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May 2, 2023
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THE TOP
Happy Tuesday morning from Washington and Jerusalem.
The debt-limit debate is now a full-blown political crisis.
Treasury Secretary Janet Yellen told congressional leaders in a Monday letter that the U.S. government could default on its $31.4 trillion debt as early as June 1 unless Congress acts. This is far earlier than many expected — and some Republicans question whether the deadline is real.
Shortly before Yellen’s letter went public, we scooped that President Joe Biden called Speaker Kevin McCarthy and other members of the Big Four seeking to schedule a meeting to discuss lifting the borrowing cap. The sitdown is slated for May 9 — a week from today.
Here are five things we’re watching right now.
No. 1: Yellen’s letter had the immediate — and perhaps counterintuitive — effect of hardening everyone’s positions.
Republicans said the Yellen letter shows the need for Biden to sit down with McCarthy. Democrats countered that it underscores the urgency of passing a clean debt-limit hike — and fast.
Some Democratic senators want Senate Majority Leader Chuck Schumer to put a clean debt-limit increase on the floor to squeeze Republicans, even though there currently aren’t 60 votes for it.
Sen. Jon Tester (D-Mont.), up for reelection in a red state, said he supports the idea of Biden and McCarthy sitting down “on the debt, but not on the debt ceiling.”
Schumer has leaned even harder into a clean debt-limit hike. Late Monday night, Schumer began the Rule 14 process on both the House-passed Limit, Save, Grow Act and a clean two-year debt-limit increase.
This is the procedure whereby legislation is teed up for potential votes, although it doesn’t mean that will happen. In doing so, according to a Schumer spokesperson, the majority leader is working to “ensure that once a clean debt ceiling is passed, the House bill is available for a bipartisan agreement on spending and revenue as part of the regular budget process.”
Top Senate Republicans suggested Yellen’s letter was part of an effort by the Biden administration to up the pressure on Republicans and evade responsibility for the crisis.
“They have to participate, good Lord,” Sen. Shelley Moore Capito (R-W.Va.) said.
No. 2: We’ve reported extensively on the small group of Senate Republicans who may be willing to support a clean debt-limit increase if the Biden-McCarthy negotiations don’t go anywhere and default seems imminent. Senate Democrats in particular are banking on this as part of their strategy.
But that same Republican faction appeared unmoved by Yellen’s letter on Monday. The Senate GOP conference is united behind McCarthy and isn’t even entertaining the idea of a clean debt hike right now.
Plus, there’s the Sen. Dianne Feinstein (D-Calif.) factor. If Schumer is to have any chance of passing a clean debt-limit hike, he’ll need Feinstein to be present and voting. On top of that, he’d need nine Republicans willing to take the plunge — if all Democrats support Schumer. Which isn’t guaranteed.
No. 3: Could McCarthy put a clean debt-limit bill on the floor and keep his speakership? The answer is no. McCarthy will need some wins — spending caps, permitting reform, new work requirements for social programs, something — in order to cut a deal acceptable to Republicans.
McCarthy’s endgame remains a mystery to Democrats. Senior White House officials — a mix of Biden loyalists and Obama veterans — don’t know the California Republican or how to deal with him. They watched what happened in January during the speaker vote and wonder what kind of leeway hard-core conservatives would give McCarthy in any high-level talks. McCarthy’s team maintains he simply wants a deal and is flexible as to what that looks like.
No. 4: How will Wall Street respond? This will have a massive impact on the debate. If the markets tank as a result of a prolonged political standoff, it could force both sides to cut a deal.
Plus, the Federal Open Market Committee is kicking off its regular two-day meeting today that will end, in all likelihood, with a decision to raise interest rates to further stem inflation.
No. 5: Senate Minority Leader Mitch McConnell may be the most important person in all of this. The Senate GOP leader told us Monday night that he “had a good conversation” with Biden, and “I’m sure we’ll be speaking again.”
But McConnell notably declined to respond when asked if he plans on attending next week’s meeting. McConnell will probably want to confer with McCarthy, who is traveling in the Middle East and Europe this week.
McConnell has insisted that this year’s talks should be between Biden and McCarthy and that Senate Republicans will follow the House’s lead.
That’s still the position of Senate GOP leaders, who see Biden’s desire to include more people in the talks as beneficial to the president.
“I’m not sure at this point what Schumer or McConnell add to that conversation,” Senate Minority Whip John Thune declared. “The only thing that can get 60 votes in the Senate is something between the president and the House Republican leadership.”
– Andrew Desiderio, John Bresnahan, Heather Caygle and Jake Sherman
Next week: On May 9 at 8:30 a.m. ET join us as Punchbowl News Founder and CEO Anna Palmer and Managing Editor Heather Caygle interview powerful women in Congress who have a seat at the table and are working across the aisle on solutions to America’s greatest challenges. The event will feature conversations with Sens. Joni Ernst (R-Iowa) and Jeanne Shaheen (D-N.H.), as well as Reps. Stephanie Bice (R-Okla.), Lisa Blunt Rochester (D-Del.) and Mikie Sherrill (D-N.J.). RSVP today!
WASHINGTON X THE WORLD
In Israel, McCarthy raps Biden on Abraham Accords
Happening today: House Republican leadership will introduce a new border security bill. The bill will be labeled H.R. 2 and called the Secure the Border Act of 2023. The bill is expected to come to the House floor for a vote next week. Reps. Mario Diaz-Balart (R-Fla.) and Tom McClintock (R-Calif.) are the lead sponsors.
JERUSALEM — Speaker Kevin McCarthy told us in an interview here that he believes President Joe Biden is avoiding expanding the Abraham Accords because of its association with the Trump administration.
“They say the Abraham Accords are great, but they don’t want to do something because it was under the Trump administration, which is not right,” McCarthy said.
The Abraham Accords, crafted by Jared Kushner and Avi Berkowitz during the Trump administration, memorialized normalization agreements between Israel and Bahrain and Israel and the United Arab Emirates.
We spoke to McCarthy at the tail end of a long day in Jerusalem. McCarthy visited Yad Vashem, Israel’s Holocaust museum, had lunch with Prime Minister Benjamin Netanyahu and addressed the Knesset, Israel’s parliament. McCarthy is heading to Egypt for the next leg of this trip.
McCarthy said that he believes Middle Eastern leaders are convinced the United States is abandoning the region.
One issue that McCarthy didn’t mention in his speech to the Knesset is peace with the Palestinians. In fact, he didn’t mention the Palestinians once during his address. McCarthy told us he thinks the “peace process would go better” if the United States leaned harder on the Abraham Accords.
“I don’t think you can get a peace process until everybody’s able to recognize Israel,” McCarthy said.
One thing that surprised us during our visit here is the emphasis McCarthy placed on China during his address to the Knesset. McCarthy said that the Chinese Communist Party “may disguise itself as promoters of innovation. In truth, they act like thieves. We must not allow them to steal our technology.”
“I am glad that Israel has also put into place a process to review foreign investment,” McCarthy said during his speech. “I strongly encourage Israel to further strengthen its oversight of foreign investment — particularly Chinese investment — building on the steps it first took in 2019.”
McCarthy told us he believes Israel is at risk of being infiltrated by the Chinese because of the nation’s burgeoning tech sector.
“They have an unbelievable tech community,” McCarthy said. “And they’re very focused on security … and this is the back door where China is now coming on trying to pick up companies where they can utilize some of the technology for the military, too.”
Perhaps the most interesting dynamic of the appearance at the Knesset was lawmakers’ interaction with a reporter from Russian state media. The reporter cornered Rep. Steny Hoyer (D-Md.) during the flag-raising ceremony outside the Knesset.
Later, during a news conference, the reporter asked McCarthy if his concern over the scale of American military and economic aid to Ukraine would result in a reduction in U.S. support for Kyiv. McCarthy shot back: “No, I vote for aid for Ukraine. I support aid for Ukraine. I do not support what your country has done to Ukraine.” It may have been his most forceful defense of Congress’ $120-billion commitment to Ukraine.
Also: The delegation had lunch with Netanyahu. The Israeli prime minister told lawmakers that he has his “hands on the wheel” — meaning he’s in control of the rightward leaning government.
– Jake Sherman
OVERSIGHT WATCH
Déjà vu: State doesn’t comply with McCaul subpoena
Stop us if you’ve heard this before. The State Department refused to comply with the latest subpoena deadline set by House Foreign Affairs Committee Chair Michael McCaul (R-Texas).
The bottom line: McCaul has continued to be unsuccessful in his bid to gain access to a dissent cable written by embassy officials in Kabul criticizing the Biden administration’s plans to withdraw from Afghanistan in 2021.
McCaul’s team has been consulting with House general counsel on the best way to litigate the case in court and obtain the dissent cable.
Throughout the spring, McCaul pushed the deadline back multiple times in a bid to entice Secretary of State Antony Blinken to voluntarily comply — with no luck. The original subpoena deadline was April 4. Then McCaul pushed that date back to April 19 while offering to see the document without the names of the signatories to satisfy State’s concerns.
April 19 came and went with no access to the dissent cable for HFAC. McCaul then moved the subpoena deadline back for a second time until May 1.
There has been some movement from the administration over this time period, however. State held a classified briefing for HFAC lawmakers last Thursday to go over concerns raised by embassy officials in Kabul ahead of the U.S. withdrawal from Afghanistan.
But McCaul had made clear that doesn’t represent compliance with his subpoena. And the briefing didn’t seem to satisfy other HFAC Republicans, as members had a number of unanswered questions.
“We believe that we have aptly engaged the committee,” State Department Principal Deputy Spokesperson Vedant Patel said during a press briefing Monday.
Here’s more from Patel:
– Max Cohen
ENERGY INFRASTRUCTURE
Manchin tries again on permitting reform
After trying but failing to push through a permitting reform proposal in the closing days of the 117th Congress, Sen. Joe Manchin (D-W.Va.) will try again today by introducing the American Energy Security Act of 2023.
This is the same legislation that stalled in the Senate on a 47-47 vote back in December. Manchin offered it as an amendment on the defense authorization bill. (It needed 60 votes to pass.) Forty Democrats and seven Republicans voted for the measure. Manchin blamed Senate Minority Leader Mitch McConnell for blocking the proposal at that time.
Manchin, chair of the Senate Energy and Natural Resources panel, said Congress must act on this issue in order to help the country achieve energy independence, as well as implementing the clean energy provisions included in the Inflation Reduction Act, which he helped craft.
“In the United States, it often takes between five and ten years — sometimes longer — to get critical energy infrastructure projects approved, putting us years behind allies like Canada, Australia, and more recently the EU, who each have policies designed to complete permitting in three years or less,” Manchin said in a statement.
“It is clear that without comprehensive permitting reform, we will never ensure lasting American energy security and independence and will delay progress on environmental goals.”
But environmental groups and progressives objected to the proposal because it would help speed up federal approval of fossil fuel projects. The length of time for any litigation would be capped as well.
It would also greenlight the Mountain Valley Pipeline, a controversial project to bring natural gas from West Virginia to southern Virginia.
Here’s the text of Manchin’s proposal, and here’s a summary from the Energy and Natural Resources Committee.
– John Bresnahan
THE CAMPAIGN
Never Back Down, the super PAC backing Ron DeSantis for president, is running a 60-second ad with a string of speeches that the Florida governor has given. The spot is running across the country. AdImpact has seen the ad in Boston, Las Vegas, South Carolina, Iowa, D.C., Atlanta, New York, Los Angeles and Philadelphia.
– Jake Sherman
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