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PRESENTED BY

BY JOHN BRESNAHAN, ANNA PALMER AND JAKE SHERMAN
WITH MAX COHEN AND CHRISTIAN HALL

THE TOP

Happy Tuesday morning. There’s one thing in Washington you should be paying attention to right now — the rapidly worsening political conflict over lifting the debt limit. The situation is alarming, there’s no other way to put it. We’re in the Capitol every day, parsing every public statement and private utterance by Republicans and Democrats and trying to understand the contours and direction of the debate. 

This morning we’re going to focus on the Senate leadership and the White House and where they are right now. We did a bunch of reporting in the Capitol Monday to try to better understand everyone’s position and explain what’s at stake here.

Remember: This will all come into focus Wednesday. The Senate has a cloture vote scheduled for then on a debt-limit increase until Dec 2022. Republicans are going to vote against it, blocking consideration of the legislation.

Happening tomorrow: Anna will interview Sen. Tom Carper (D-Del.) for a virtual pop-up conversation at 2:30 p.m. In addition to news of the day, they’ll discuss the role private capital is playing to spur investment in the renewable energy and infrastructure industries. RSVP!

THE GOP

McConnell and the GOP stay firm

1) The Position: Senate Minority Leader Mitch McConnell has been saying since mid-July that he and his GOP colleagues won’t participate in lifting the debt limit. That means Republicans won’t vote to lift the debt limit, and they won’t allow Democrats to do it by the normal legislative processes. McConnell is demanding Democrats use reconciliation to lift the borrowing cap.

2) The Incentives: From a political point of view, there are a few things driving McConnell and Senate Republicans. Even after Republicans spent like drunken sailors during the Trump years, they’re eager to have the political conversation turn back toward the national debt and deficits — never mind the hypocrisy. Republicans look at the $3.5 trillion reconciliation package proposed by President Joe Biden on top of the $1.9 trillion American Rescue Plan, coupled with rising inflation, and believe they can paint Democrats as reckless and incapable of leading the country during these uncertain times. 

This whole episode has to be viewed as a political attack by McConnell on the Democrats’ reconciliation package. Chaos helps derail the Democrats’ agenda. This Democratic legislation is another step toward “partisan socialism,” where everything in Americans’ economic life flows from Washington, transforming the entire social fabric of the nation, according to McConnell. Listen to his floor speeches, McConnell is telling you exactly what he thinks.

And McConnell and Senate Republicans are particularly peeved that Democrats keep thumbing their nose at reconciliation, which they believe was the most logical path to raise the debt limit. This has led to Republicans digging in deeper, they tell us. It also helps that McConnell truly can’t be shamed. He doesn’t care what people say about him. Furthermore, McConnell world seems completely certain that Republicans won’t be blamed for an economic meltdown since Democrats control the White House and Congress.

3) The Strengths: McConnell has his conference solidly behind him, much more than Democrats or the White House initially believed. We’ve struggled to come up with 10 Senate Republicans that would even contemplate going against McConnell here, much less actually do it. 

4) The Weakness: A debt crisis isn’t like a government shutdown. If the U.S. government technically defaults on its $28 trillion-plus debt, the short and long-term damage to the American economy would be “catastrophic,” according to Treasury Secretary Janet Yellen. Millions of Americans would pay the price for this political stalemate, and the country’s status as the world’s leading economic and financial power would be jeopardized.

McConnell’s demand for reconciliation versus an up-or-down vote under regular order is a meaningless parliamentary distinction that 99.99% of Americans won’t care about if this crisis leads to a recession.

Another huge point — if default were to happen just nine months after the bloody Jan. 6 insurrection, it would further confirm for many here and abroad that the American experiment has run its course and they should look elsewhere for global leadership.

The ultimate weaknesses in McConnell’s position are two-fold. No. 1: Will Senate Republicans get weak-kneed as the crisis point approaches? No. 2: If McConnell alters his position and decides to allow this vote to proceed in regular order, Senate Republicans are staking out a position that would be hard to retreat from politically.

5) Their End Game: Here’s something that kind of flew under the radar. In McConnell’s letter to Biden on Monday, the Kentucky Republican sought to bypass Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer and appeal directly to Biden. The undertone of the letter was that McConnell is being misjudged: he’s dead serious about forcing Democrats to do this on their own.

DEMOCRATS

Schumer, sick of Mitch, tries to force Republicans’ hands

1) The Position: Senate Majority Leader Chuck Schumer’s position here is quite clear — he believes Republicans should get out of the way and let Democrats raise the debt limit. He’s been engaged in this showdown with Senate Minority Leader Mitch McConnell for some time. Schumer has dismissed using the reconciliation process to lift the debt limit, calling it “very, very risky.” His view is that McConnell’s use of the filibuster to block action on the debt limit is both ridiculous and dangerous.

2) The Incentives: For Schumer, some of this is “McConnell 101” — the Kentucky Republican is inventing new rules to justify his own political goals. It’s like Merrick Garland’s Supreme Court nomination in 2016 all over again. McConnell is doing what he wants to do because he has the power to do it, not because it’s the right thing to do as a national political leader or as a steward of the Senate as an institution.

For Schumer, Wednesday’s cloture vote is a chance to put every Republican on record. Are they willing to pay the country’s debts, picking up the tab for legislation and policies that many of these Republicans voted for, or are they going to risk default in order to score political points?

3) The Strengths: The Senate GOP’s position is extreme, as some of them will candidly admit in private. If McConnell and Republicans don’t want to raise the debt limit, they can just vote no. Pretty simple. It’s happened lots of times in the past. As Schumer noted Monday, Democrats will pass it and move on. Let the American people decide in the midterm elections who was right here.

Also, the pressure on individual Republican senators is going to only grow. Financial services companies and big banks are going to start pressing them on this issue. Big employers in their home states will get anxious. Political donors, former college classmates and their neighbors are going to ask them what’s happening. People at their country clubs. Especially if Biden and the Democrats can ramp up their message operation here. The president of the United States has the biggest megaphone in the world. If the Biden administration is skillful here — if — Democrats can make a bunch of Senate Republicans very nervous.

Schumer and the White House don’t have to sway 50 Senate Republicans. They just need 10 to say they’d vote for cloture and then let Democrats push it through to final passage. Just 10. 

One other point — Democrats have been fighting with each other so much recently that this may be a wake-up call for them. McConnell ain’t Donald Trump, of course, but he’ll do.

4) The Weaknesses: Biden pretty much admitted the reality of the situation here during his White House presser on Monday.

Reporter: "Can you guarantee that the U.S. will not reach the debt ceiling? That that will not happen?"

Biden: "No, I can’t. That’s up to Mitch McConnell."

When the president of the United States says that, it serves to highlight that a Senate majority leader with only 50 votes is playing a weak hand. 

Here’s some other points to consider: 1) Democrats knew this moment would arrive when they passed their $3.5 trillion budget resolution two months ago. They could’ve included debt-limit instructions in that resolution and they didn’t. They wanted to spare vulnerable 2022 incumbents a tough vote. So this crisis is as much their fault as Republicans; 2) Time is Schumer’s enemy. Schumer needed to start the reconciliation process for a debt limit-only bill on Monday, and he chose not to do so. The pressure will only grow on him; 3) McConnell is right that Americans don’t care about reconciliation versus regular order; 4) Schumer and Biden voted against debt-limit increases. It undermines their attacks against McConnell; 5) Schumer was once “a champion of Wall Street” in Congress. And Wall Street hates a debt crisis more than anyone.

5) The End Game: Biden is now in the game along with Schumer and Speaker Nancy Pelosi. The media, especially the TV networks and big news outlets, have awakened to the stakes here, both politically and economically. Senators are going to be barraged with questions and ask repeatedly to justify their positions. All this attention means political pressure, and political pressure can force compromises on the unwilling. Or Schumer can try to jam the debt limit via reconciliation. But he doesn’t have much time.

THE OTHER SIDE OF PENNSYLVANIA

The White House hopes for the best

1) The Position: The White House spent weeks trying to downplay the debt-limit threat, rarely addressing it publicly because they were trying to act as if it wasn’t a crisis. It’s a crisis now, however. President Joe Biden finally weighed in Monday and said, “A meteor is headed to crash into our economy.” So they seem pretty awake to the threat now. The administration’s effort right now is to back Senate Majority Leader Chuck Schumer’s play, which is Republicans should get out of the way and allow Democrats to boost the debt limit. Biden said he would be talking to Senate Minority Leader Mitch McConnell — something the Kentucky Republican said he wants too — but as of Monday night, that hadn’t happened yet. 

In our conversations with administration officials, they do recognize that they need outside validators to try to pressure McConnell since they won’t be able to get through to him or pressure him directly. The problem is McConnell can withstand a massive amount of political heat.

2) The Incentives: We actually think the White House is vastly underrating how serious this situation is. Last week, the Biden administration seemed to think that this would begin to resolve itself by Monday, and it didn’t. A fiscal crisis of this magnitude threatens to delay or derail the entire Biden agenda — an agenda that’s currently having its own struggles. Furthermore, Democrats do control everything. They can make the case that McConnell blocked any debt-limit increase — and that would be true. But legislative crises are unpredictable. Who knows what McConnell will be able to extract for an eventual increase of the debt limit. 

3) The Strengths: The Biden administration seems to be fully engaged in this fight now, which is a positive development for Democrats.

The president has a lot of ways to amplify his message, both directly and indirectly. Treasury Secretary Janet Yellen has been engaged on this issue for awhile, and look for her to ramp up calls for congressional action. White House officials can use business leaders and trade groups as intermediaries to go after individual GOP senators, including big employers in their home states. Biden can reach out to those senators, many of whom he served with or knows personally. And Oval Office meetings also have a way of focusing attention on problems. 

4) The Weaknesses: This should be obvious to everyone, but Biden is the president, and everything is his responsibility. Right now he’s deferring to Schumer — that’s fine, it’s the right tactic. But soon, the White House should probably take control of the situation.

5) The End Game: McConnell isn’t anywhere close to folding, so we wonder if there’s a conversation to be had with the president about the Kentucky Republican’s price — to the extent he has one.

THE OUTSIDE GAME

The Chamber supports, doesn’t support BIF

The U.S. Chamber of Commerce spent months suggesting that the bipartisan infrastructure bill and the infrastructure bill were not linked — despite all of the obvious evidence that they were indeed linked. We reported yesterday that the Chamber was booted from House GOP strategy calls. And last night, Neal Bradley, a former aide to Eric Cantor who is now a top official at the Chamber, decided the two were linked. The Chamber does not support the BIF if it’s linked to reconciliation, which it is and always has been.

Our buddy Alayna Treene had the scoop for Axios: 

The U.S. Chamber of Commerce is withdrawing its support of the Senate-passed $1.2 trillion bipartisan infrastructure bill just hours after Punchbowl News reported House Republicans were booting it from its strategy calls, Axios has learned.

Why it matters: The Chamber’s chief policy officer, Neil Bradley, announced the policy shift in a letter to its Board of Directors on Monday. The pretense for his decision: President Biden formally linking the "hard" infrastructure bill with the $3.5 trillion budget reconciliation package during a meeting with House Democrats on Friday.

Between the lines: The two bills, which are seen as the top priorities in fulfilling Biden’s agenda, have long been linked. House Speaker Nancy Pelosi (D-Calif.) has described them as "companion bills."

Tim Doyle, a spokesman for the Chamber, sent this statement to us last night: “The Chamber continues to support the Senate-passed bipartisan infrastructure bill and believes it should pass the House as a stand-alone bill unlinked to the proposed tax and spend reconciliation bill. The Chamber is continuing and expanding its efforts to defeat the reconciliation bill and opposes efforts to link the infrastructure bill to the reconciliation bill.”

So they don’t support it linked to the Democrats’ reconciliation package, but they do support it as a standalone. 

The idea that these two bills weren’t was so ridiculous we never spent any real time on it. They are both part of the president’s agenda. They were decoupled to make it easier for Senate Republicans to vote for the bipartisan infrastructure bill. But, in reality, one wouldn’t exist without the other. It was a talking point — and not a great one at that. 

It will take something approaching a miracle for the Chamber to get back in the good graces of the Republican leadership at this point.

THE POLITICAL SIDE

Biden-linked outside group up on the air, and the DCCC makes new hires

→ President Joe Biden is going to Michigan today to talk about the infrastructure and reconciliation bills. The aim of his trip is to step away from the infighting in Washington and to take the case directly to the American people why these measures will benefit them.

Building Back Together, an outside group focused on boosting Biden’s agenda, is going up on TV in the districts of Rep. Elissa Slotkin’s (D-Mich.) and Rep. Haley Stevens (D-Mich.) district touting the benefits of the package. The ad features “Mike,” a retired steelworker in Michigan.

Slotkin’s ad:

Stevens’ ad:

→ Christian Hall sent over this scoop last night: The DCCC has a bunch of new hires. Kristin Slevin is joining as chief of staff. Slevin is an alum of Sen. Elizabeth Warren’s (D-Mass.) office. Veronica Yoo is joining as the senior adviser for AAPI engagement. She’s also a Warren alum and worked for the DNC in 2020. Christale Spain is the senior adviser for Black engagement. Spain ran the South Carolina Democratic Party’s coordinated campaign in 2020. Before that, she was Sen. Cory Booker’s (D-N.J.) presidential campaign’s director in South Carolina. Gisel Aceves is joining as political director for redistricting and a senior adviser for Latino engagement. Aceves was the executive director of the CHC Bold PAC.

MOMENTS

9 a.m.: President Joe Biden will get his intelligence briefing.

10:15 a.m.: Biden will meet virtually with a group of moderate House Democrats. 

11:30 a.m.: Biden will leave for Andrews, where he will fly to Lansing, Mich. He will arrive at 1:20 p.m. and then fly to Howell, Mich. Karine Jean-Pierre will gaggle en route to Lansing.

2 p.m.: Senate leadership will speak at the sticks following their party lunches.

3 p.m.: Biden will visit the International Union of Operating Engineers Local 324 training facility.

3:30 p.m.: Biden will speak about the infrastructure and reconciliation bills, which are linked. 

4:30 p.m.: Biden will leave Howell for Lansing and then fly to Andrews, where he will arrive at 6:20 p.m. He’ll return to the White House at 6:40 p.m.

6 p.m.: Vice President Kamala Harris will speak at a virtual fundraiser for the DNC.

CLIP FILE

NYT

→ “With Biden’s Agenda in the Balance, Lobbying Kicks Into High Gear,” by Luke Broadwater

 → “One Justice Missing and Only One Masked, the Supreme Court Returns,” by Adam Liptak

→ “A U.S. Military First: The War in Afghanistan Ended With Zero M.I.A.s,” by Dave Phillips 

WaPo

→ “Trump, talked out of announcing a 2024 bid for now, settles on a wink-and-nod unofficial candidacy,” by Michael Scherer and Josh Dawsey

→ “Pfizer vaccine 90% effective against hospitalization, death six months later, study says,” by Bryan Pietsch and Adela Suliman 

WSJ

→ “U.S. Wants New Trade Talks With China, but Will Keep Tariffs,” by Josh Zumbrun, Bob Davis and Linling Wei

AP

→ “Biden eager to get out of DC, push benefits of spending plan,” by Jonathan Lemire

→ “Blinken, in Paris, seeking to heal AUKUS rift with France,” by Matthew Lee in Paris

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