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May 25, 2023
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THE TOP
Happy Thursday morning.
OK, here’s the current state of play with seven days to go until the U.S. could default on its debt: The House Republican leadership feels exceedingly confident that they’ll clinch a deal with the White House to raise the debt limit and pare back federal spending. Republicans expect the compromise will come together sometime in the next few days. There’s intense pressure to wrap negotiations up as soon as possible in order to get a bill through Congress in a timely fashion.
We anticipate that the debt limit will be extended through 2024 as part of any agreement.
And the GOP leadership feels as if they will be able to win the support of the majority of the House Republican Conference for this eventual package.
Now listen: We’ve covered enough of these negotiations to know that there could be another dozen twists and turns between now and the announcement of any agreement. The last yard is always the toughest one.
But the signals we were getting Wednesday night from Speaker Kevin McCarthy’s leadership team were positive. They feel like they are on the brink of what could be a very substantial agreement.
We also want to lay down a marker once again and tell you that the anger in the House Democratic Caucus right now is palpable. Many rank-and-file Democrats feel as if they’re going to be asked to vote for a package that is slanted toward Republican demands with little for them in return.
The White House — especially President Joe Biden — will have a lot of work to do to get this across the finish line. Just ask the House Democratic leadership, which has been fielding many of the complaints from members. One senior House Democratic aide suggested that Biden must try to sell lawmakers on the package by saying he — and the country — need to put the debt-limit mess behind them.
This will be a big test for House Minority Leader Hakeem Jeffries and Minority Whip Katherine Clark. They’ll have to deliver dozens of Democratic votes for Biden on a deal that benefits the president’s reelection campaign perhaps more than anyone else.
That said, a number of Democrats privately told us that they question the leadership at the White House over how this entire episode has been handled.
The White House declined to comment on the status of talks.
Let’s now get down to the nitty-gritty on how we expect the next few days to play out.
Many in the House GOP leadership anticipate a deal to be finalized by the weekend. Let’s say, for argument’s sake, that the agreement comes together tonight. It will still take roughly two days to convert any agreement into legislative text. That would mean a final vote as early as Tuesday.
McCarthy won’t waive the rule that allows members to have 72 hours to review the text of the agreement. It’s somewhat advantageous for McCarthy’s leadership team that the 72-hour review of the bill will likely come with lawmakers out of Washington for the Memorial Day recess.
We’ll get to this in a minute, but it seems very possible that Congress won’t be able to lift the debt limit until next weekend, which is June 3-4. That’s right at the edge of when Treasury Secretary Janet Yellen warned of a potential default. And Senate Majority Leader Chuck Schumer will have to jump through procedural hoops to get any package to the floor by that time.
Put this all together: It will be a high-wire 10 days or so on Capitol Hill from now until the end of next week.
— Jake Sherman and John Bresnahan
Reminder: Join Punchbowl News Managing Editor Heather Caygle on Thursday, June 15 at 9 a.m. ET for a conversation with Rep. John Joyce (R-Pa.). The interview will focus on healthcare innovation and the future of cancer research following the Inflation Reduction Act. RSVP now to join us in person or on the livestream.
DEBT-LIMIT DRAMA
The unthinkable becomes thinkable again
For long-time House members, Wednesday’s news sounded eerily familiar.
Treasury Secretary Janet Yellen warned that “it seems almost certain” that the Treasury Department won’t be able to pay all its bills unless the debt limit is raised by early June.
And Fitch Ratings put the U.S. government on “rating watch negative,” meaning a downgrade in the country’s credit rating is possible:
The echoes of the 2011 debt crisis are getting harder to ignore. At that time, a showdown over the debt limit between House Republicans and then President Barack Obama pushed the U.S. government to the brink of default and led to an unprecedented downgrade.
Right now, it seems unlikely that Congress will be able pass a debt-limit boost by the June 1 deadline set by Yellen, even if there’s a deal between President Joe Biden and Speaker Kevin McCarthy by today (see above). Once again, just as it was 12 years ago, the unthinkable becomes thinkable.
“It’s the consistency now of lurching from crisis to crisis,” Rep. Richie Neal (D-Mass.) said of the long-running dysfunction in Washington. “Raising the debt ceiling as long as I’ve been here, there’d be some demagoguery, but we would always get around to getting it done.”
Rep. Frank Lucas (R-Okla.), first elected to office in 1994, described it this way:
More from Lucas: “I just know this dance has to come to a conclusion pretty soon. It could be a bitch.”
The slow-moving nature of this crisis — and the sheer unpredictability of what could occur if the government does default — also makes this current situation so frustrating for many members.
White House Press Secretary Karine Jean-Pierre warned reporters that default would mean “millions of jobs lost, devastated retirement accounts and a recession.” Jean-Pierre suggested as many as 8 million jobs could be wiped out.
But many House Republicans — from McCarthy and Majority Leader Steve Scalise down through the conference — don’t believe Yellen on the June 1 deadline. Or they’re convinced the Treasury Department can continue to pay interest on the debt — aka “debt prioritization” — technically avoiding a default, while other obligations get pushed off. It doesn’t seem to matter that multiple Treasury secretaries from Republican administrations have shot this idea down, either.
“This is insane. This is all about political posturing,” complained Rep. Jim McGovern (D-Mass.), ranking member on the Rules Committee.
“I don’t know how all this works out. If I was Biden, I would just raise the debt ceiling” using the 14th Amendment, McGovern added.
“The Republicans are playing games with the economy and security of the country for no particular purpose,” said Rep. Adam Smith (Wash.), the top Democrat on the House Armed Services Committee. The panel has had to delay marking up the annual defense authorization bill because of the debt-limit clash.
But GOP Rep. Tom Cole of Oklahoma, a key McCarthy ally, has a much different take.
“I think Democrats, frankly, didn’t think McCarthy could be speaker,” Cole said. “And they didn’t think he could pass the [Limit, Save, Grow Act]. They’ve been sort of flummoxed since then. They expected us to break. We’re not going to break.”
Rep. Brendan Boyle of Pennsylvania, ranking Democrat on the House Budget Committee, tried to get the debt limit raised during the lame-duck session back in December. Then Speaker Nancy Pelosi backed Boyle’s idea, but there wasn’t enough support to do it, especially in the Senate.
Boyle is now pushing to change the whole process so this can’t occur again.
“It’s been the same cycle the last dozen years,” Boyle noted. “That is, there’s a debt-ceiling fight. People get scared and ultimately it gets resolved, and then people move on and immediately forget about it again. That can’t happen this time.”
— John Bresnahan
MAJORITY MAKERS
As attack ads ratchet up, vulnerable Rs stand by their debt-limit stance
Democratic groups are seizing on the debt-limit crisis by attacking swing-seat House Republicans on their home airwaves, accusing them of pushing the country closer to default and cutting veterans’ funding.
For example, take this back-and-forth playing out in Rep. Jen Kiggans’ (R-Va.) district. The Virginia Beach-area seat is a military-heavy region that Kiggans flipped red in November.
A recent spot running there features a veteran slamming Kiggans for voting for “a disastrous default bill.”
“Prioritizing tax breaks for billionaires, jeopardizing veterans’ health care,” the veteran says. “How do you betray veterans, seniors and families all at once?”
Republicans are pushing back against the ads, decrying what they say is false criticism. The GOP’s majority makers say Democrats are lying about veterans’ spending cuts and are hitting the minority party for failing to come up with a debt-limit plan of its own.
Kiggans pointed to her own status as “a veteran myself, spouse of a veteran, daughter of a veteran, granddaughter of a veteran, mother of future veterans.”
“It’s ludicrous to think that I would vote against veterans,” Kiggans told us.
A similar dynamic is happening in competitive districts all across the country.
Republicans we spoke to pointed to the recent markup of a Milcon-VA appropriations package that increased funding for the VA by $18 billion.
“They’re running with these ads in spite of the markup happening last week on the veterans bill and our proposing to increase funding there,” Rep. Juan Ciscomani (R-Ariz.) said, accusing Democrats of being “dishonest from the very beginning.”
Rep. Mike Garcia (R-Calif.) was equally upset.
“To come after me on anything related to jeopardizing the welfare and support of our veterans — I mean, that’s just terrible marketing from the Dems,” Garcia said. “So that’s good ground. We’ll fight on that all day.”
Of course, Democrats argue GOP appropriators just drafted the FY2024 bill to counteract their attacks and note the proposal never even got out of committee.
Democrats also point out that nearly all House Republicans — including those in swing districts — voted for the GOP’s Limit, Save, Grow Act which would fund the federal government at FY2022 levels. That represents a cut of more than $130 billion from this year. If the Pentagon and entitlements are spared – as GOP leaders say – programs for veterans may be on the chopping block, Democrats argue.
House Veterans’ Affairs Committee Democrats also argue the Milcon-VA package isn’t all it seems. Committee staff say the GOP package cuts money for a fund created in the PACT Act that helps veterans exposed to toxic burn pits.
“The Republicans are running scared because they’re being held accountable for their deep and painful cuts that will hurt veterans period, full stop,” House Minority Leader Hakeem Jeffries told us.
Similar ads are also playing in upstate New York districts that Democrats need to win if they want to flip back the House. One spot hits Reps. Brandon Williams (R-N.Y.) and Marc Molinaro (R-N.Y.) for cutting health care for veterans.
“In competitive districts, the campaign never ends,” Williams told us. “So it just comes with the territory.”
Fellow New York Republicans were incensed at what they called false Democratic messaging.
“Can anybody in the Democratic Party point to a single actual line in that bill that cuts veteran spending?” Rep. Mike Lawler (R-N.Y.) said. “At this point, the press should be calling them out for lying.”
“It’s the typical playbook of the Democrats,” Rep. Anthony D’Esposito (R-N.Y.) asserted. “They’re gonna make up lies and spread fear because they know that people in those blue states feel like they’ve lost their party and they’re voting Republican.”
Both parties run brutal campaign ads that stretch the boundaries of the truth, especially in competitive districts. But Republicans’ defensive posture here shows they recognize the potential potency of the Democratic attacks with swing-district voters.
For Democrats, this is just the opening salvo in their quest to take back the House next year. And the party’s playbook runs straight through New York, with Jeffries closely involved in the effort.
— Max Cohen
PRESENTED BY INSTAGRAM
THE MONEY GAME
The House heads home for the Memorial Day holiday this afternoon, but don’t worry — if you’re looking to spend money on lawmakers’ reelection bids, you still have ample opportunity.
This morning, Rep. Dan Kildee (D-Mich.) has a breakfast with special guest House Minority Whip Katherine Clark. For $2,500, you can attend and perhaps ask Clark just how many House Democrats will vote for a debt-limit deal.
Are you into paper art? Yes? Well, terrific. Rep. Chrissy Houlahan (D-Pa.) is hosting an “Art of Origami!” fundraiser today at 11 a.m. For between $500 and $5,000, you can fold paper with Democrats and their financial backers.
— Jake Sherman
THE CAMPAIGN
Sen. Tim Scott (R-S.C.) has a new ad up in Iowa and New Hampshire in support of his presidential campaign. This is a bio spot that talks about Scott’s upbringing.
— Jake Sherman
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