump."

Unfortunately, it's a message that certain Democrats fear and are happy to amplify. It's unfortunate, because a) the debt ceiling is about the money the government has already spent with a huge chunk of it attributed to the GOP tax scam of 2017, and b) the things they would be spending money on are massively popular. That's even though they don't really know these plans are in the big package.

In the new CBS polling, which shows that public knowledge about Biden's plans is not good, 88 percent of support federal funding for lowering prescription drug prices; 84 percent support federal funding for Medicare coverage for dental/eye/hearing care; 73 percent support federal funding for paid family/medical leave; 67 percent support federal funding for universal pre-school. Those majorities are going to be swayed a lot more by those things making their lives better than by the cost. Because that's how it works. Which McConnell knows and which is why, in a recent example, the Republicans fought so hard to keep the Affordable Care Act from passing and then getting established.

McConnell is keeping the two fronts of this fight—debt ceiling and the reconciliation bill—tied together to kill the latter. But there is a very straightforward path for Democrats: nuke the filibuster. They could do just a carve-out for the debt ceiling (to go with the 161 exceptions that already exist), but that would be pretty crappy considering they haven't yet decided to do it to restore the Voting Rights Act, you know, saving democracy.

Treasury Secretary Janet Yellen is all for making the debt ceiling as an issue go away. "[T]here is an enormous amount at stake," Yellen told George Stephanopoulos on ABC's "This Week" Sunday. "A failure to raise the debt ceiling would probably cause a recession and could even result in a financial crisis," she continued.

"I have said I support, personally, getting rid of the debt ceiling. I believe that, once Congress and the administration have decided on spending plans and tax plans, it's simply their responsibility to pay the bills that result from that," she said. "And that means we have had deficits for most of the post-war period. And that means raising the debt ceiling. It is a housekeeping chore. [W]e should be debating the government's fiscal policy when we decide on those expenditures and taxes […] not when the credit card bill […] comes due."

That's all very true, as is the threat we exist under that, next time, Republicans are going to force a breach. Better that Democrats to take that threat away entirely, and soon.

Senate Votes To Raise Debt Ceiling, Averting Catastrophic Default

WASHINGTON (Reuters) - Legislation to raise the U.S. federal borrowing authority by $480 billion and avoid possible catastrophic debt defaults later this month drew enough support in the Senate on Thursday -- including 11 Republican votes -- to advance toward passage.

(Reporting by Richard Cowan and Makini Brice, Editing by Rosalba O'Brien)

McConnell Proves That ‘Bipartisan’ Filibuster Is A Fraud

Reprinted with permission from Alternet

Senate Minority Leader Mitch McConnell seems to be almost intentionally making a mockery of the small number of Democratic senators who continue to defend the filibuster.

Democratic Sens. Joe Manchin of West Virginia and Kyrsten Sinema of Arizona have vocally opposed any effort to change the chamber's rules that require 60 votes to proceed on most legislation. Many Democratic lawmakers and advocates have called for the filibuster to be abolished, which would make it easier for the party to enact various pillars of its agenda.

Read Now Show less

Wall Street Watches As Senate Haggles Over Debt Ceiling 'Truce'

(Reuters) - An apparent truce in the U.S. debt-ceiling standoff in Congress has offered some relief to Wall Street investors on edge about a possible debt default, but analysts are left assessing the risk of a repeat crisis as the year closes out.

The heads of major banks and financial institutions warned lawmakers of catastrophe if the debt ceiling was not raised before Oct. 18, the date the government expects to run out of cash, leading to a default on its debt.

A plan floated by U.S. Senate Republican Leader Mitch McConnell on Wednesday would extend the borrowing limit into December -- providing respite but no long-term solution.

"There will be many proposals, trial balloons and negotiations going on to resolve this issue," said S&P Global Ratings' lead U.S. sovereign credit analyst Joydeep Mukherji in an email on Wednesday, adding that S&P's view on the U.S. underlying credit rating has not changed.

Mukherji in a recent interview said the scenario of the AA-plus U.S. credit rating plummeting to D due to a default was "crazy, almost difficult, impossible to imagine it."

Markets reacted positively to news of a potential, though temporary solution on Wednesday, with stocks rising and Treasury yields falling.

"Two months seems like plenty of time and (we) think the debt ceiling would be raised through reconciliation by then and do not expect to experience the past week come December," NatWest analysts wrote in a research note on Wednesday.

Republicans said Democrats could use the intervening weeks to pass a longer debt-ceiling extension through a complex process called reconciliation, which would allow Democrats to marshal their razor-thin majority in the Senate to approve the measure without any Republican support.

Goldman Sachs analysts wrote on Wednesday that the ultimate outcome may be "what had seemed like the most likely outcome all along, which is that Democrats use the reconciliation process to increase the debt limit just before the deadline" after exhausting all other options.

Even so, there are serious risks for President Joe Biden and his fellow Democrats.

Under the temporary extension plan, Democrats would have to address the debt ceiling issue again in December, just as another federal government shutdown looms. That could complicate their efforts to pass two massive spending bills that make up much of Biden's domestic agenda.

Mike O'Rourke, chief market strategist at JonesTrading, wrote in a note to clients that he expected McConnell to "continue to grant limited debt limit extensions right through the (2022) mid-term elections if the lack of urgency continues to slow the Democrats' reconciliation spending bill.

The stakes are high if a solution is not reached.

Financial risk firm Moody's Analytics, which is a separate entity from Moody's Investors Service, said a default would be a "catastrophic blow" to the U.S. economic recovery from the COVID-19 pandemic and upend global financial markets.

Moody's Analytics noted that an inadvertent missed Treasury bill payment in 1979 caused bill yields to spike 60 basis points and remain elevated for several months at the cost of tens of billions of dollars. The 1979 technical default was blamed on check-processing glitches.

The major credit rating agencies do not expect the U.S. will default. Still, Mukherji and his counterpart at Fitch Ratings in recent research and interviews said a default, including a temporary or so-called technical one, on any Treasury bill, note or bond payment would push the country's respective ratings of AA-plus and AAA down to D.

Moody's Investors Service, which rates the U.S. Aaa with a stable outlook, said it saw a "limited" impact on the country's rating in the case of a default and would likely downgrade the rating for all U.S. Treasury securities and keep it on review until it was clear "a cure would happen."

Even without a default, if a solution is not in hand to avoid a cash crunch the United States risks losing another of its triple-A ratings. S&P famously cut the rating a notch to AA-plus on Aug. 5, 2011, in the wake of a round of political wrangling over the country's debt.

Major financial institutions have considered the United States an AA-plus-rated credit since October 2020, down from AAA where it stood since 2017, according to David Carruthers, head of research at Credit Benchmark, a financial data and analytics company that collates the internal credit risk views of more than 40 institutions around the world, including 15 global systemically important banks.

Mukherji in an interview last week said that a U.S. default on a debt payment would be highly unusual as it would be a result of politics and not economic woes. Still, at the end of the day it's the same thing.

"If you don't pay, it really doesn't matter what the reason was -- you are in default."

(Reporting by Karen Pierog; editing by Megan Davies and Leslie Adler)

Yellen: Debt Default Would 'Permanently' Weaken America

By David Lawder

WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen issued a fresh plea for Congress to raise the federal debt ceiling on Sunday, arguing a default on U.S. debt would trigger a historic financial crisis.

In a Wall Street Journal opinion piece , Yellen said that the crisis triggered by a default would compound the damage from the continuing coronavirus pandemic, roiling markets and plunging the U.S. economy back into recession at the cost of millions of jobs and a lasting hike in interest rates.

"We would emerge from this crisis a permanently weaker nation," Yellen said, noting that U.S. creditworthiness has been a strategic advantage.

Yellen did not offer a new timeline for a possible default, but described economic damage that would fall on consumers through higher borrowing costs and lower asset prices.

She has said previously that a default could come during October when the Treasury exhausts its cash reserves and extraordinary borrowing capacity under the $28.4 trillion debt limit.

"We can borrow more cheaply than almost any other country, and defaulting would jeopardize this enviable fiscal position. It would also make America a more expensive place to live, as the higher cost of borrowing would fall on consumers," Yellen wrote. "Mortgage payments, car loans, credit card bills—everything that is purchased with credit would be costlier after default."

Republicans have refused to support raising or suspending the $28.4 billion. Senator Bill Cassidy from Louisiana said earlier on NBC's "Meet the Press" program that Democrats want to increase the borrowing cap to fund trillions of dollars in "Democratic wish list" spending.

Yellen argued the debt ceiling is about paying for past spending obligations, and said waiting too long to lift the debt ceiling can still cause damage, citing a 2011 debt ceiling crisis that pushed the federal government to the brink of default that prompted a credit rating downgrade.

"This led to financial-market disruptions that persisted for months. Time is money here, potentially billions of dollars. Neither delay nor default is tolerable."

House of Representatives Speaker Nancy Pelosi, in a statement, cited Yellen's past remarks on the issue and noted that Congress addressed the debt ceiling on a bipartisan basis three times during the Trump administration.

"When we take up the debt limit this month, we expect it to be bipartisan once more," Pelosi said.

Still, House Majority Whip Jim Clyburn on Sunday that Democrats may have to pass the debt ceiling hike without Republican support.

"I think we ought to do what's necessary and message to the American people exactly who is trying to destroy this great democracy that we hope to keep in place," he told CNN.

(Reporting by David Lawder and David Shepardson; Additional reporting by Phil Stewart; Editing by Diane Craft and Daniel Wallis)

Republicans Know Deficits Don’t Matter (When They Control Spending)

“No politician (has) ever lost office for spending more money.” Donald Trump reportedly relayed this message from Mitch McConnell to his staff recently, and you can see that philosophy at work in the two-year budget deal he just struck with Congress.

In exchange for putting off the debt ceiling for two years, Trump agreed to eliminate the discretionary spending sequester—automatic spending cuts authorized in 2011 but continually nullified in the ensuing decade—which translates into $320 billion in new spending. This increase is partially offset by the extension of some customs fees and Medicare reimbursement caps that maintain the status quo.

While sequester waivers have become routine, the trend lines on spending point to something really different under Trump. Barack Obama and a Republican Congress cut discretionary spending by an average of 2 percent per year in his second term; so far Trump and Congress have increased it by 4 percent every year in office. And this accounts for much the economy’s resiliency in the Trump era, alongside the tax cuts he highlights.

The Brookings Institution Hutchins Center Fiscal Impact measure shows fiscal policy contributing to GDP growth since the end of 2017 by a rising margin, peaking at 0.86 percent in the first quarter of this year, a figure that will only rise with this new budget deal. As Justin Fox points out, the shift from fiscal policy detracting from growth in Obama’s last six years to contributing to growth under Trump accounts for the entire increase in GDP since 2017.

The point here is that old-fashioned federal spending works to increase demand and boost growth. None of the negative side effects we constantly hear about—public spending “crowding out” private investment, or deficits leading to runaway inflation—have materialized since the Great Recession. We had a persistent demand shortfall, and when government finally decided to fill it, the economy accelerated. This may be a spending theory more associated with liberals, but it’s certainly assisted the last two conservatives in the White House.

You will hear Republicans come back to these declarations about the evils of government spending as soon as a Democrat takes the oath of office and occupies the White House. While Obama’s economic team did prefer pivoting to deficit reduction after the first two years of stimulus, Republicans angrily denounced his presumably profligate spending at every opportunity. They demanded the sequester, and assorted budget cuts and caps along the way. They took every opportunity to reduce public investment as soon as they took control of the House in 2011. By 2013, public investment was at its lowest level since the Truman administration, according to The Century Foundation.

Republicans, in short, adopt situational ethics about spending—stiffly opposed when a Democratic president would sign the bill, broadly in support when a Republican wields the pen. Not coincidentally, these tendencies translate into throwing a wet blanket on economic growth in the Democratic years, and pumping it up in Republican years.

Of course, GOP officials are all too happy to performatively restrict spending on the very poor—applying work requirements to Medicaid, for example, or limiting states from maximizing access to food stamps. But these should rightly be seen as social and not fiscal policies, meant to reverse allegedly unfair handouts to people who don’t vote for them. The spending itself is a means to an end, and the aggregate level rises and falls depending on which party might benefit in elections.

Democrats should not be expected to play a similar game of demanding austerity depending on the White House’s occupant. Unlike Republicans they wouldn’t harm the economy for political gain. No, they do something far worse: Acting as responsible stewards, they seek to handcuff themselves in office by forwarding deficit reduction packages, sabotaging their own economies in the process. Both the Clinton and Obama administrations paid close attention to deficits, egged on by Republican legislatures but to some degree in on the game themselves.

The current incarnation of the Democratic Party sets up more to the left of those past administrations. Still, there are a few things they could fight for more strongly. For one, discretionary budget “parity”—an equal amount of spending in the discretionary budget on defense and non-defense items—has become a sought-after goal. Another way of saying that is that the government spends as much on the military as it does on every other non-mandatory program in the budget combined. But why should that be the standard? The fight should seek to have non-defense discretionary exceed military spending by a wide margin.

Second, in this particular case, Democrats agreed to pass an emergency supplemental spending bill at the border outside of the two-year budget deal. That seems to me to be an unnecessary relinquishing of leverage. Trump very obviously did not want to engage in any brinksmanship over the budget: Pairing that to the standards many Democrats wanted for the treatment of immigrants and refugees in the border supplemental, or at least trying to do so, would have been a strong move.

The budget deal also didn’t salt the debt ceiling under the earth, which many progressives see as an unforgivable error. I don’t. Under House rules, any time a budget resolution passes, the debt ceiling is deemed lifted; this is known as the Gephardt rule after the former Democratic House Majority Leader. The Senate doesn’t have such a rule, which is why we’ve had this trouble with debt extensions this year. Win the Senate and adopt the Gephardt rule and the debt ceiling problem goes away. McConnell doesn’t willingly give away leverage; it will have to be taken.

What McConnell does engage in, like his Republican colleagues, is runaway spending as long as a Republican is president. The hypocrisy of the cries of deficit hysteria from the GOP under Obama is certainly galling. But we should heed the lessons available here. Fiscal policy works. The warnings against it have yet to come true. Democrats should not apply brakes to themselves on spending if they get the chance. And if Republicans try the same special pleading for austerity under the next Democratic president, well, that’s what nuking the filibuster is for.

#EndorseThis: How Republicans Really Feel About Trump’s Deal With Democrats

If you’re still stunned by Trump’s deal with Congressional Democrats to increase the debt ceiling and fund relief for Harvey victims, imagine how the Republican leadership feels. Trevor Noah channels their highly comical distress in the most graphic terms (and incidentally reveals where several Dreamers are currently hiding out — take a close look at Mitch McConnell’s face.)


White House And Republican Leaders Reach Budget Deal

By Lisa Mascaro, Tribune Washington Bureau (TNS)

WASHINGTON — The White House and congressional Republican leaders reached a budget agreement late Monday that would resolve the stalemate over paying for federal programs and could end the threat of another government shutdown for the rest of President Barack Obama’s term.

The $80 billion, two-year budget accord would increase spending somewhat on defense and domestic programs, rolling back some of the automatic cuts known as sequesters that Obama repeatedly has denounced.

The deal is likely to face opposition from both right and left. Earlier in the evening, as news of the possible accord spread, some conservative groups denounced the additional spending as a betrayal, while some liberal groups warned against the possibility that trims in benefits would be agreed upon to pay for parts of the agreement.

The package also would raise the nation’s borrowing limit and avert the risk of a credit default, which could come as early as Nov. 3. In addition, the deal is expected to block price increases on seniors who use Medicare Part B, halting forthcoming boosts in their premiums and deductibles.

A vote on the deal could come as early as Wednesday.

Progress came as a surprise; many had doubted the White House and Republicans could come to terms. It would be one of the final legislative acts of House Speaker John A. Boehner, R-Ohio, who is preparing to retire this week after repeated confrontations with his party’s hard-right flank.

Boehner met with his leadership team Monday afternoon and convened rank-and-file lawmakers for a hastily called private evening session.

“Fiscal negotiations are ongoing,” said Senate Majority Leader Mitch McConnell, R-Ky., as he opened the Senate. “As the details come in, and especially if an agreement is reached, I intend to consult and discuss the details with our colleagues.”

After abruptly announcing his retirement last month, Boehner had vowed to “clean up the barn” for his successor. Resolving the budget standoff would clear one of the most divisive issues from the agenda of Rep. Paul D. Ryan, R-Wis., who is expected to be elected the next House speaker this week.

The more legislation Boehner can muscle through the testy GOP-led House in the days ahead, the smoother the transition will be for Ryan.

The measure to lift the nation’s debt limit, currently at $18.1 trillion, through March 2017 would be tacked on to the budget deal, according to congressional aides, who did not want to be identified speaking about the sensitive negotiations.

Boehner’s critics on the right quickly sought to galvanize Republican opposition, and conservative lawmakers left the evening meeting fuming that the speaker was cutting a last-minute deal before stepping aside.

“The only reason you negotiate in the dark is because Republicans won’t accept it,” said Rep. Tim Huelskamp, R-Kan. One lawmaker stood up during the private session and asked why Boehner, not Ryan, was at the negotiating table. Ryan, according to those in the room, did not address the issue.

“In Washington, cleaning the barn is apparently synonymous with shoveling manure on the American people,” said Heritage Action Chief Executive Michael A. Needham. “John Boehner is clearly a rogue agent negotiating on behalf of well-connected special interests, not the voters that gave him the gavel.”

Liberal groups voiced their own concerns.

“The White House needs to know that any budget deal that cuts Social Security, Medicare or Medicaid benefits, or eligibility for those benefits, is unacceptable to the American people and roughly equivalent to declaring a holy war on struggling working families,” said Jim Dean, chairman of Democracy for America.

For weeks, aides to congressional leaders and the White House have been meeting behind closed doors on a possible budget deal. The aim has been to roll back some of the steep sequester cuts that were agreed to after a 2011 debt ceiling showdown. Both parties have wanted to undo the sequester cuts, for different reasons.

Republicans have wanted to halt cuts to the Pentagon, while Democrats have sought to ease reductions to domestic programs.

Talks had dragged, though, as the two sides tried to figure out how to pay for the increased spending.
The deal probably would be paid for with a combination of budget cuts elsewhere, new fees and partial reliance on an overseas contingency fund set aside for military operations.

The deal would adjust spending caps for two years by a total of $80 billion — $50 billion the first year and $30 billion in the second — equally divided between defense and nondefense spending, according to a person familiar with the negotiations.

An additional $32 billion in spending over the two years will come from the overseas contingency account, which brings the total package to $112 billion. Republicans had suggested tapping that account before to boost military funding, but Democrats and even some Republicans argued it was an accounting gimmick because the emergency war fund was not intended for such a purpose.

The bulk of the costs would be paid for by clipping government programs and raising fees on others in ways that would cause political discomfort on both sides of the partisan line.

Democrats probably will object to cuts in the Social Security Disability Insurance program that would lower part of the benefits individuals receive based upon any wages they earn. Republicans probably will pan new tax-filing fees.

The GOP will score a victory with another provision that would do away with an Affordable Care Act requirement that larger companies automatically sign up workers for health care unless the workers specifically opt out. Businesses have fought the requirement.

Passage is a multi-step process, giving opponents ample opportunity to derail the deal. Even if the deal is approved this week, Congress still would need to pass a separate spending bill to keep the government running after the Dec. 11 deadline. If it fails to do so, the specter of a government shutdown could reappear.

This final effort by Boehner could result in a politically heroic act to resolve looming crises despite deep resistance from the GOP majority in the House — or it could cement his reputation among hard-right Republicans that his willingness to compromise with Obama makes him insufficiently conservative.

“Listen, this is not about us,” Boehner said last week. “Our job is to do the right thing for the American people every day. You have heard me say this multiple times, and I will say it one more time: If you do the right things for the right reasons every day, the right things will happen for our country.”

Also Monday, the House advanced legislation to salvage the Export-Import Bank, a Depression-era financing entity that big business says is vital for exports but conservatives deride as crony capitalism.

This year, conservatives succeeded in beginning to close the bank by failing to authorize new lending. A brutal lobbying campaign over the bank has been underway on both sides of the issue.

A bipartisan majority in the House that wants to revive the bank pushed the vote forward with a rare “discharge petition” procedure, which hasn’t been fully deployed since the 1970s. Boehner did not stand in the way.
(Staff writer Christi Parsons in Washington contributed to this report.)

Photo: This is the last thing House Speaker is dealing with. For reals. REUTERS/Jonathan Ernst