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Tag: federal budget deficit

  • Corporate America celebrates debt ceiling deal and urges Congress to quickly pass legislation | CNN Business

    Corporate America celebrates debt ceiling deal and urges Congress to quickly pass legislation | CNN Business

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    New York
    CNN
     — 

    Leading business groups are praising President Joe Biden and House Speaker Kevin McCarthy for forging a bipartisan agreement to raise the debt ceiling, and they are calling for Congress to pass the legislation before the government suffers a devastating default.

    “With the US at risk of defaulting in less than 10 days, there is no time to spare. We urge members of Congress to give the legislation their strong support,” Josh Bolten, the CEO of the Business Roundtable and former chief of staff to President George W. Bush, said in a statement on Sunday.

    Bolten applauded the agreement for not only raising the debt ceiling through January 1, 2025, but for making a “down payment” on permitting reform and taking steps towards putting America on a “more sustainable fiscal trajectory.”

    Suzanne Clark, president and CEO of the US Chamber of Commerce, said in a separate statement that by reaching a compromise, Biden and congressional leaders have “shown they can come together on a bipartisan basis and act in the best interests of our country.”

    “Members of Congress must finish the job and send the bill to the President’s desk to be signed into law without delay. The gravity of this moment cannot be overstated,” said Clark, who added the Chamber will consider this a “key vote” for lawmakers.

    The National Association of Manufacturers, the largest manufacturing trade group in the nation, congratulated Biden, McCarthy and their lawmakers for reaching an agreement.

    “Defaulting on our debt would create economic chaos, harming manufacturing workers and their families and jeopardizing our leadership in the world,” NAM CEO Jay Timmons, who previously worked as a senior aid to Republican officials, said in a statement. “Congress should act quickly to pass this agreement and to demonstrate to Americans and to the world the continued strength of our institutions and our democracy.”

    Big bank CEOs are also pressing lawmakers to green light the debt limit deal.

    The Financial Services Forum, a trade group whose members include Citigroup CEO Jane Fraser, JPMorgan Chase CEO Jamie Dimon and Goldman Sachs CEO David Solomon, issued a statement Tuesday praising the efforts of Biden and McCarthy and urging Congress to adopt the agreement.

    “Responsible and timely action will preserve the full faith and credit of the United States and our nation’s important position of global economic leadership,” Financial Services Forum CEO Kevin Fromer said in the statement.

    Biden and McCarthy reached an agreement Saturday, but the deal isn’t done yet. Party leaders in Washington are working furiously Monday to convince holdouts to back the compromise legislation that would avert default. Still, prospects for passage of the bill are rising as many centrist Democrats said they would back the bill, and Republicans said they believed that they would be able to carry the support of the majority of their House conference.

    The House vote is expected to take place Wednesday.

    – CNN’s Kevin Liptak contributed to this report.

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  • Republican tries to scuttle debt limit bill in House Rules Committee as pressure grows on key swing vote | CNN Politics

    Republican tries to scuttle debt limit bill in House Rules Committee as pressure grows on key swing vote | CNN Politics

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    CNN
     — 

    Rep. Chip Roy accused House Speaker Kevin McCarthy on Monday of cutting a deal that could complicate negotiators’ efforts to pass a bill to raise the US debt ceiling this week.

    But McCarthy’s allies quickly refuted the Texas Republican, underscoring the tension ahead of a key meeting of the House Rules Committee on Tuesday – and putting new pressure on a conservative holdout, Rep. Thomas Massie of Kentucky, who has yet to take a position on the plan.

    Roy contended that McCarthy cut a hand-shake deal in January that all nine Republicans on the powerful panel must agree to move any legislation forward, otherwise bills could not be considered by the full House for majority approval. That would essentially doom the debt ceiling bill since Roy – who sits on the panel – and another conservative committee member are trying to stop the bill from advancing.

    “A reminder that during Speaker negotiations to build the coalition, that it was explicit both that nothing would pass Rules Committee without AT LEAST 7 GOP votes – AND that the Committee would not allow reporting out rules without unanimous Republican votes,” Roy tweeted.

    Senior GOP sources acknowledged that there was an agreement for seven Republican committee members to agree to move forward in order to advance a bill to the floor, but they flatly dispute that there was a deal for all nine to sign off for legislation to advance.

    “I have not heard that before. If those conversations took place, the rest of the conference was unaware of them,” said Rep. Dusty Johnson of South Dakota. “And frankly, I doubt them.”

    The dispute is significant because Roy sits on the committee – which is divided between nine Republicans and four Democrats – as does GOP Rep. Ralph Norman of South Carolina. Both men have emerged as leading foes of the bipartisan debt limit bill to avoid a June 5 default, arguing it does little to rein in government spending.

    A third conservative who sits on the panel – Massie – has been mum about how he plans to handle the rule vote in committee. McCarthy agreed to name all three men to the panel as part of the promises he made during his hard-fought speaker’s victory – all to give more power to conservatives on committees, including on Rules, which is typically stacked with the speaker’s closest allies.

    If Massie were to join Roy and Norman and vote against the rule at Tuesday’s meeting, he could effectively stall the measure in committee.

    But in January, Massie told CNN he was reluctant to vote against rules to stop bills in their tracks.

    “I would be reluctant to try to use the rules committee to achieve a legislative outcome, particularly if it doesn’t represent a large majority of our caucus,” Massie said at the time. “So I don’t ever intend to use my position on there to like, hold somebody hostage – or hold legislation hostage.”

    Democrats on the committee may also vote for the rule, sources told CNN, and that would ensure it has the votes to advance to the floor. But if Massie were to oppose the rule, only six Republicans would be in favor of it, complicating McCarthy’s efforts to bring the plan to the floor since he previously agreed to only take up bills with the backing of seven committee Republicans.

    Massie’s office declined to comment on how he may vote on Tuesday, and neither Roy nor the speaker’s office responded to requests for comments on the Texan’s assertion.

    But Republicans close to McCarthy refuted the notion that bills could only advance with unanimous GOP support in the committee.

    “I’m a rules guy,” Johnson said. “And when I checked, there wasn’t a rule that something has to come out of Rules Committee unanimously. Now Chip is a rules guy too. So I think he’s going to understand that, that this is a majoritarian institution, and that ultimately, we’re going to serve Americans the best way that the majority of us know how – that’s going to be to pass this bill.”

    Other McCarthy allies agreed.

    “I don’t know what Speaker McCarthy agreed to, but that has not been something that any of us were familiar with,” Rep. Stephanie Bice of Oklahoma said. “I think that comment was that it had to be unanimous to come out of the Rules Committee to go to the floor is the tweet that I read. And I think that is inaccurate, at best, but I don’t know because I wasn’t in the room. I don’t know how you would have something like that functionally work.”

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  • Biden and McCarthy lean on holdouts in both parties to pass debt ceiling deal | CNN Politics

    Biden and McCarthy lean on holdouts in both parties to pass debt ceiling deal | CNN Politics

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    CNN
     — 

    Party leaders in Washington are waging an urgent campaign Monday to convince Democrats and Republicans to get behind compromise legislation that would avert a first-ever national default, with each side proclaiming victory following marathon talks.

    Prospects for passage of the bill, based on the agreement struck between President Joe Biden and Republican House Speaker Kevin McCarthy, grew Sunday as many centrist Democrats fell in line and Republicans maintained confidence that they would be able to carry the support of the majority of their House conference in a pivotal vote expected Wednesday.

    In both parties’ sights are those in the political middle, who leaders are wagering will swallow some provisions they disagree with in order to suspend the federal borrowing limit through January 1, 2025 – after the next presidential election – and avoid default. The bill caps non-defense spending, temporarily expands work requirements for some food stamp recipients and claws back some Covid-19 relief funds.

    The release of the bill text Sunday evening amounted to a consequential moment for both Biden and McCarthy, whose political futures could hinge on their ability to pass the legislation while also selling it as a victory for their respective parties.

    Speaking from the White House on Sunday, Biden hailed the agreement as critical to preventing economic disaster.

    “It’s a really important step forward,” he said from the Roosevelt Room. “It takes the threat of catastrophic default off the table, protects our hard-earned economic recovery, and the agreement also represents a compromise – which means no one got everything they want, but that’s the responsibility of governing.”

    The president shrugged off concerns from some Democrats who worry he gave away too much in his negotiations with Republicans.

    “They’ll find I didn’t,” he said.

    In a private call Sunday with House Democrats, Biden’s briefers defended their dealmaking with McCarthy, going into detail about what they had prevented from being added to the bill, according to multiple sources. They argued they stopped Republicans from pushing even stiffer work requirements and beat back efforts to repeal the Inflation Reduction Act and gut and gut Biden’s signature 2021 infrastructure law.

    After those briefings, many Democrats signaled that they were willing to support the plan simply because there’s no other viable option to avoid default, lawmakers told CNN.

    “It’s not a victory, but it’s a lot better (than) what might have happened if there were default,” one Senate Democrat told CNN after an evening briefing.

    Members of two major centrist groups – the New Democrat Coalition and Problem Solvers Caucus – are expected to largely support the plan, according to multiple sources. That represents roughly 100 Democrats, which could be enough to offset the losses from members of the hard-right who are furious over McCarthy’s dealmaking.

    Several members of the hard-line House Freedom Caucus have already harshly criticized the plan, vowing to try blocking it from passage.

    McCarthy has insisted to House Republicans that Democrats “got nothing” in the negotiations, and he worked to amplify government spending caps and new work requirements for food stamps as critical wins long sought by the GOP.

    But like Biden, McCarthy acknowledged the agreement required concessions from both sides.

    “It doesn’t get everything everybody wanted,” McCarthy told reporters in the Capitol on Sunday. “But, in divided government, that’s where we end up. I think it’s a very positive bill.”

    For McCarthy, the first big test will come Tuesday in the House Rules Committee, a panel that must adopt a rule to allow the bill to be approved by a majority of the House. To win the speakership, McCarthy agreed to name three conservative hardliners – Reps. Ralph Norman of South Carolina, Chip Roy of Texas and Thomas Massie of Kentucky – to the committee, a major concession since usually the powerful panel is stacked with close allies of the leadership.

    Norman and Roy have emerged as sharp critics of the debt limit deal so far, while Massie was quiet while waiting for bill text to be released. If all three voted against the rule in committee, that would kill the bill – unless any Democrats vote to advance the rule.

    McCarthy’s allies sought to play down the conservative revolt.

    “When you’re saying that conservatives have concerns, it is really the most colorful conservatives,” Rep. Dusty Johnson said on “State of the Union.”

    Passing the bill through the House will not be the final step. The package must also clear the Senate, where any single senator could stall progress for several days. On Sunday, a handful of powerful Senate Republicans had raised concerns about the deal’s defense spending during a Senate GOP conference call, a source on the call said.

    But with the support of Senate GOP Leader Mitch McConnell and expected backing of Senate Majority Leader Chuck Schumer, several Senate sources say there is a high likelihood there’ll be 60 votes to break a filibuster attempt. The timing of the final votes in the Senate could slip into Friday or the weekend.

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  • White House and House Republicans strike agreement in principle to raise debt ceiling, sources say | CNN Politics

    White House and House Republicans strike agreement in principle to raise debt ceiling, sources say | CNN Politics

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    Washington
    CNN
     — 

    The White House and House Republicans have an agreement in principle on a deal to raise the debt ceiling and cap spending, multiple sources familiar with the negotiations told CNN.

    The text of the deal will be reviewed overnight by both sides to ensure it lines up with the tentative agreement.

    This is a breaking story and will be updated.

    White House and House GOP negotiators are racing to finalize a deal to raise the nation’s debt limit with time running perilously short and the risk of a first-ever US default growing.

    There have been some signs that talks have progressed in recent days, and negotiators were hoping to announce an agreement as soon as Saturday, according to a person familiar with the matter.

    House Speaker Kevin McCarthy and President Joe Biden spoke by phone Saturday evening, and House GOP leaders were planning to brief all members on the state of negotiations later in the evening, according to multiple sources familiar with the situation.

    A source with knowledge of the negotiations told CNN on Saturday that a provision to impose new work requirements for certain social safety net programs remains a final sticking point.

    Republicans have been pushing this issue hard, saying beneficiaries of programs such as food stamps with no dependents should be forced to follow new rules. Democrats, however, have cast that idea as an attack on poor people.

    It’s unclear how the negotiators could come to an agreement, but the source told CNN the issue needs to be resolved before a deal can be reached.

    McCarthy arrived at the US Capitol on Saturday morning after his top Republican negotiators, Reps. Garret Graves of Louisiana and Patrick McHenry of North Carolina, had worked late into the night drafting the final details of a deal from the speaker’s office.

    “I feel closer to an agreement now than I did a long time before, because I see progress. But listen, this is not easy in any shape or form. But that doesn’t back us away from it,” McCarthy told reporters.

    The California Republican said he’d like to hold a vote on a debt limit bill as soon as Tuesday, which would mean negotiators would need to announce a deal and send legislative text to lawmakers by Saturday.

    Asked by CNN if he was confident he could get the full House GOP Caucus behind him following an agreement, McCarthy said: “Do you ever think you’re going to get every single member to vote for it? I didn’t get every single member to vote for the first one. I didn’t get every single member to vote for me for speaker.”

    But McCarthy maintained he’d be able to get the majority of House Republicans on board, telling CNN, “I don’t think I’ll have any problem with that.”

    White House officials were generally optimistic about the state of negotiations Saturday afternoon. One official told CNN that negotiations were ongoing and echoed Biden’s remark on Friday that they were close to a deal.

    While nothing is final, negotiators have made some progress on the work requirements provision for certain social safety net programs, two sources familiar with the matter told CNN earlier Saturday.

    Spending cuts on domestic programs were another issue that negotiators had worked to sort out late Friday night, but It’s unclear if the dispute has been fully resolved.

    Energy permitting reform, which aims to cut down the time it takes for new projects to get approved, remains a high priority for Graves. The issue pits environmentalists against the oil and gas industry and has divided congressional Democrats.

    McHenry said earlier Saturday that he and Graves had returned to McCarthy’s office, where they are meeting virtually with the White House. Friday’s negotiations broke off in the early morning hours Saturday.

    McHenry said negotiators have a “very narrow set of issues that has to be dealt with” before they can reach a deal, which he said was still “hours or days away.”

    People involved in the process said earlier they felt confident the issues could be resolved in a timely manner.

    It’s unclear when the final bill text will be released, and the process of turning a framework into an actual bill can be laborious. New issues could easily crop up at each step along the way, and each step has the potential to be time-consuming, running out the clock ahead of the debt limit deadline early next month.

    The two sides, however, have been trying to firm up the legislative text as they’ve gone along in a bid to speed up that process.

    “House Republicans have a bill that we passed out of the House to raise the debt ceiling. So we have legislative text that is wide and complete. And so that is a helpful baseline when you’re getting into a window like this,” McHenry said Saturday.

    Selling the deal to members will be no small task, with stiff opposition expected from both the left and right. That means it’s going to require an intense whipping operation – and support from both sides of the aisle – to get the bill over the finish line.

    The pressure on negotiators is intense as the US steadily inches closer to the possibility of a default and the threat of economic catastrophe.

    In a major development Friday that will give lawmakers more time to reach and pass a deal, Treasury Secretary Janet Yellen said that Congress must address the debt ceiling by June 5 or the government will not have enough funds to pay all of the nation’s obligations in full and on time. Previously, Yellen had estimated that the earliest possible date a default could occur was June 1.

    McHenry said the Yellen’s new date “clarifies that our timeline is very tight.”

    “House Republicans asked for clarification. Chip Roy and Matt Gaetz and Byron Donalds and Dan Bishop, among others, asked for clarification on Secretary Yellen’s math. She updated her math. Obviously, it was a good request. And I think it clarifies our window for us to actually achieve the deal,” he said Saturday.

    Debt limit predictions, however, aren’t clear-cut. Rather than a set-in-stone deadline, it is more of a best-guess estimate, which makes it harder to know exactly how much time Congress has to act to avert potential financial catastrophe.

    This story has been updated with additional information.

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  • Major differences remain over spending cuts and other key issues as debt limit deadline looms | CNN Politics

    Major differences remain over spending cuts and other key issues as debt limit deadline looms | CNN Politics

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    CNN
     — 

    Negotiations are continuing to unfold in an attempt to reach a debt limit deal, but major differences between House Republicans and the White House have yet to be bridged, and the pressure is only intensifying as the risk of default grows ever more real with each day.

    Republicans have long said that spending cuts must be paired with any increase in the debt limit – an issue that is proving to be the central sticking point as Democrats argue the cuts Republicans want are too extreme, though the White House has expressed a willingness to cut some spending.

    Asked if there is any general agreements on cuts, GOP Rep. Garret Graves, who has served as a chief negotiator during the talks, said on Tuesday, “No, that’s our biggest gap.”

    Graves made clear that a wide array of significant differences remain, even as the timeline to avoid default grows shorter.

    “Look, there are some big bright red lines on both sides,” he said. “We do not have any of those issues closed out.”

    Underscoring just how far apart the two sides are, House Speaker Kevin McCarthy told Republicans during a closed-door meeting on Tuesday, “We are nowhere near a deal,” according to sources in the room.

    The window to secure a deal is rapidly closing and the stakes are incredibly high with the Treasury Department continuing to say the US could default by June 1. A first-ever default for the US would likely trigger a global economic catastrophe.

    McCarthy met with President Joe Biden at the White House on Monday, a meeting the speaker and the president both said was “productive,” but that did not yield a breakthrough in negotiations or end in a deal.

    Congressional Democrats, meanwhile, continue to push back against positions Republicans have staked out in negotiations and express heightened concern over the ticking clock.

    House Democratic Caucus Chair Pete Aguilar argued that Republicans have been pushed to take extreme positions by far-right members of the GOP conference.

    “This is tough, this is not where we should be. Speaker McCarthy is being held captive by the Freedom Caucus,” Aguilar told reporters on Tuesday.

    “We’re concerned that Republicans are not only moving the goalposts, but continue to hold onto the most extreme elements of their proposals,” he said.

    McCarthy, despite saying the two sides are still far apart, said Tuesday he thinks it is possible to get everything done by the June 1 deadline. “We could still finish this by June 1st,” he told reporters.

    But in a sign there may not be much room to maneuver in negotiations, McCarthy told CNN’s Manu Raju, “We’re going to raise the debt ceiling,” when asked what concessions he would make – a significant remark that indicates Republicans are not willing to give any more than raising the debt ceiling in exchange for their demands.

    When Raju pressed the speaker, asking if that is his only concession, McCarthy said, “Everything we’re going to do is going to make America stronger.”

    McCarthy’s comment Tuesday that raising the debt ceiling is the only concession he will make rankled a White House that just a day earlier viewed conversations with McCarthy as productive, according to two sources familiar with the negotiations.

    A Democratic official slammed McCarthy for his comments, accusing him of refusing to compromise and being beholden to the most conservative members of his caucus as negotiations languish.

    The official slammed McCarthy’s demand that defense spending increase while non-defense spending decrease as extreme and out of step with budget deals over the last decade.

    Another significant challenge facing negotiators is that even if a deal is reached, that is far from the end of the road to prevent default.

    Legislative text will need to be written, which can be arduous and complicated work as lawmakers and staff dive into nitty-gritty policy details – a part of the process toward final passage of any bill that can often lead to further issues and eleventh-hour hangups over disagreements about the fine print.

    Then, leaders from both parties will need to wrangle the votes to pass a bill, no small task with narrow majorities in both chambers. After that, a deal would need to be brought to the floor, a process that can take days to play out in both chambers, though there are mechanisms available to leadership to speed things up.

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  • Yellen warns Congress again that default could be just days away, but others forecast a little more time | CNN Politics

    Yellen warns Congress again that default could be just days away, but others forecast a little more time | CNN Politics

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    CNN
     — 

    Treasury Secretary Janet Yellen reinforced her warning to Congress that it has only a little time left to address the debt ceiling before the nation defaults on its obligations.

    It is “highly likely” that the agency will not be able to pay all of its bills in full and on time as soon as June 1, Yellen wrote in a letter to House Speaker Kevin McCarthy on Monday.

    “With an additional week of information now available, I am writing to note that we estimate that it is highly likely that Treasury will no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1,” she wrote.

    Yellen’s latest missive to Congress comes as White House and House GOP negotiators continue trying to hammer out a deal before the so-called X-date, when the nation would default.

    McCarthy, who is scheduled to meet with President Joe Biden on Monday, said “nothing is agreed to,” though there have been some good discussions. Among the sticking points is the depth of spending cuts.

    The speaker said that the package has to come together this week for the House to pass it and move it to the Senate.

    Yellen has spent much of May laying out the seriousness of a potential default, which would be a first for the US. She has said it could unleash a global economic recession and financial upheaval, as well as hurt millions of Americans who rely on federal government payments, including Social Security recipients, federal workers and Medicare providers.

    Several other analyses back up Yellen’s forecast that the X-date could arrive in early June, though they don’t necessarily think it’s as early as June 1.

    “Our projections show Treasury able to get to June 14 before exhausting its cash, but there is no room for error and this date can change,” Nancy Vanden Houten, lead US economist for Oxford Economics, wrote in a report Monday.

    Meanwhile, Goldman Sachs on Friday said the agency faces “clear risk of missing payments” on June 8 or June 9.

    Wells Fargo analysts said they are a bit more optimistic than Yellen that Treasury could get to June 15. The secretary has said that the odds are “quite low.”

    But they added that their confidence has been shaken by earlier forecast misses that underestimated the need for financing and the size of budget deficits. They noted that even in the best-case scenario, Treasury will not have a lot of funds on hand in the first half of next month.

    “Put another way, a fifty-fifty chance of an early June default in the absence of a debt ceiling increase is still very concerning and highlights the clear risk of hitting the X date in early June,” they wrote in a note.

    If Treasury can continue paying the bills into the middle of next month, then it’s likely the government won’t default until later in the summer. The agency will get another injection of funds from second quarter estimated tax payments, which are due June 15, and from $145 billion in an “extraordinary measure” that becomes available at the end of that month.

    Treasury had $60.7 billion in cash on hand as of Friday, according to federal data. The amount bounces around as the agency takes in revenue and makes payments, but the balance has declined from $238.5 billion at the start of the month, when the coffers were relatively flush from tax collections in April.

    Ever since the US hit its borrowing cap in January, Treasury has been forced to rely on cash and extraordinary measures to pay the bills until Congress addresses the debt ceiling. The agency had about $92 billion remaining in extraordinary measures as of Wednesday, down from around $220 billion at the end of January.

    This headline and story have been updated with additional information.

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  • Biden and McCarthy to discuss debt ceiling Monday as staff-level talks resume | CNN Politics

    Biden and McCarthy to discuss debt ceiling Monday as staff-level talks resume | CNN Politics

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    Hiroshima, Japan
    CNN
     — 

    Staff-level discussions over the debt ceiling and budget between the White House and congressional Republican will resume Sunday evening after President Joe Biden and House Speaker Kevin McCarthy spoke by phone in the afternoon, according to a White House official.

    Biden and McCarthy will meet later on Monday, the official added.

    McCarthy said the phone call with Biden, who was aboard Air Force One returning to Washington from Japan, was “productive.”

    In an 18-minute gaggle with reporters at the US Capitol, the California Republican said that while the timing of the meeting was still being worked out, it was likely to be Monday afternoon. It is not expected to include other congressional leaders.

    McCarthy’s more optimistic tone comes after the president had issued a stark warning earlier Sunday that congressional Republicans could use a national default to damage him politically and acknowledged that time had run out to use potential unilateral actions to raise the federal borrowing limit, as the deadline to reach an agreement neared.

    Characterizing GOP proposals as “extreme” and warning they couldn’t gain sufficient support in Congress, Biden said he wasn’t able to promise fellow world leaders gathered in Hiroshima, Japan, for Group of Seven talks that the US would not default.

    “I can’t guarantee that they will not force a default by doing something outrageous,” he said at a news conference before he left for Washington.

    Biden’s remarks were the latest indication that talks between the White House and congressional Republicans remained far apart.

    Republicans have been seeking spending cuts in the federal budget in exchange for their support to raise the nation’s borrowing limit. On Sunday, Biden acknowledged “significant” disagreement with Republicans in some areas, insisting that while he’s willing to cut spending, tax “revenue is not off the table” as part of the deal.

    McCarthy, in an interview Sunday with Fox News, disagreed with that characterization, saying Biden previously told him that tax increases were “off the table” and that he wouldn’t agree to them.

    “He’s now bringing something to the table that everyone said was off the table,” the California Republican said. “It seems as though he wants to fault more than he wants a deal.”

    At his news conference, Biden said that much of what Republicans have proposed “is simply, quite frankly, unacceptable.”

    “It’s time for Republicans to accept that there’s no bipartisan deal to be made solely, solely on their partisan terms. … They have to move, as well,” the president said.

    Pressed on whether he would be to blame for a default scenario, Biden said that based on what he’s offered, he should be blameless but conceded that “no one will be blameless” as he suggested some of his political rivals could be encouraging a default to sabotage his reelection efforts.

    “I think there are some MAGA Republicans in the House who know the damage it would do to the economy, and because I am president, and a president is responsible for everything, Biden would take the blame and that’s the one way to make sure Biden’s not reelected,” he said.

    McCarthy, in turn, blamed what he called the “socialist wing of the Democratic Party” for driving Biden’s goals in the negotiations.

    “The president keeps changing positions every time Bernie Sanders has a press conference. He gets reactive and he shifts,” the speaker said as he arrived at the US Capitol in Washington on Sunday.

    Meanwhile, Biden’s top national security aide told CNN that the stalled debt ceiling and budget negotiations have not undercut American leadership abroad or undermined the G7 summit as it came to a close Sunday.

    “When you look at the totality of the last three days, it’s actually a reflection of and an exclamation point on the way in which President Biden has led on the world stage. People understand democracies, and they understand that there are moments in domestic politics when you have got to look at the home front,” national security adviser Jake Sullivan told CNN’s Jake Tapper on “State of the Union.”

    Biden in his news conference addressed the possibility of using the 14th Amendment to continue US government borrowing in the absence of a deal, suggesting he has the power but not the time to utilize the unilateral action.

    “I think we have the authority. The question is, could it be done and invoked in time that it could not – would not be appealed?” Biden asked, calling the question of whether an appeal could be solved before the default deadline “unresolved.”

    Pressed by CNN’s Phil Mattingly to clarify whether he thought he could invoke the 14th Amendment as a serious and tangible option, the president made clear that maneuver would not be successful given the short window remaining.

    “We have not come up with unilateral action that could succeed in a matter of two weeks or three weeks. That’s the issue. So it’s up to lawmakers. But my hope and intention is to resolve this problem,” he said.

    Republican Sen. Bill Cassidy of Louisiana said Sunday a potential invocation of the 14th Amendment would be a “dodge.”

    “The president needs to show leadership. ‘OK, House Republicans, American people, you’re concerned about spending, I will meet you there. As opposed to finding a dodge that tries to work its way around,” Cassidy said.

    Treasury Secretary Janet Yellen reiterated Sunday in an interview with NBC News that June 1 was a “hard deadline” for the US to raise the debt ceiling or risk defaulting on its obligations.

    But Rep. Brian Fitzpatrick, a co-chair of the bipartisan Problem Solvers Caucus, said there may be some leeway.

    “The June 1st date was probably, according to Secretary Yellen, the earliest possible date,” the Pennsylvania Republican told CBS News, adding that “we do have enough cash flow” to “pay the interest on our debt.”

    “We’re going start to see the state tax revenues come in the second week of June, so I think we’re OK on that,” Fitzpatrick said.

    Biden had originally planned to stop in Australia and Papua New Guinea after the G7 summit in Hiroshima, but he canceled those portions of the trip amid the debt ceiling talks.

    On Saturday, Rep. Dusty Johnson, a McCarthy ally and chair of the centrist Main Street Caucus, confirmed that the White House had made an offer seeking to cap future spending at current levels, which Johnson called “unreasonable.”

    “The paper that the White House provided was a major step backward. And it undermined all the progress that was made Wednesday and Thursday. … It has endangered negotiations,” the South Dakota Republican said.

    On Sunday, McCarthy told reporters at the Capitol that GOP Reps. Garrett Graves of Louisiana and Patrick McHenry of North Carolina would begin conversations again with White House staff “so we can walk them through literally what we’ve been talking about.”

    Before news broke of the talks resuming, McHenry told CNN that he was “not at all” optimistic a deal could come together.

    “I’ve been pessimistic for a while, and something needs to change,” he said Sunday morning.

    Graves said both sides had “made a lot of progress in understanding one another’s positions, in understanding red lines” and that the negotiators were closer than when they had started.

    He said there were still discussions to be had over ancillary topics such as work requirements and permitting reform, but “the numbers are the baseline.”

    “The speaker has been very clear: A red line is spending less money, and unless and until we’re there, the rest of it is really irrelevant,” the Louisiana Republican said.

    This story and headline have been updated with additional developments.

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  • Could the Fed raise rates again in June? | CNN Business

    Could the Fed raise rates again in June? | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.


    New York
    CNN
     — 

    Will the Federal Reserve hike interest rates at its next meeting in June — for the 11th time in a row — or pause? Wall Street seems to be betting on the latter, but it was a topsy-turvy journey to that consensus last week.

    What happened: The Fed’s meeting earlier this month fueled hopes that it was done with rate hikes, at least for now. Then, a slate of economic data last week came in stronger than expected.

    Retail spending rebounded in April after two months of declines, suggesting that consumers are still spending despite tightening their purse strings. Jobless claims declined more than expected for the week ended May 13, staying below historical averages.

    Traders saw a roughly 36% chance last Thursday that the Fed will raise rates by another quarter point in June, up from around 15.5% on May 12, according to the CME FedWatch Tool.

    Then, Fed Chair Jerome Powell weighed in mid-morning Friday. In a panel with former Fed head Ben Bernanke, Powell said that uncertainty remains surrounding how much demand will decline from tighter credit conditions and the lagged effects of hiking rates. Traders pared down their expectations to about a 18.6% chance that the central bank will raise rates next month, as of Friday evening.

    Experts seem to agree that the Fed is unlikely to raise rates again in June. “The absence of any such preparation [for a raise] is the signal and gives us additional confidence that the Fed is not going to hike in June absent a very big surprise in the remaining data, though we should expect a hawkish pause,” Evercore ISI strategists said in a May 19 note.

    Jim Baird, chief investment officer at Plante Moran Financial Advisors, also expects the Fed to hold rates steady in June. But that decision isn’t set in stone, and the Fed will likely monitor three key factors in making its decision, he said. Those are:

    • The debt ceiling. President Joe Biden and congressional leaders have maintained that the US will likely not default on its debt. But if such a scenario were to happen, it could have catastrophic consequences for the economy and financial markets that would require the Fed wait for the crisis to be resolved before taking action.
    • Evolving financial conditions. The collapses of regional lenders Silicon Valley Bank, Signature Bank and First Republic have accelerated the tightening of credit conditions. While that has complicated the Fed’s plan to stabilize prices, it also could benefit the central bank by doing some of its work for it by slowing spending.
    • Delayed impact. The Fed’s interest rate hikes flow through the economy with a lag. So, it will take some months for the full effect of its aggressive tightening cycle to show up in the economy. That means the Fed could want to take a pause to monitor the continuing impact of what it has already done.

    The Fed has also maintained that its actions are data dependent, meaning it will keep close watch on economic data that comes in before it’s due to announce its next rate decision on June 14.

    Some key data points set for release before then include the April Personal Consumption Expenditures price index (that’s the Fed’s preferred inflation metric), May jobs report, the May Consumer Price Index and May Producer Price Index. (The latter two reports are due on the two days the Fed meets.)

    If these data points show considerable weakening in the labor market or continued declines in inflation, that helps make the case for a pause. But signs of a robust economy with little to no signs of slowing down could mean the Fed has more room to tighten — and that it could take that opportunity.

    Morgan Stanley chief executive James Gorman, 64, will step down from his role within the next 12 months, he said Friday at the bank’s annual meeting.

    “The specific timing of the CEO transition has not been determined, but it is the Board’s and my expectation that it will occur at some point in the next 12 months. That is the current expectation in the absence of a major change in the external environment,” Gorman said.

    Gorman, who is one of the longest-serving heads of a US bank and largely responsible for helping lead a sweeping transformation of the company after the 2008 financial crisis, became CEO in January 2010.

    He will assume the role of executive chairman for “a period of time,” Gorman said, adding that the board of directors has three senior internal candidates in the pipeline to potentially take over as the next chief executive.

    Read more here.

    The June 1 ‘X-date’ — the estimated point at which the US Treasury could run out of cash — is fast approaching. For JPMorgan Chase’s Jamie Dimon, another key date is already here.

    The chief executive told Bloomberg earlier this month that he has held a so-called “war room” weekly to prepare the bank for the possibility the United States defaults on its debt. He plans to meet more often as the X-date approaches, and then meet every day by May 21, he said, adding that the meetings will eventually ramp up to take place three times a day.

    “I don’t think [a default] is going to happen, because it gets catastrophic,” Dimon said. “The closer you get to it, you will have panic.”

    Debt ceiling negotiations appeared to be going in a positive direction for most of last week. Both President Joe Biden and House Speaker Kevin McCarthy said that the United States is unlikely to default on its debt and seemed optimistic about the path to a deal.

    But debt ceiling talks between the White House and McCarthy’s office have hit a snag, and negotiators put a pause on the talks, multiple sources told CNN Friday.

    While that doesn’t mean the negotiations are falling completely apart, or that the country is headed for a default, it does pose more challenges for the stock market, which has stayed relatively resilient despite debt ceiling worries starting to slowly creep in.

    Dimon said in the same Bloomberg interview that he’d “love to get rid of the debt ceiling thing” altogether.

    The debt ceiling situation “is very unfortunate,” he said. “It should never happen this way.”

    Monday: JPMorgan Chase investor day.

    Tuesday: April new home sales. Earnings from Lowe’s (LOW).

    Wednesday: May Fed meeting minutes.

    Thursday: GDP Q1 second read, April pending home sales, mortgage rates and weekly jobless claims. Earnings from Costco (COST), Dollar Tree (DLTR) and Best Buy (BBY).

    Friday: April Personal Consumption Expenditures and May University of Michigan final consumer sentiment reading.

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  • Zelensky makes dramatic Japan appearance as G7 leaders take aim at Russia and China | CNN Politics

    Zelensky makes dramatic Japan appearance as G7 leaders take aim at Russia and China | CNN Politics

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    CNN
     — 

    Ukraine’s President Volodymyr Zelensky joined leaders of major democracies on Saturday at a summit in Japan dominated by a push to present a unified front against both Russia and China.

    The Group of Seven (G7) talks in Hiroshima are seeking common ground on a host of global issues, including how to confront Beijing’s growing military and economic assertiveness as well as the war raging in Europe.

    Zelensky, dressed in his trademark military themed clothing, made a headline-grabbing entrance as he touched down on board a French government plane in a Japanese city once obliterated by a nuclear bomb.

    “Japan. G7. Important meetings with partners and friends of Ukraine. Security and enhanced cooperation for our victory. Peace will become closer today,” he tweeted moments after arriving before heading to a dizzying round of bilateral meetings with leaders at the summit.

    His attendance underscores the pressing need to maintain Western unity in the face of Russian aggression.

    With Russia’s aerial assaults pounding Ukrainian cities and Kyiv preparing for a counter offensive, there is a growing urgency to Zelensky’s appeals for more advanced weapons and tighter sanctions on Moscow.

    A joint communique issued by G7 nations on Saturday focused heavily on Russia’s war against Ukraine, which the block “condemned in the strongest possible terms”.

    “We reaffirm our unwavering support for Ukraine for as long as it takes to bring a comprehensive, just and lasting peace,” the communique read.

    A day earlier G7 nations announced a string of further sanctions against Moscow while US President Joe Biden told his counterparts he was dropping objections to providing Ukrainians F16 fighter jets and would train Ukrainian pilots in the United States, a major advance in US military support for the country.

    Biden is expected to unveil a $375 million military aid package to Ukraine after the summit hears from Zelensky, officials familiar with the matter said, but leaders are confronting a wide-ranging set of issues beyond the war-torn country during their talks, including climate change and emerging artificial intelligence technologies.

    But Russia is not the only focus of the three day gathering, which Zelensky is set to address on Sunday.

    China also features heavily.

    Differences persist between the United States and Europe in how to manage their increasingly fraught relationships with the world’s second largest economy.

    But in Saturday’s joint communique, leaders spoke in one voice on a series of positions related to China, including the need to counter “economic coercion” and protect advanced technologies that could threaten national security, while also stressing that cooperation with Beijing was necessary.

    “A growing China that plays by international rules would be of global interest. We are not decoupling or turning inwards,” the communique read.

    Leaders called on Beijing not to “conduct interference activities” that could undermine the “integrity of our democratic institutions and our economic prosperity” – an apparent nod to recent allegations that Beijing’s interfered in Canadian elections and operates of a network of overseas police stations across the globe.

    A separate joint statement on economic security made no specific mention of China – while explicitly referencing Russia – but its intended audience was unmistakably Beijing’s leadership.

    The leaders called for enhancing supply chain resilience, hitting back against “harmful industrial subsidies,” and protecting sensitive technologies crucial to national security – all areas that leaders have expressed concerns about in recent years in relation to China’s economic practices.

    Western leaders and officials were more direct in framing the measures as a response to threats from China in comments made around the statement.

    Ahead of its release on Saturday, the United Kingdom released a statement on G7 measures against economic coercion, which pointed to China’s use of its “economic power to coerce countries including Australia and Lithuania over political disputes.”

    China is “engaged in a concerted and strategic economic contest,” and nations “should be clear-eyed” about the growing challenge we face,” Prime Minister Rishi Sunak said in the statement released by Downing Street, which also referenced Russia’s “weaponization” of Europe’s energy supplies.

    European Commission President Ursual von der Leyen welcomed the G7 action in a statement Saturday that nations must be “aware of the risk of weaponization of interdependencies,” but “urged de-risking not decoupling” – a term she has used to refer to how the EU should approach its economic relationship with China.

    China has already pushed back on ahead of G7 discussions, with its Foreign Ministry on Thursday posting a more than 5,000 word document on its website that reached back as far as 1960s Cuba to point to what it described as examples of “America’s Coercive Diplomacy and Its Harm.”

    “The US often accuses other countries of using great power status, coercive policies and economic coercion to pressure other countries into submission and engage in coercive diplomacy,” Foreign Ministry spokesman Wang Wenbin said in a regular press briefing in Beijing Friday.

    “The fact is, the US is the very origin of coercive diplomacy. It is the US and the US alone who owns the copyrights of coercive diplomacy,” he said, adding that China has “no taste for coercion and bullying.”

    Climate change was also a major theme of this weekend’s gathering with the joint communique including a pledge that the G7 would drive the economic transition to clean energy.

    “We commit to realizing the transformation of the economic and social system towards net-zero, circular, climate-resilient, pollution-free and nature-positive economies,” the communique read.

    The leaders also signaled they would closely monitor the rapid development of artificial intelligence (AI), by advancing discussions on AI governance and interoperability in line with “shared democratic values.”

    Biden is balancing his world leader talks with updates from the standoff over the US debt ceiling in Washington – a “subject of interest” in the president’s summit meetings, according to Biden’s national security adviser Jake Sullivan.

    “Countries want to have a sense of how these negotiations are going to play out. And the president has expressed confidence that he believes that we can drive to an outcome where we do avoid default, and part of the reason that he’s returning home tomorrow, rather than continuing with the rest of the trip, is so that he can help lead the effort to bring it home,” Sullivan said.

    Speaking to reporters as he met Australian Prime Minister Anthony Albanese on the sidelines of the G7 summit in Japan, Biden said he was not concerned “at all” about negotiations with House Republicans to avoid a default.

    “This goes in stages. I’ve been in these negotiations before,” Biden said.

    Biden, who departed a leaders’ dinner early on Friday to return to his hotel to receive additional information from staff, has gotten continual updates on the negotiations underway in Washington.

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  • Debt ceiling talks hit a snag, negotiators press pause for now | CNN Politics

    Debt ceiling talks hit a snag, negotiators press pause for now | CNN Politics

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    CNN
     — 

    Debt ceiling talks between the White House and House Speaker Kevin McCarthy’s office have hit a snag, and negotiators have put a pause on the talks, multiple sources tell CNN.

    Negotiators met briefly in the Capitol on Friday before breaking up, and as of right now, there are no more meetings scheduled for the day.

    This setback dashes hopes that there could be a deal in principle by this weekend.

    McCarthy confirmed that talks have paused, saying there’s not enough “movement” from the White House and suggested that spending levels are part of the issue.

    “We’ve got to get movement by the White House. And we don’t have any movement yet,” McCarthy told reporters as he headed into the Capitol.

    Asked why he had such an optimistic tone one day earlier, McCarthy said, “I really felt we were at the location where I could see the path. The White House is just – we can’t be spending more money next year. We have to spend less than the year before. It’s pretty easy.”

    McCarthy said he has not spoken to the president and did not answer questions about next steps.

    Time is of the essence and pressure is building to raise the borrowing limit ahead of June 1, which is the earliest date the Treasury Department says the government could be unable to pay its bills. If the US were to default, it would likely trigger a global economic catastrophe.

    GOP Rep. Garret Graves, who is leading negotiations for House Republicans, left a brief meeting with negotiators in the morning saying the situation was “not productive.” He said he is not sure they will meet again this weekend.

    “Until people are willing to have reasonable conversations about how you can actually can move forward and do the right thing we aren’t going to sit here and talk to ourselves. That’s what’s going on,” Graves said.

    As talks stalled, a White House official acknowledged that there are “real differences” and “talks will be difficult,” but said the president’s negotiating team is working to reach a “reasonable bipartisan solution.”

    This story has been updated with additional information.

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  • American consumers are growing worried about a US debt default | CNN

    American consumers are growing worried about a US debt default | CNN

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    Washington, DC
    CNN
     — 

    US consumer sentiment worsened in May as Americans grew concerned about the economy’s direction and a potential default of the US government’s debt, according to a preliminary report from the University of Michigan Friday.

    The political impasse over raising the debt ceiling has dragged on for weeks and is inching closer to the day the federal government will not be able to fully meet its financial obligations. Consumers are now taking notice.

    “While current incoming macroeconomic data show no sign of recession, consumers’ worries about the economy escalated in May alongside the proliferation of negative news about the economy, including the debt crisis standoff,” Joanne Hsu, director of the surveys of consumers at the University of Michigan, said in a release. “If policymakers fail to resolve the debt ceiling crisis, these dismal views over the economy will exacerbate the dire economic consequences of default.”

    The latest survey showed that the university’s consumer-sentiment index fell by 9% in May. The index’s latest decline wiped out more than half of its gains since recovering from the record low in June 2022.

    “In Washington’s past fiscal games of chicken, sentiment recovered within a few months of the crises ending,” Bill Adams, chief economist at Comerica Bank, wrote in analyst note. “On the other hand, if the government defaults, it won’t be pretty.”

    Pessimism among consumers can have an impact on their spending behavior if their expectations worsen and they decide to pull back. Some data have already pointed to demand for goods weakening some.

    US household spending was flat in March from the prior month, after limping just 0.1% in February. Retail sales sank 0.8% in March from the prior month, following a 0.5% decline in February. The Commerce Department releases April figures on retail spending next week, which will offer additional clues into how demand is shaping up as credit conditions tighten.

    A trio of recent bank failures mean that banks are poised to toughen their lending standards even more, which can dampen demand. A recent survey of loan officers showed that banks were making it harder to access credit even before the failures of Silicon Valley Bank and Signature Bank. Stack on top of that the Federal Reserve’s punishing interest-rate increases and still-high inflation, and consumers might just tap out.

    Many economists, including those at the Fed, expect the US economy to slip into a recession later in the year. A recession is a broad economic downturn that would include weakness in consumption.

    The Conference Board’s sentiment survey showed that consumer confidence worsened in April as Americans became more worried about the jobs market. The business group’s Consumer Confidence Index, which measures attitudes toward the economy and the job market, fell to 101.3 in April, down from 104 in March and marking the lowest level since July 2022.

    The labor market is still going strong. Employers added 253,000 jobs in April, a robust gain, and the unemployment rate fell back to a 53-year low of 3.4% that month. That’s good news, but the job market still isn’t balanced, because “labor demand still substantially exceeds the supply of available workers,” Fed Chair Jerome Powell said in his news conference after officials voted to raise the central bank’s benchmark lending rate by a quarter point earlier this month.

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  • US could default on its debt as soon as June 1 if Congress doesn’t act, Yellen says | CNN Politics

    US could default on its debt as soon as June 1 if Congress doesn’t act, Yellen says | CNN Politics

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    CNN
     — 

    The US could default on its obligations as soon as June 1 if Congress doesn’t address the debt limit before then, Treasury Secretary Janet Yellen said Monday.

    “After reviewing recent federal tax receipts, our best estimate is that we will be unable to continue to satisfy all of the government’s obligations by early June, and potentially as early as June 1, if Congress does not raise or suspend the debt limit before that time,” Yellen wrote in a letter to House Speaker Kevin McCarthy.

    The accelerated timetable increases pressure on President Joe Biden and House Republican lawmakers to ramp up their debt ceiling discussions. After months of talks being at a standstill, the president called all four congressional leaders on Monday afternoon and invited them to a May 9 meeting.

    Yellen warned that the actual date that Treasury exhausts its ability to pay the government’s bills on time and in full could be “a number of weeks later than these estimates.” She noted that it’s impossible to pinpoint an exact date since the amount of revenue the federal government collects and the amount it spends is variable.

    She will continue to update Congress as more information becomes available, but she reiterated that it’s “imperative” that lawmakers act as soon as possible.

    “We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States,” Yellen wrote.

    “If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests,” she continued.

    The Congressional Budget Office also updated its forecast on Monday, saying that there is a “significantly greater risk that the Treasury will run out of funds in early June” because of weaker-than-expected tax collections. It had originally projected that the default could happen between July and September.

    When the US hit its $31.4 trillion debt ceiling in January, Yellen informed Congress that cash on hand and “extraordinary measures” should last at least until early June. But she warned the projection was subject to considerable uncertainty.

    A variety of forecasters have estimated that the so-called X-date, when the US would default, would arrive over the summer or in the early fall.

    The likelihood of an early June default grew in recent weeks when April tax receipts were coming in weaker than expected. A trio of analysts issued reports warning that the default date could hit soon.

    However, a surge of tax revenue last week prompted two analysts to revise their forecasts to the second half of July.

    If tax collections wind up being enough to keep Treasury’s coffers flush through early June, then it’s likely the government won’t default until much later in the summer. The agency will get another injection of funds from second quarter estimated tax payments, which are due June 15, and from an extraordinary measure that becomes available at the end of that month.

    Biden told the congressional leaders – Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, House Minority Leader Hakeem Jeffries and McCarthy – that he wants to discuss the need to pass a clean bill to raise the debt ceiling.

    The White House is maintaining its position that it will not negotiate over the debt ceiling.

    The invitation comes after McCarthy noted earlier Monday that he had yet to hear from the president, nearly a week after the House passed its package to raise the debt ceiling by $1.5 trillion. However, the bill also includes spending cuts, beefed-up work requirements in safety net programs and other measures that Democrats would not accept.

    Schumer sent a letter to colleagues on Monday voicing Senate Democrats’ opposition to the House package.

    This story has been updated with additional information.

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  • ‘You’ve underestimated us’: How McCarthy’s horse-trading stopped a GOP revolt in debt fight | CNN Politics

    ‘You’ve underestimated us’: How McCarthy’s horse-trading stopped a GOP revolt in debt fight | CNN Politics

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    CNN
     — 

    Speaker Kevin McCarthy rolled the dice.

    As he took his short walk from the speaker’s suite to the House floor on Wednesday evening, the California Republican wasn’t entirely sure he would have the votes on the most important bill of his young speakership: To raise the $31.4 trillion national debt limit on Republican support alone.

    McCarthy knew he was close but couldn’t guarantee it, according to a person familiar with the matter.

    After months of internal discussions, the speaker had been engaged in round-the-clock talks with pockets of dissident members, cutting deals and horse-trading to pick off one GOP vote after another in his high-stakes fight – all an attempt to show the White House and the country that his party speaks with one voice on the consequential economic battle.

    But one Republican member was absent on Wednesday – and some hard-right members would not explicitly say how they’d vote, forcing the speaker to make a risky bet. In the end, it was two Democratic absences that helped McCarthy: Allowing him to pass the bill on the narrowest of margins, 217-215, and now shifting the focus to the White House and Senate Democrats.

    “We are the only ones to lift the debt limit to make sure this economy is not in jeopardy,” McCarthy beamed in the Capitol’s ornate Statuary Hall moments after the gavel came down, calling on President Joe Biden to negotiate a spending-cut deal he has resisted for months. He added: “You’ve underestimated us.”

    It was an effort that was months in the making. Immediately after securing the speakership in a messy, 15-ballot race, McCarthy made the concerted decision to avoid the pitfalls of a predecessor, John Boehner, and allow rank-and-file members to feel like they could shape the ultimate package rather than being steamrolled by leadership. A dozen listening sessions were held by two members of his whip team, Reps. Tom Emmer of Minnesota and Guy Reschenthaler of Pennsylvania, starting in February and continuing with them calling every member through this past weekend. Then there were regular meetings of the so-called “five families” – nicknamed after the mob families in “The Godfather” – that represent various ideological factions of the conference and were led by Rep. Garret Graves of Louisiana.

    But even after they had agreed to an outline of their deal last week, McCarthy continued to run into pitfalls. In a meeting last week in the basement of the Capitol, he and his team moved to appease conservatives who wanted to target tax breaks for biofuels in the Democrats’ Inflation Reduction Act. McCarthy agreed, prompting a furious pushback by Iowa Republicans, including a tense phone call between Gov. Kim Reynolds and McCarthy.

    It was an issue that could have derailed the bill and one that put McCarthy in familiar crosshairs between competing factions of his conference. But he ultimately cut a deal past 2 a.m. on Wednesday and helped move closer to securing the votes more than 15 hours later.

    “They realized that you were not going to be able to steamroll four people from Iowa,” said Rep. Zach Nunn, an Iowa freshman, referring to the four GOP members of the delegation.

    Yet more problems emerged, and McCarthy moved to head them off. Rep. Nancy Mace told reporters Wednesday morning she was ready to vote against the plan over her concerns it didn’t go far enough to balance the budget. But after an afternoon meeting in his office, the South Carolina Republican said she would back the plan. The promise, according to a source familiar with the matter: Votes on bills dealing with women’s access to reproductive health care and a vote on a bill dealing with active shooter alerts.

    “I haven’t gotten rolled yet by the leadership on anything,” Mace said, defending her deal-cutting.

    The ultimate plan would raise the debt limit by $1.5 trillion and propose to implement a slew of spending cuts to domestic programs, in addition to new work requirements on Medicaid beneficiaries and provisions targeting Biden’s domestic and regulatory agenda. It would save $4.8 trillion over the next 10 years, according to the Congressional Budget Office. But the $1.5 trillion increase would only last through March 2024 at the latest.

    In a private meeting in the Capitol, GOP leaders debated how high of a debt limit increase they should seek. Some had floated odd numbers because it sounded more intentional than an even number. One member suggested $1.69 trillion, but that was rejected because of the innuendos associated with such a figure, according to three GOP sources. Ultimately, a $1. 5 trillion increase was the number they settled on.

    Republicans say the deal-cutting that has since transpired was the result of new relationships forged from McCarthy’s drawn-out fight for the speaker’s gavel in January.

    “Absolutely, it has reaped benefits to everyone in the conference,” Rep. French Hill, a Republican of Arkansas, said of the relationships that were formed.

    But passing the bill was never a sure bet – something McCarthy sensed last week as he moved to appease conservatives and push for a repeal of energy tax breaks.

    “This is going to come back to bite us,” McCarthy warned conservatives last week, according to a person in the room, as they demanded the bill repeal green energy tax credits and other provisions in the Inflation Reduction Act. McCarthy feared taking that step would unlock a process allowing the Senate to later jam the House on thorny tax-related provisions.

    But he had a more immediate problem: The governor of Iowa.

    A fired-up Reynolds, the two-term Republican governor, was on the phone with McCarthy on Tuesday, relaying concerns over the provision in his debt ceiling plan to repeal tax breaks for ethanol use, according to people familiar with the call, warning it would be detrimental to farmers in her state.

    All four GOP members of the Iowa delegation, who were also in constant communication with the governor, informed leadership in a Tuesday night meeting that clawing back the tax credits was a “red line” for them, according to sources in the room.

    McCarthy now had a math problem. His allies had believed that the Iowa Republicans, some of the closest allies of leadership, would swallow the provisions and ultimately side with their party in their high-stakes fight with the White House. But they had miscalculated, forcing the speaker to cut a last-ditch deal after repeatedly insisting they would not open the bill to changes.

    Nunn, the Iowa Republican, told CNN he learned about the deal at around 2:30 a.m. on Wednesday, when Graves came to his office along with Rep. Michelle Fischbach, a Minnesota Republican who had similar issues with the ethanol provisions.

    “We had been in conversation throughout the entire day, but by Tuesday, we had really ratcheted up,” Nunn told CNN. “Iowa nice also means Iowa stubborn.”

    It was an issue that GOP leaders had sought to avoid. They had worried that if they cut a deal with the Iowa delegation, they would have to make similar deals with members from fossil-fuel heavy districts in order to make them happy.

    And the leadership knew if they were going to make 11th-hour changes to appease Midwestern Republicans, they’d have to offer some concessions to conservatives as well, and ultimately agreed to a faster implementation of the Medicaid work requirements. Yet even that wasn’t enough to satisfy some conservatives who had been pushing for that change – namely GOP Rep. Matt Gaetz of Florida, who was upset that the deal was cut at the last minute after the leaders said they wouldn’t change the bill, according to people familiar with the matter. He was one of four who later voted against the plan.

    Rep. Ken Buck, a member of the whip team, said in the end, he voted “no” because the GOP bill didn’t do enough to reduce the deficit. The Colorado Republican told CNN, “$58 trillion with Biden’s numbers and $53 trillion, it’s just too much debt.”

    But one member that McCarthy had been lobbying came through: freshman Rep. Eli Crane. The Arizona Republican had been wavering on the bill and was being heavily whipped by leadership, but said he ultimately backed the legislation because of his constituents.

    “We conducted a poll at a teletown hall last night and the people that responded overwhelmingly supported this bill,” he told CNN. “It kind of surprised me, honestly.”

    With this victory secured, McCarthy could later have an even bigger test on his hands: If he is forced to ask his conference to get behind any deal with Biden to raise the debt limit – something that almost certainly wouldn’t go as far as the House plan for spending cuts.

    His members are watching him closely.

    “What Kevin has assured us is he’s not coming back and presenting a watered-down version,” said Rep. Ralph Norman of South Carolina, a member of the House Freedom Caucus.

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  • McCarthy slams Biden in handling of US debt | CNN Politics

    McCarthy slams Biden in handling of US debt | CNN Politics

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    ‘What changed, Mr. President?’: McCarthy slams Biden in handling of US debt

    House Speaker Kevin McCarthy traveled to Wall Street on Monday to deliver a fresh warning that the House GOP majority will refuse to lift a cap on government borrowing unless Biden agrees to spending cuts that would effectively neutralize his domestic agenda.

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  • The US economy could depend on McCarthy corralling his extremist Republican troops | CNN Politics

    The US economy could depend on McCarthy corralling his extremist Republican troops | CNN Politics

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    CNN
     — 

    Millions of Americans could face massive consequences unless Speaker Kevin McCarthy can navigate out of a debt trap he has set for President Joe Biden that is instead threatening to capture his House Republicans.

    The California Republican traveled to Wall Street on Monday to deliver a fresh warning that the House GOP majority will refuse to lift a cap on government borrowing unless Biden agrees to spending cuts that would effectively neutralize his domestic agenda and neuter his White House legacy.

    McCarthy also assured traders, however, that he would never let the US government default on its obligations – a potential disaster that could halt Social Security payments, trigger a recession and unleash job cuts by the fall in the event that the debt ceiling is not raised.

    This is where the risk to Americans comes in. It’s hard to see how a rookie speaker, with a tiny majority and a conference containing plenty of extremists, can engineer either of these outcomes.

    Most countries don’t require the legislature to raise the government’s borrowing threshold. But the quirky situation in the US has made a once routine duty an opportunity for political mischief in a polarized age. Since the government spends more than it makes in revenue, it must borrow money to service its debt and pay for spending that Congress has already authorized. It has no problem getting more credit since the US pays its bills and has always had a stellar credit rating, despite one previous downgrade from the threat of default.

    At least, that’s the way it has worked until now.

    McCarthy beseeched his conference in a closed-door meeting on Tuesday to line up behind a bill that would raise the debt limit for a year but require a flurry of spending concessions from Biden. He styled the measure as an initial way of forcing the president to the negotiating table. But the bill is purely tactical since it’s got no chance of passing the Democratic-led Senate.

    But in a sign of how difficult it will be for the speaker to even pull this gambit off, there were signs of internal disagreement on what should be in the package among GOP members.

    Rep. Scott Perry, the chairman of the hardline House Freedom Caucus, was frustrated about a lack of specificity in the plan and wanted steeper cuts.

    “I don’t know what’s in the package completely. That’s the issue,” Perry told reporters. Some members seem reluctant to commit so far. Conservative Rep. Tim Burchett told CNN’s Manu Raju, “I’m open to it but I’m still a ‘no’ vote.”

    It is not unusual for various factions in a congressional majority to haggle over details before a final package is agreed. And House Financial Services Chair Patrick McHenry, a McCarthy ally, was confident the plan would pass the House. “The question is, what does the White House then do once we pass this package? We’ve clearly stated there is no clean debt ceiling that will pass the House,” he added. “So we’ll have the first opening offer here. And we’ll see if the president’s willing to come to the table and negotiate like previous presidents have.”

    McHenry’s comment, however, reflected a big flaw in the GOP strategy since it relies on McCarthy’s belief that Biden will have no choice but to come to the table. The White House has insisted the House should do its job and pass a simple bill that only raises the borrowing limit

    In effect, McCarthy has already set up a severe test of his leadership since there’s no guarantee that he can pass the measure in a House where he can only lose four votes and in which there are few signs the fractious GOP can agree on what programs to cut and by how much. And even if the measure does squeeze through the House in the coming weeks, it will likely be an idealized Republican product on which Biden and the Democratic Senate will never bite. Any subsequent package that emerged would almost certainly feature concessions that could splinter its GOP support.

    Still, the speaker was typically bullish when he predicted Monday he’d have the votes to pass his initial bill.

    “I think we got 218 to raise the debt ceiling,” McCarthy told CNN. “We’ve got a lot of consensus within the conference. We’ll get together and work through it.”

    His assurances may not be very reassuring, however, because his similarly blithe predictions that he had the votes to win the speakership in January degenerated into a farcical process that saw him make huge concessions to his party’s most radical members and required 15 ballots before he finally won the job of his dreams.

    But with the debt ceiling, it will be Americans’ livelihoods and the global economy, rather than McCarthy’s immediate political ambitions, that are on the line.

    So far, Republicans seem to be having trouble negotiating with themselves, let alone Biden. Republican Rep. Dusty Johnson of South Dakota, who is helping to fashion the GOP’s position, said that while the party hopes to pass the initial bill next week, challenges remain.

    “I think the hardest part is just that there are an unlimited number of conservative policy victories that, of course, we all want to see worked in,” Johnson told CNN’s Manu Raju. “The reality is that in a negotiation, you never get everything you want. And so I think our biggest issue right now is how do we squeeze these thousands of desires down to a manageable and credible number of asks?”

    Another complication is that some members of the Republican conference have said they will never vote to raise the debt ceiling on principle – no matter what. In a powerful Republican majority such holdouts could be ignored. In McCarthy’s narrow majority – secured after a 2022 midterm election that fell short of GOP expectations – they have real leverage. And Democrats have little incentive to help McCarthy out in the event of GOP defections since they’d presumably have to vote for huge cuts that Biden has opposed in any final GOP bill. And the speaker probably couldn’t risk using Democratic votes anyway after agreeing to a rule, as he battled to win his job, that lets any single member call a vote on his ouster.

    The coming showdown over the debt ceiling is potentially the defining moment in the two-year period of uneasy cohabitation between the Democratic president and Republican speaker. Neither Biden nor McCarthy can afford to lose, and the outcome will shape both their legacies.

    There is nothing wrong with Republicans seeking to use the leverage they won in a democratic election to try to further their political goals of cutting public spending. There are some GOP lawmakers who sincerely worry about debt and deficits – even when their party runs government. Plenty of economists worry about the always ballooning national debt, which has crashed through $31 trillion. And Biden’s big spending on Covid relief packages, infrastructure, climate mitigation measures and health care programs triggered a debate on whether he worsened the inflation crisis.

    But are Republicans choosing the right hill for this battle when jobs, market-linked pension plans and the economic well-being of millions are at risk? The absolutist nature of McCarthy’s position pays little heed to a delicate balance of power. Democrats control the White House and the Senate, so in handing Republicans the House, albeit barely, voters might have been seeking compromise rather than confrontation.

    Republicans are also facing claims of hypocrisy, since they had little problem raising the debt limit when Donald Trump, who rarely worried about making a big spending splash, was president. The 45th commander in chief is also on videotape dating to his White House days saying he couldn’t believe anyone would use the debt ceiling as a “negotiating wedge.” Republicans notoriously turn into fiscal hawks when Democrats are in office but often look the other way when there is one of their own in the Oval Office.

    In order to prevail in this fight, McCarthy has to somehow change the political dynamic by saddling Biden with the blame for any default and the economic tensions that could begin to unfold even before the country plunges over a fiscal cliff.

    He tried to do so on Monday by insisting that the biggest threat to the US economy wasn’t a default but rising national debt.

    “Without exaggeration American debt is a ticking time bomb that will detonate unless we take serious responsible action. Yet, how has President Biden reacted to this issue? He has done nothing. So in my view, and I think the rest of America, it’s irresponsible,” he said.

    Previous fiscal showdowns between GOP-controlled Congresses and Democratic presidents have often rebounded poorly on Republicans. Presidents Bill Clinton and Barack Obama, for example, branded their foes in the House as economic arsonists and thereby gained political traction.

    McCarthy needs to reverse the equation, which is why he’s trying to portray Biden as stubborn in refusing to negotiate concessions for raising the debt ceiling. The two men haven’t met for the last 75 days and the White House is sticking to its position that the place for talks is over a budget – which House Republicans are yet to produce – and not with the full faith and credit of the US government on the line and with America’s reputation as a financial haven at stake.

    McCarthy is, therefore, in a bind. Congress, not the president, has the power to raise the government’s borrowing limit. Yet the speaker is demanding Biden give away his store over a duty that only McCarthy and his lawmakers can fulfill. No one would benefit from a default – especially not a president likely heading into a reelection race. But it’s hard to see how McCarthy can emerge from this conundrum as the winner if he triggers an economic meltdown.

    The White House twisted that particular knife on Monday.

    “There is one responsible solution to the debt limit: addressing it promptly, without brinksmanship or hostage taking – as Republicans did three times in the last administration and as Presidents Trump and Reagan argued for in office,” spokesman Andrew Bates said.

    Republicans in the Senate have so far tried to avoid the mess. But Senate Republican leader Mitch McConnell did at least give his colleague in the House some moral support on Monday when he returned to the Capitol after convalescing after a fall.

    “President Biden does not get to stick his fingers in his ears and refuse to listen, talk or negotiate. And the American people know that. The White House needs to stop wasting time and start negotiating with the Speaker of the House,” McConnell said, though notably didn’t volunteer to get involved.

    McCarthy’s speech on Monday only furthered the impression that a damaging political crisis over the debt ceiling is, after months of simmering, moving toward a boil.

    As Senate Democratic Majority Leader Chuck Schumer of New York put it on Monday: “He went all the way to Wall Street and gave us no more details, no more facts, no new information, and I’ll be blunt: If Speaker McCarthy continues in this direction we are headed to default.”

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  • McCarthy makes plea for Republicans to back debt ceiling plan | CNN Politics

    McCarthy makes plea for Republicans to back debt ceiling plan | CNN Politics

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    CNN
     — 

    Speaker Kevin McCarthy made a plea to House Republicans during a closed-door meeting Tuesday morning to back his debt ceiling plan, telling them that although it doesn’t have to include everything they want, it will help get him to the negotiating table with President Joe Biden.

    McCarthy also told members that once he is at the table, he can push for other policy provisions down the road, according to multiple sources in the room, underscoring the idea that leadership sees the GOP-only plan as purely a way to strengthen their hand at the negotiating table.

    Top House Republicans are projecting confidence that they will be able to unite the conference behind a plan and move quickly to pass it. But that is far from certain. Key details of the plan are still yet to be finalized and some members are expressing frustration over the proposal as it stands – and elements that have not been included.

    House Rules Chairman Tom Cole told CNN the GOP debt limit bill will be on the House floor next week, but other House Republicans have signaled skepticism over whether specifics of the proposal can be ironed out in time for a vote to happen that soon and the timeframe may slip.

    House Republicans are insisting that any increase in the debt limit must be paired with spending cuts, while the White House argues that the limit should be raised without any conditions. McCarthy wants to move a debt limit bill through the House as a way to put pressure on the White House to come to the table for negotiation, even if the bill won’t pass the Democratic-controlled Senate.

    The closed-door meeting kicks off a difficult push by GOP leaders to wrangle 218 votes for a proposal to raise the debt ceiling and reduce federal spending. McCarthy walked members through his proposal, which includes clawing back unspent Covid-19 funds, 10-year caps on spending, prohibiting Biden’s student loan forgiveness and enacting a GOP energy bill.

    Conservatives are pushing for more to be included while some have said they won’t back a debt ceiling hike under any circumstances, illustrating how challenging it is going to be for GOP leaders to unite the conference behind a proposal.

    GOP Rep. Scott Perry, the chairman of the hardline House Freedom Caucus, expressed frustration over the lack of specificity from House GOP leaders on their debt ceiling and spending cut plan.

    “I don’t know what’s in the package completely, that’s the issue,” Perry told reporters. “I know what was on the screen, but I don’t think that’s the entire package.”

    Perry also said he disagreed with GOP leadership’s approach of trying to pass something now in order to get to the negotiating table with Democrats and then demanding more later. Perry was one of several members who stood up during the closed-door conference meeting and advocated for additional cuts.

    Rep. Kevin Hern, the leader of the Republican Study Committee, told CNN that Republicans have to come together on one debt ceiling plan or face a much weaker hand in any future negotiations with the White House.

    “It’s about leadership. If we can’t lead then we have a problem,” Hern said.

    Hern said he had no problem with voting as soon as next week, arguing it’s time for Republicans to coalesce.

    GOP Rep. Don Bacon said one of the things they are still debating is how – and how long – to raise the debt ceiling, and whether they should raise it by a dollar amount or to a date. Some members are pushing for a shorter increase, but Bacon said it will likely go into next year.

    He also confirmed some members are still pushing to include more spending cuts and repeals, and some lawmakers advocated for that during the meeting, but Bacon predicted the 18 Republicans in Biden districts, like himself, will be for it.

    Florida Rep. Matt Gaetz said that conference talks on the debt ceiling were “getting closer,” but that there are still details that need to be addressed. He said he’s not sure a vote on the budget deal can come as early as next week.

    “I think a lot of that depends on how these discussions go today, tomorrow, the following day,” he said. “I think there are a number of really critical details that we’ve still got to work out before making a final decision on a vote, but it’s been a very productive discussion, a lot of good ideas” though he said he would be “very surprised” if bill text was released today.

    A source inside the room tells CNN that inside the House GOP conference, members of the House Freedom Caucus including Reps. Perry, Chip Roy and Andrew Clyde called for more cuts to be included and pushed leadership on why some provisions weren’t included.

    It goes to show how hard this is going to be for leaders even though leadership has pitched this as an opportunity to strengthen leverage with the White House.

    One of the topics discussed during the GOP conference meeting was why a few items were not included in the debt ceiling framework.

    For example, conservatives have been frustrated a measure that would claw back Internal Revenue Service enforcement funds wasn’t included. But a source in the room tells CNN that the reason it isn’t included is because it would be scored by the Congressional Budget Office as expensive and without enforcement money, the CBO would argue less tax revenue would be collected.

    Republicans are trying to raise as much revenue as they can and cut spending in this bill.

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  • House Republicans in talks over one-year debt ceiling plan in push to challenge White House | CNN Politics

    House Republicans in talks over one-year debt ceiling plan in push to challenge White House | CNN Politics

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    Washington
    CNN
     — 

    House Republican leaders are moving behind the scenes to get their conference behind a plan that would raise the debt ceiling for one year with a slew of cuts and revenue raisers, a move intended to strengthen their negotiating position with the White House in the high-stakes standoff.

    The goal is to put a bill on the House floor as soon as May that could pass the narrowly divided chamber and send a clear signal to President Joe Biden that any legislation raising the debt ceiling must have strings attached, according to GOP sources involved in the talks.

    There is no official estimate yet for the amount of cuts and revenue raisers Republicans are seeking, but one source said the goal is to find $3 trillion to $4 trillion worth of budget savings over 10 years.

    Over the two-week recess, top House Republicans have been speaking with their rank-and-file members to find consensus on a plan that has been under development from the GOP’s so-called five families, representing the various ideological wings of the conference

    Republicans are not yet unified on the emerging plan, with one source familiar with the talks saying some of the more conservative members have pushed for more measures – such as tougher border security provisions and a repeal of green energy tax credits – and some of the more moderate members have raised concerns over proposed changes to Medicaid.

    But GOP lawmakers have called the talks productive and expect internal discussions over a Republican-led plan, which are continuing Sunday, will also intensify when lawmakers return to Washington this week after recess.

    House Speaker Kevin McCarthy plans to set the tone over the GOP demands with a speech Monday in New York. The California Republican previewed his message during a Sunday call with his conference, a source familiar with the matter told CNN.

    It is not yet clear when the country could potentially face its first-ever default if the debt ceiling isn’t raised, but it could happen as soon as this summer or as late as the fall – something that could have drastic economic ramifications. The White House and Senate Democrats have said that the debt ceiling should be approved without any conditions and have challenged Republicans to produce a plan if they won’t move on a clean increase.

    Even if House Republicans can pass their own plan, it has no chance of passing the Democratic-led Senate. But House GOP leaders believe passing their own bill would force the White House to negotiate a package of spending cuts in exchange for raising the debt ceiling.

    Among the provisions under consideration in the GOP plan are rolling back domestic discretionary spending to fiscal 2022 levels, something that would spare the Pentagon’s budget. Republicans are also looking to rescind funding for certain programs enacted to provide Covid-19 relief, and they want to impose new work requirements for Medicaid beneficiaries under the age of 60 and with no dependents.

    Republicans are also considering an overhaul to the federal regulatory process by giving Congress new power to reject rules imposed by the administration. Plus, the GOP believes it can raise new revenue through provisions that would make it quicker to greenlight major energy projects. And they are weighing a 2% cut to federal spending when Congress passes a stop-gap resolution to keep the government funded.

    One senior GOP source said the reception has been mostly positive so far.

    “I think we can get there,” the source said.

    This story has been updated with additional information.

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  • Early struggles of new House Republican majority raise anxiety over high-stakes fights to come | CNN Politics

    Early struggles of new House Republican majority raise anxiety over high-stakes fights to come | CNN Politics

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    CNN
     — 

    As House Republicans prepared to pass a parental rights bill – a signature plank of their governing agenda – GOP leaders ran into unexpected headwinds.

    House Majority Whip Tom Emmer, who is tasked with counting votes, began picking up on concerns from conservatives who thought the measure was federal overreach and moderates who worried about potential amendments related to transgender students.

    Even Rep. Ken Buck of Colorado, a member of Emmer’s whip team, informed leadership he would be voting against the bill – prompting grumbling from some senior Republicans who mused about kicking him off the whip team, according to sources familiar with the internal conversations.

    And when it came time for the floor vote, a last-minute hiccup – GOP Rep. Troy Nehls of Texas accidentally voting against the bill – prompted Emmer and other leaders to swarm Nehls on the floor and urge him to change his vote, a frantic scene as the clock ticked down and the measure’s fate hung in the balance.

    In the end, the bill wound up narrowly passing with five Republican defections – a margin that would have been enough to sink the legislation, had it not been for 10 Democratic absences.

    “Nobody ever said it was going to be easy,” Emmer told CNN in a phone interview. “You’re dealing with a whole bunch of people with a whole bunch of personalities, different points of view. (The amendment process) is an exciting process when members are able to come to the floor with an idea to impact a piece of legislation. … It’s always a challenge though.”

    Asked about Buck defying leadership on the education bill, Emmer said they are not booting him from the whip team, but he did joke about getting retribution.

    “I told him instead, we’re going to add a couple people to his whip card that will give him just a little bit more work,” Emmer said.

    The intense whipping effort and internal drama on a messaging bill that is dead-on-arrival in the Senate has become a recurring theme of the House GOP’s first 100 days in office. With little room for error in their razor-thin majority, Republicans have so far struggled to deliver on key priorities like the border and the budget amid their internal divisions – though they have notched some symbolic victories on energy and education, while actually succeeding in overturning a DC crime bill.

    Despite the handful of successes, the party’s more vulnerable members are frustrated with how the House Republican majority has so far spent its time in power, which has also included a heavy focus on investigations and running defense for former President Donald Trump.

    “I’m concerned about the kind of legislation that we’re working on, and what we’re talking about,” Rep. Nancy Mace of South Carolina, who represents a swing district, told CNN. “We just spent the last week talking about paying off porn stars, and that doesn’t get us anywhere closer to solving the inflation crisis, it doesn’t inch further to finding ways to protect women. … I’ve been very disappointed with what we’re doing right now.”

    Rep. Tony Gonzales of Texas, a moderate and outspoken critic of the GOP’s hardline border security bills, was even blunter: “I don’t have time to sit around all day long and drink scotch and bullsh*t about bills that have no chance of passing into law.”

    Senior Republicans chalked up the early struggles to natural growing pains that come with any new majority.

    “There’s always a bit of a learning curve. You have to understand, over half our members have never been in a majority,” said veteran Rep. Tom Cole of Oklahoma, a member of the GOP leadership team. “There’s a lot of learning that goes on – then add in a divided government and a narrow majority.”

    But the biggest hurdles are yet to come, with Congress gearing up to deal with must-pass items like lifting the nation’s debt ceiling and funding the government – two politically tricky issues with incredibly high stakes. And while GOP lawmakers say they are generally experiencing a honeymoon phase right now, the anxiety over the challenges ahead was palpable in interviews with over two dozen Republican members for this story.

    In a sign of how difficult things could get for GOP leaders, members of the hardline House Freedom Caucus are already talking about the cudgels they have at their disposal to use in those upcoming fights – namely, the power of any single member to force a floor vote on ousting the speaker. Restoring the procedural tool, known as the “motion to vacate,” was one of the key concessions Kevin McCarthy made in his bid to become speaker.

    “It hasn’t come up as far as in a serious conversation, as this needs to be enacted. But as we look at these issues … It does come up from time to time, as we game plan and we look at all of the alternatives and contingency plans that could play out over the next two years,” said freshman Rep. Eli Crane of Arizona, one of the McCarthy holdouts who ended up voting “present” on the last ballot.

    Lawmakers have largely attributed the House GOP’s slow start to the historic, drawn-out speaker’s battle that delayed their ability to organize committees.

    But there are other reasons: House Majority Leader Steve Scalise initially promised to put 11 bills on the floor within their first two weeks in office, but leadership was forced to pull five of them – including legislation on hot-button topics like border security, law enforcement and abortion – amid resistance within their ranks.

    House Republicans also promised to produce a 10-year budget, but have struggled behind the scenes to find consensus and are now discussing delaying – or even skipping – a budget in order to focus on a bill to combine hiking the debt ceiling with spending cuts.

    McCarthy can only afford to lose four Republican votes on any partisan bills. And he made a number of promises to secure his speakership that have complicated his ability to govern, such as vowing a more open amendment process that allows any member to alter legislation on the floor.

    While many lawmakers welcomed this addition to the legislative process, some have expressed concern that it could sink otherwise bipartisan pieces of legislation.

    “I’ve got mixed feelings,” GOP Rep. Don Bacon, who represents a Biden-won district in Nebraska, told CNN. “On the positive side, it gets more people involved. They feel like they have a voice. That’s good. I think, too, though, on the downside, it’s taking some of our bills that should be more bipartisan, but through the amendment process is made more partisan.”

    Rep. Kelly Armstrong of North Dakota acknowledged that the process is “not without its stumbles and it’s going to cause problems along the way,” but added: “I think we should celebrate it.”

    Abolishing the House’s remote voting system, though encouraging for many who wanted the chamber to return to its pre-Covid posture, has also made attendance an issue. Emmer told CNN that even a member who recently tore his Achilles’ heel is not planning on missing any time.

    Despite the challenging dynamics, Republicans have notched some real wins, including passing a resolution to block a DC crime bill that lessened penalties for certain offenses and a resolution to end the Covid-19 public health emergency.

    “We’re holding tight to our commitment to America. And I know it looks a little bit dicey and it doesn’t look real fluid. … That’s democracy. I think that’s a positive thing,” said Rep. Lisa McClain of Michigan, a new member of the GOP leadership team. “It’s not real pretty all the time, but I think it’s positive.”

    GOP Rep. Jennifer Kiggans, a freshman from Virgina who flipped her seat, said it is important to show what Congress looks like under Republican leadership even if the legislation is not going to pass the Senate.

    “We’ve been there three months. I don’t know anybody that assumes a new position and changes things overnight. So it’s a work in progress. I think we are demonstrating what Republican leadership looks like.”

    A number of House Republicans expressed concern that the toughest fights the party will face are still to come, from reaching a deal on the debt ceiling, to funding the government to continuing to deliver on key campaign promises.

    “We haven’t gotten to the heavy lifting yet,” GOP Rep. Mike Rogers of Alabama, a committee chairman, told CNN.

    Crane told CNN, “I’m definitely concerned about it” when asked about the pace of legislation coming to the floor.

    And GOP Rep. Steve Womack of Arkansas compared the first 100 days to a football scrimmage.

    “In football terms, we have been in a scrimmage. We’ve basically been trying to figure out how this small majority is going to work together with differing viewpoints,” he explained. “We’re going to join the varsity now. Competition is going to get a little tougher. The issues are going to get a little harder. And the challenge to leadership is going to get a little bit more compelling. But I think that they are equal to the task.”

    A number of members also voiced their concern that not enough progress has been made on crucial issues like the debt ceiling.

    “What worries me is the delay,” Cole told CNN about the state of debt ceiling talks.

    There’s also been some miscommunication issues. House Budget Chairman Jodey Arrington of Texas ruffled some feathers among Republicans when he told CNN that the GOP would produce a budget in May – a statement his office had to then walk back – and when he told a group of reporters that he is working on a “term sheet” of spending cuts, which McCarthy later shot down, saying: “I don’t know what he’s talking about.”

    Still, most House Republicans are pinning their frustrations on President Joe Biden, who they framed as unwilling to come to the negotiating table.

    “I wish we had made more progress on the debt ceiling at this point,” GOP Rep. Dusty Johnson, chair of the centrist-leaning Main Street Caucus, told CNN. “We are getting very close to go time. The fact that we’re where we’re at should concern a lot of us. That is because Joe Biden refuses to come to the table.”

    Kiggans told CNN, “there’s got to be less finger pointing” over the issue.

    “I really disagree with standing up on the floor and making really obnoxious speeches about the other side.”

    The White House has called for the debt ceiling to be raised without any conditions attached.

    Beyond the debt ceiling, the conference is still stalled on a number of key pieces of legislation including a narrow border security bill that has run into fierce opposition from moderates.

    The various ideological groups inside the House GOP met twice about a broader immigration and border package during the last week the House was recently in session, including one meeting involving McCarthy. The hope is to move a package through committee later this month.

    But the two most vocal voices on the issue, Gonzales and Texas GOP Rep. Chip Roy, do not appear to be budging.

    “I’m not going to give in, and you’re never going to out-border me,” said Gonzales, who opposes a hardline border security bill from Roy.

    Meanwhile, Roy told CNN: “I’m not really worried about what [Gonzales] has to say.”

    To help deal with the internal divisions, McCarthy tapped GOP Rep. Garret Graves of Louisiana to lead negotiations on the debt ceiling and to meet at least weekly with leaders of each faction of the House GOP conference, known as the “five families,” in an effort to privately air grievances and avoid tensions from spilling into public view.

    But the deputization of Graves – as opposed to someone on McCarthy’s elected leadership team, like Scalise, or Arrington, who is actually in charge of budget issues– has raised some eyebrows in GOP circles, who wonder if McCarthy is trying to create some distance from the talks or if he doesn’t feel like he can trust his other deputies.

    One GOP lawmaker said Arrington is not a close ally of the speaker, which has made things more challenging for the pair.

    “Jodey’s not a McCarthy guy,” the member said. “But Jodey is doing his best.”

    Another Republican acknowledged that there’s long been some distrust between McCarthy and Scalise, who were once seen as potential rivals.

    Arrington, in a statement, said he is focused on his mission “to stop the reckless spending that is bankrupting our country and restore fiscal sanity in Washington before it’s too late.”

    And Armstrong pointed out that having Graves in charge of overseeing some of these talks makes sense from a resource perspective.

    “Scalise and his team have to run the floor with a five-vote majority,” he said. “They are doing a great job, but it’s a lot.”

    Graves acknowledged to CNN the significance of being tapped by leadership to take on such a pivotal role.

    “Everything that I’m doing is sort of part of the speaker’s authority,” Graves told CNN. “I was not elected.”

    Graves likened the meetings, which McCarthy joins at least a third of the time, to “a therapy session.”

    “The best way I can describe it is a big family Thanksgiving dinner,” Armstrong, a regular meeting attendee, told CNN. “Everybody fights and is rowdy and will get into arguments but you know what? When you walk out of that Thanksgiving dinner, you better not make fun of my sister or brother at a bar or you’re going to have a problem.”

    “They’re contentious, but they’re respectful,” Armstrong added.

    These meetings are intended to open the lines of communication with members who normally wouldn’t engage with one another and be proactive about working out issues in order to avoid clashes on the House floor. From there, Emmer digs into the details with members who have specific sticking points. Beyond targeted meetings, Emmer said he and his team have had listening sessions with every member of the conference.

    The process of bringing various groups of House Republicans together has become a fixture in the conference’s first 100 days in the majority and a hallmark of McCarthy’s leadership style. Part of that is, by necessity, since McCarthy can only lose four Republicans on any given vote.

    But that process takes time, which is partly why the conference has not been able to put up some of its top priorities up for a floor vote yet.

    “It’s like getting a bunch of stray cats to all come together and go in the same direction. Pretty much the same thing with congressmen,” GOP Rep. Jeff Van Drew of New Jersey said.

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  • ‘It’s not zero.’ Wall Street is pricing in a small but growing risk of a disastrous US default | CNN Business

    ‘It’s not zero.’ Wall Street is pricing in a small but growing risk of a disastrous US default | CNN Business

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    New York
    CNN
     — 

    A US default would have such devastating economic and financial consequences that many observers dismiss the possibility out of hand. But investors are not ruling out such a nightmare scenario.

    Even though a default could wipe out millions of jobs and wreak havoc on Wall Street, the White House and Republican leaders in Washington are nowhere near a deal to avert disaster that could strike as soon as July.

    As politicians sleepwalk toward a potential debt ceiling crisis, financial markets have begun pricing in a small — but growing — chance of a disastrous default.

    The implied probability of a US government default has increased to approximately 2%, according to modeling by research provider MSCI shared exclusively with CNN. That calculation is based on the cost to insure US debt in the market for credit default swaps.

    Although the probability of default is tiny, it has increased roughly fivefold since January 2, MSCI said.

    Since then, chaos in Congress, underlined by the historic dysfunction leading up to the election of House Speaker Kevin McCarthy, have raised concerns about how lawmakers will reach a compromise on much thornier issues such as the debt ceiling.

    “The probability of default has gone up noticeably,” Andy Sparks, head of portfolio management research at MSCI, told CNN in an interview. “It is small, but it’s not zero. And it has gone up in a very significant way.”

    An actual default would be terrible — for both Wall Street and Main Street. Moody’s Analytics chief economist Mark Zandi has described a default as “financial Armageddon.”

    “I don’t think anyone should be complacent about this,” said Sparks. “Turmoil in the banking system shows how things can change very quickly.”

    The federal government hit the $31.4 trillion debt ceiling in January, forcing Treasury Secretary Janet Yellen to take accounting moves known as “extraordinary measures” to avoid default.

    Yellen has used unusually strong language for a former central banker to warn Congress against messing with the debt ceiling. On Thursday, Yellen said a breach of the debt ceiling could spark a “prolonged downturn and a global financial crisis.”

    “It could upend the lives of millions of Americans and those around the world,” Yellen said in a speech.

    Goldman Sachs chief economist Jan Hatzius told CNN in January that even a near-default could cause a recession as well as turmoil in financial markets. Moody’s estimates that even a brief breach of the debt limit would kill almost a million jobs.

    All of this explains why many believe Washington will get a deal done before disaster strikes, as it has in the past.

    Even though leaders in Washington are not seriously negotiating on a debt ceiling deal, there is still time.

    The Congressional Budget Office has estimated that even without addressing the debt ceiling, the government will have enough cash to avoid a default until sometime between July and September. The exact timing for the so-called X-date will depend in large part on 2022 tax collections in April.

    Tom Barkin, president of the Federal Reserve Bank of Richmond, told CNN last week that it’s “hard to imagine” the government would breach the debt ceiling.

    Still, Barkin conceded if it happened the Fed would be forced to react, much like it did after the Sept. 11 terror attacks.

    Others are more pessimistic about the debt ceiling.

    Greg Valliere, chief US policy strategist at AGF Investments, only sees a 60% chance that Congress reaches a deal to address the debt ceiling.

    “I think we’ll come right up to the precipice,” Valliere, who is based in Washington, told CNN. “Most people in this city feel it’s inconceivable we could default on our debt. I agree it’s unlikely but it’ll be much closer than people thought.”

    He pointed to the more radical makeup of the Republican caucus and the reluctance among some lawmakers to vote for a debt ceiling hike.

    Even McCarthy, the Republican House Speaker, told CNBC this week there has been “no progress” in negotiations. “Time is ticking. Now I’m very concerned about where we are,” McCarthy said.

    “I worry there are just enough House radicals who might not accept anything. And it doesn’t take many of them to make this a crisis,” Valliere said.

    Asked about MSCI’s estimate of a 2% implied probability of a default, Valliere said that number is low.

    “The markets are too sanguine,” he said. “The market has felt for months that this is like the little boy who cries wolf. But this is not a typical debt ceiling debate.”

    There are some early indicators of concern popping up in the bond market.

    Morgan Stanley wrote in a report on Thursday that “kinks” have emerged in the Treasury bill market around bonds that mature around the X-date.

    “Market attention could swing back to this issue soon” Morgan Stanley advised clients.

    Or maybe not.

    McCarthy and his top lieutenants say they are prepared to push ahead with a fallback plan: A party-line bill to raise the debt ceiling, CNN’s Manu Raju reports.

    But such a move could be risky. Republicans can only afford to lose four of their own members in any party-line vote.

    There is also a possibility that Congress punts, reaching a short-term agreement to delay the issue by a few months.

    Eurasia Group analyst Jon Lieber said in a report Thursday there is a growing chance that lawmakers put off a debt ceiling solution until the end of the year.

    “A short-term punt would merely delay and not eliminate the disruption risks of the debt limit,” Lieber said.

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  • McCarthy sends letter to Biden urging more robust negotiations on the debt ceiling | CNN Politics

    McCarthy sends letter to Biden urging more robust negotiations on the debt ceiling | CNN Politics

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    CNN
     — 

    House Speaker Kevin McCarthy urged the White House in a letter sent Tuesday to start more robust negotiations over raising the nation’s borrowing limit, the first major action in weeks on either side of the debt ceiling issue.

    McCarthy writes “with each passing day, I am incredibly concerned that you are putting an already fragile economy in jeopardy by insisting upon your extreme position of refusing to negotiate any meaningful changes to out of control government spending.”

    McCarthy also proposed a series of places to start saving money including reclaiming unspent Covid-19 relief funds and strengthening work requirements for social programs.

    However, there are limited relief funds left to draw upon. As of the end of January, some $90.5 billion in federal Covid-19 pandemic funding has not been obligated and has not expired, according to the US Government Accountability Office.

    That’s out of the roughly $4.6 trillion in pandemic relief and recovery funding that Congress approved in six packages since early 2020.

    The largest chunk of unexpired, unobligated money is in the Public Health and Social Services Emergency Fund, with smaller amounts left in the Pension Benefit Guaranty Corporation Fund, the Emergency Rental Assistance, Veterans Medical Care and Health Fund and other programs, according to the GAO.

    Republicans have also long been eager to add or enhance work requirements in public assistance programs, which will limit enrollment and reduce the amount of federal funding needed. Already, one GOP lawmaker has proposed broadening the work mandate in the food stamps program.

    McCarthy walked his members through his letter during their GOP conference meeting. He said that the White House is doing everything it can to not negotiate in an attempt to extract maximum leverage in these talks when the deadline approaches.

    McCarthy, shortly after the letter went out, criticized Biden for refusing to sit down with him.

    “I’m concerned more than I’ve ever been about getting this debt ceiling done,” the California Republican said on CNBC, due to the lack of conversations and negotiations.

    The White House, however, said it does not want to continue negotiations until Republicans are ready to offer a counter proposal to the White House’s budget request, which the Biden administration unveiled earlier this month.

    In a statement, the White House said, “It’s time for Republicans to stop playing games, agree to a pass a clean debt ceiling bill, and quit threatening to wreak havoc on our economy. And if they want to have a conversation about our nation’s economic and fiscal future, it’s time for them to put out a Budget – as the President has done with his detailed plan to grow the economy, lower costs, and reduce the deficit by nearly $3 trillion.”

    Republicans have yet to release their plan, as they continue struggle to find an agreement between the different factions in their narrowly divided majority.

    However, McCarthy told CNBC that House Republicans are prepared to lay out $4 trillion in cuts in his next meeting with Biden.

    “If the president would have a meeting I would have all the $4 trillion sitting there and provided to you … the difference, is he wants to play politics and I do not. I think we should be adults here,” he said.

    McCarthy and his team still believe that they have the upper hand on the debt ceiling in the sphere of public opinion if they continue to show a pattern of trying to get Biden to sit down and he refuses to do so. It’s why McCarthy publicly said last week he’d asked Biden when they’d talk at the Friends of Ireland lunch – they want to show they are making the effort.

    Republicans believe that if this does go to the brink, they need to show that they’ve tried repeatedly to talk.

    Rep. Richard Hudson, the head of the campaign committee for Republicans, told CNN that while the politics should be secondary on debt ceiling, he does think McCarthy repeatedly asking for negotiations only to be rebuffed helps Republicans.

    This story has been updated with additional developments.

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