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Tag: public debt

  • Here’s how the House GOP majority will try to curb federal spending and taxes | CNN Politics

    Here’s how the House GOP majority will try to curb federal spending and taxes | CNN Politics



    CNN
     — 

    In adopting their rules package Monday, the new House Republican majority has made it clear that they want to rein in federal government spending and keep a lid on taxes.

    The package, which governs how the chamber will operate for the next two years, lays out several measures aimed at making it harder to hike spending and to increase taxes to pay for it. Some of the provisions have been in effect previously when the GOP has controlled the House.

    The measures, several of which raised concerns even among cost-conscious Republican lawmakers, are sure to lead to battles later this year with the Democratic-led Senate and President Joe Biden that could have severe consequences for the nation.

    If the two parties can’t work out an agreement to fund the government for fiscal year 2024, which starts October 1, it could result in a shutdown. And if a war over spending cuts prevents Congress from raising the $31 trillion debt limit this summer or fall, it would risk a default on US debt that would roil the national and global economies.

    “I’m worried about the types of fiscal goals that they’re setting, that they’re not going to be achievable, and they’re setting themselves up for failure,” said Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget. “I’m also worried that instead of both parties negotiating in good faith, we’ll be stuck in one of these dangerous standoffs.”

    The package swaps the pay-as-you-go rule for a cut-as-you-go requirement, as existed the last time the GOP ran the House.

    The former mandates that any new spending or tax cuts have to be paid for by spending cuts or tax increases elsewhere. But the latter requires only new spending be paid for, making it easier to cut taxes, said Shai Akabas, director of economic policy at the Bipartisan Policy Center.

    Another provision would restore the requirement that tax rate increases be approved by a 60% supermajority vote, making such efforts harder to pass and limiting lawmakers’ options to reduce the deficit or raise spending.

    Plus, the package makes it harder for House members to game the system by proposing legislation that would not raise spending in the first decade, the typical time frame Congress considers, but would in subsequent years. It does so by establishing a point of order, or an objection, against consideration of such a bill.

    What may prompt even more chaos on Capitol Hill are the side deals that House Speaker Kevin McCarthy made with conservative members of his party last week to secure their support for his leadership. The details of those agreements have yet to be made public, which has annoyed more than a few GOP lawmakers.

    McCarthy signed off on a pledge that the Republican-led House would pair any debt ceiling increase to spending cuts, which would add even more complexity to what’s expected to be difficult negotiations within the GOP and between the two parties.

    What’s more, McCarthy agreed to approve a fiscal year 2024 budget capping discretionary spending at fiscal year 2022 levels. That would require cutting all domestic discretionary spending by roughly 25% in inflation-adjusted dollars if defense funding is protected, Akabas said.

    Just how wed to these measures conservative Republicans are will determine the depth of the dysfunction in Congress this year. McCarthy’s slim majority in the House means he needs the support of nearly everyone in the party to pass any legislation.

    “It has yet to be seen whether these are immovable policy positions or policy preferences that are the starting point for negotiations,” Akabas said.

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  • Analysis: The speaker fight is over but the chaos is just beginning | CNN Politics

    Analysis: The speaker fight is over but the chaos is just beginning | CNN Politics

    A version of this story appeared in CNN’s What Matters newsletter. To get it in your inbox, sign up for free here.



    CNN
     — 

    This is not the end of House Speaker Kevin McCarthy’s nightmare, rather just the beginning.

    Having won the coveted job, the California Republican has leveled up to a new series of challenges with higher stakes for all Americans, and less room for error for a man who needed 15 tries to get the gavel.

    Related: Read this profile from McCarthy’s hometown

    This week Republicans must try to coalesce around the concessions McCarthy made and pass a package of rules to govern the House for the next two years. It’s an open question whether the party’s moderates, such as they are, will all buy in to the cut, cut, cut mentality McCarthy has agreed to.

    Unlike the Senate, which has standing rules that carry over from year to year, the House adopts a new rules package for each Congress. This year, in particular, as they take over from Democratic control, Republicans want to make their mark in the rules package. The Rules Committee has posted a text and summary of the proposed rule changes.

    Some of the new elements include things that amount to framing – replacing “pay as you go” language for budget matters with “cut as you go.”

    Other elements could have more concrete consequences, like forcing specific votes to raise the debt ceiling and enacting spending cuts before the debt ceiling is raised. That debate will come to a head in the coming months as the government runs out of authority to add to the $31 trillion national debt.

    On Sunday, Republicans all said they would try to avoid cutting defense and Medicare spending, which leaves a relatively small portion of the federal budget – think the Environmental Protection Agency and other regulatory arms of the government – from which to carve out spending.

    The other way, besides spending cuts, for the government to cut down on deficit spending, is to raise taxes. The proposed rules reinstate a requirement that a House supermajority of 3/5, rather than a simple majority, sign off on any tax increases.

    If McCarthy fails to live up to these promises, the rules also allow for any member to force a vote on a “motion to vacate the chair” – ousting him from the speaker’s chair – at any time. It would only take a handful of Republicans, along with all Democrats, to oust him.

    This rules package effectively limits his ability to negotiate with the Democrats who run the rest of the federal government. McCarthy can marshal House Republicans to vote for steep spending cuts, but his greatest difficulty will be in finding legislation that can pass the House and not be immediately rejected by the Senate or vetoed by President Joe Biden.

    Just like with his quest to be speaker, McCarthy will rely only on Republicans to pass the rules package and he can only afford to lose four.

    Republican Rep. Tony Gonzales of Texas has already said he will oppose the rules package because he worries it will lead to cuts in defense spending.

    “How am I going to look at our allies in the eye and say, ‘I need you to increase your defense budget, but yet America is going to decrease ours,’” Gonzales said on CBS’ “Face the Nation” on Sunday.

    Another Republican, Rep. Nancy Mace of South Carolina, said on the same program that she likes a lot of the rules package, but she is “on the fence” about it because it was formulated behind closed doors with fringe Republicans.

    It’s an irony both that the rules package is perceived as being hashed out behind closed doors and that those who held out on supporting McCarthy argued they were achieving a path to a more open government.

    We don’t yet know all of the concessions McCarthy made to bring the ultra conservatives along. Rep. Chip Roy of Texas denied during an appearance on CNN’s “State of the Union” that he had been promised a position on the powerful Rules Committee, for instance. He said that would ultimately be up to the rest of the Republican conference.

    There was also some question about how McCarthy would enforce a pledge to cap spending for the 2024 fiscal year at 2022 spending levels.

    A main issue for Roy was that individual members should be able to offer amendments and get votes on spending bills on the House floor.

    Leaders from both parties have barred such amendments by the full House in order to pass bundled-up spending bills. They have relied on debate in the Appropriations and Authorization committees.

    Roy is among the critics who refer to Republican and Democratic leaders as the “uniparty” for this reason.

    “Too often bills are cooked up with handful of people, they’re brought through with the Rules Committee, jammed through, put on the floor and you have to vote yes or no,” Roy told CNN’s Jake Tapper on Sunday. “A little temporary conflict is necessary in this town.”

    He wants more of the openness and free form debate – the kind that Americans saw on the House floor during the speaker fight – to be present in spending discussions.

    “You say, ‘Well, are we going to have this kind of conflict going forward?’ I hope so,” Roy said.

    The idea that these debates are necessary was even being adopted by critics of the drawn-out speaker fight, like Republican Rep. Dan Crenshaw of Texas.

    “The more that you actually have everyone involved in it, the less likely it is that it gets blown up at the end,” Crenshaw told Tapper.

    But things will get increasingly difficult for McCarthy, and maybe the country, when he needs to negotiate with Senate Democrats and Biden – and also appease the fringe that does not mind a trip to the brink.

    Roy urged party leaders to work quickly and openly to find a path to raise the debt ceiling, rather than waiting until there’s a must-do-immediately moment.

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  • Chaos in Congress sends an ominous signal to Wall Street | CNN Business

    Chaos in Congress sends an ominous signal to Wall Street | CNN Business


    New York
    CNN
     — 

    Many on Wall Street cheered last fall when the midterm elections ushered in a return of divided government in Washington.

    The old mantra is that gridlock is good because it means neither political party can mess things up.

    But the historic dysfunction playing out in Congress this week is a reminder that you should be careful what you wish for. While gridlock might be good for markets and the economy, complete paralysis is bad because, every so often, government needs to get stuff done.

    House Republicans’ inability to pick a speaker on the first ballot (or second or third) for the first time in a century raises an ominous question: If lawmakers can’t pick a speaker, how can they tackle truly thorny issues like raising the debt ceiling or responding to a potential recession?

    “We’re watching a slow-moving trainwreck collide with a dumpster fire,” Isaac Boltansky, director of policy research at BTIG, told CNN in a phone interview. “This is a clear indication we will have dysfunction for the entirety of this Congress, which heightens the risk around must-act deadlines such as the debt ceiling.”

    One New York Stock Exchange trader, a self-described conservative, told CNN on Tuesday the situation in the House is “disturbing” because it suggests lawmakers will struggle to get even more important things done.

    “This is a joke. The party can’t get its [stuff] together. It’s a disgrace,” said the trader, who requested anonymity to discuss the situation candidly.

    Even if Republicans eventually coalesce around Rep. Kevin McCarthy or a consensus candidate for speaker, the past few days have made plain to investors, economists and the public just how ungovernable the GOP majority in the House appears to be.

    “This is not gridlock so much as a rudderless ship without a captain,” Chris Krueger of Cowen Washington Research Group wrote in a note titled, “Burning down the House: Speaker vote opening act for 2 years of tail risk.”

    Krueger said the 4,000-page spending bill passed by Congress last month removed “a lot of the sharp objects” that could harm the economy.

    But lawmakers did not agree to tackle the debt ceiling, the borrowing limit that must be raised to avoid a calamitous US debt default.

    It’s not hard to imagine the ungovernable GOP majority clashing with Democrats and the White House this summer and fall over the debt ceiling — with the entire world economy hanging in the balance.

    Even before the House speaker stalemate, Goldman Sachs warned late last year that 2023 could bring the scariest debt ceiling fight since that infamous 2011 episode that cost America its perfect AAA credit score.

    In the past, brinksmanship over the debt ceiling eventually gave way to a compromise, though often not until significant pressure was applied by business leaders, financial markets — or both.

    It’s not clear how a debate over the debt ceiling will play out this time though, given the narrowly divided Congress and skepticism from Republicans about corporate America.

    “Our concern is that an increasingly populist GOP is less tied to big business influence, while a narrow majority amplifies their influence,” Benjamin Salisbury, director of research at Height Capital Markets, wrote in a note to clients on Wednesday.

    Of course, the “House of Cards”-style drama playing out in Congress is not the most pressing issue facing the economy and investors right now.

    The biggest questions concern whether the US economy is about to stumble into a recession (or a “slowcession,” if you ask Moody’s) and how long the Federal Reserve will keep up its fight against inflation.

    Later this week, on Friday, investors will be laser-focused not on McCarthy’s fate but on the monthly jobs report and what it says about efforts to cool down the labor market.

    Andrew Frankel, co-president of Stuart Frankel, dismissed the House speaker race as a “big, fat nothing-burger” for the market and said it was “just noise.”

    “It’s all about the Fed,” Frankel said.

    And yet the stalemate in the House underscores how hard it will be for lawmakers to aggressively respond to a potential recession or another crisis in the next two years.

    Although there are reasons to be cautiously optimistic about a soft landing, former Fed Chair Alan Greenspan warns a recession is still the most likely outcome.

    Greenspan, senior economic adviser at Advisors Capital Management, said in a discussion posted online that inflation will not cool enough to avoid “at least a mild recession” induced by the Fed.

    “We may have a brief period of calm on the inflation front, but I think it will be too little too late,” Greenspan said.

    If there is a recession, the chaos in Washington suggests the economy may not be able to count on a timely rescue from Congress this time around.

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  • Five political trends that could make 2023 a momentous year | CNN Politics

    Five political trends that could make 2023 a momentous year | CNN Politics



    CNN
     — 

    Republicans’ take over of the House this week will usher in a two-year political era that threatens to bring governing showdowns and shutdowns as a GOP speaker and Democratic president try to wield power from opposite ends of Pennsylvania Avenue.

    The unprecedented possibility that former President Donald Trump, who’s already launched another bid for the White House, could face indictment could tear the nation further apart at a moment when American democracy remains under grave strain. The already stirring 2024 presidential campaign, meanwhile, will stir more political toxins as both parties sense the White House and control of Congress are up for grabs after the closely fought midterms.

    Abroad, the war in Ukraine brings the constant, alarming possibility of spillover into a NATO-Russia conflict and will test the willingness of American taxpayers to keep sending billions of dollars to sustain foreigners’ dreams of freedom. As he leads the West in this crisis, President Joe Biden faces ever more overt challenges from rising superpower China and alarming advances in the nuclear programs of Iran and North Korea.

    If 2022 was a tumultuous and dangerous year, 2023 could be just as fraught.

    Washington is bracing for a sharp shock. Since November, the big story has been about the red wave that didn’t arrive. But the reality of divided government will finally dawn this week. A House Republican majority, in which radical conservatives now have disproportionate influence, will take over one half of Capitol Hill. Republicans will fling investigations, obstruction and possible impeachments at the White House, designed to throttle Biden’s presidency and ruin his reelection hopes.

    Ironically, voters who disdained Trump-style circus politics and election denialism will get more of it since the smaller-than-expected GOP majority means acolytes of the ex-president, like expected House Judiciary Chairman Jim Jordan of Ohio and Rep. Marjorie Taylor Greene of Georgia, will have significant sway. The new Republican-run House represents, in effect, a return to power of Trumpism in a powerful corner of Washington. If House GOP leader Kevin McCarthy wins his desperate struggle against his party’s hardliners to secure the speakership, he’ll be at constant risk of walking the plank after making multiple concessions to extreme right-wingers.

    A weak speaker and a nihilistic pro-Trump faction in the wider GOP threaten to produce a series of spending showdowns with the White House – most dangerously over the need to raise the government’s borrowing authority by the middle of the year, which could throw the US into default if it’s not done.

    As Democrats head into the minority under a new generation of leaders, government shutdowns are more likely than bipartisanship. The GOP is vowing to investigate the business ties of the president’s son, Hunter Biden, and the crisis at the southern border. The GOP could suffer, however, if voters think they overreached – a factor Biden will use as he eyes a second term.

    In the Senate, Democrats are still celebrating the expansion of their tiny majority in the midterms. (After two years split at 50-50, the chamber is now 51-49 in their favor). Wasting no time in seeking to carve out a reputation among voters as a force for bipartisanship and effective governance, the president will travel to Kentucky this week. He’ll take part in an event also featuring Republicans, including Senate Minority Leader Mitch McConnell, to highlight the infrastructure package that passed with bipartisan support in 2021.

    Attorney General Merrick Garland could shortly face one of the most fateful decisions in modern politics: whether to indict Trump over his attempt to steal the 2020 election and over his hoarding of classified documents.

    A criminal prosecution of an ex-president and current presidential candidate by the administration that succeeded him would subject the country’s political and judicial institutions to more extreme strain than even Trump has yet managed. The ex-president has already claimed persecution over investigations he faces – and an early declaration of his 2024 campaign has given him the chance to frame them as politicized.

    If Trump were indicted, the uproar could be so corrosive that it’s fair to ask whether such an action would be truly in the national interest – assuming special counsel Jack Smith assembles a case that would have a reasonable chance of success in court.

    Yet if Trump did indeed break the law – and given the strength of the evidence of insurrection against him presented in the House January 6 committee’s criminal referrals – his case also creates an even more profound dilemma. A failure to prosecute him would set a precedent that puts ex-presidents above the law.

    “If a president can incite an insurrection and not be held accountable, then really there’s no limit to what a president can do or can’t do,” outgoing Illinois GOP Rep. Adam Kinzinger, a member of the select committee, said on CNN’s “State of the Union” Sunday.

    “If he’s not guilty of a crime, then I, frankly, fear for the future of his country because now every future president can say, ‘Hey, here’s the bar.’ And the bar is, do everything you can to stay in power.”

    Like it or not, with his November announcement, Trump has pitched America into the next presidential campaign. But unusual doubts cloud his future after seven years dominating the Republican Party. His limp campaign launch, bleating over his 2020 election loss and the poor track record of his hand-picked election-denying candidates in the midterms have dented Trump’s aura.

    Potential alternative figureheads for his populist, nationalist culture war politics, like Florida Gov. Ron DeSantis, are emerging who could test the ex-president’s bond with his adoring conservative base. Even as he fends off multiple investigations, Trump must urgently show he’s still the GOP top dog as more and more Republicans consider him a national liability.

    Biden is edging closer to giving Americans a new piece of history – a reelection campaign from a president who is over 80. His success in staving off a Republican landslide in the midterms has quelled some anxiety among Democrats about a possible reelection run. And Biden’s strongest card is that he’s already beaten Trump once. Still, he wouldn’t be able to play that card if Trump fades and another potential GOP nominee emerges. DeSantis, for example, is roughly half the current president’s age.

    As 2023 opens, a repeat White House duel between Trump and Biden – which polls show voters do not want – is the best bet. But shifting politics, the momentous events in the months to come and the vagaries of fate means there’s no guarantee this will be the case come the end of the year.

    Russia’s invasion of Ukraine last year showed how outside, global events can redefine a presidency. Biden’s leadership of the West against Moscow’s unprovoked aggression will be an impressive centerpiece of his legacy. But Russian President Vladimir Putin shows every sign of fighting on for years. Ukraine says it won’t stop until all his forces are driven out. So Biden’s capacity to stop the war from spilling over into a disastrous Russia-NATO clash will be constantly tested.

    And who knows how long US and European voters will stomach high energy prices and sending billions of taxpayer cash to arm Ukraine if Western economies dip into recession this year.

    Biden has his hands full elsewhere. An alarming airborne near miss between a Chinese jet and US military jet over the South China Sea over the holiday hints at how tensions in the region, especially over Taiwan, could trigger another superpower standoff. Biden also faces burgeoning nuclear crises with Iran and North Korea, which, along with Russia’s nuclear saber rattling, suggests the beginning of a dangerous new era of global conflict and risk.

    Rarely has an economy been so hard to judge. In 2022, 40-year-high inflation and tumbling stock markets coincided with historically low unemployment rates, which created an odd simultaneous sensation of economic anxiety and wellbeing. The key question for 2023 will be whether the Federal Reserve’s harsh interest rate medicine – designed to bring down the cost of living – can bring about a soft landing without triggering a recession that many analysts believe is on the way.

    Washington spending showdowns and potential government shutdowns could also pose new threats to growth. The economy will be outside any political leader’s capacity to control, but its state at the end of the year will play a vital role in an election that will define America, domestically and globally after 2024.

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  • This is how your government works now | CNN Politics

    This is how your government works now | CNN Politics



    CNN
     — 

    The annual dash to fund the government is starting to sound like a bad Christmas carol: 12 spending bills, $1.7 trillion, 4,000-plus pages, a single massive end-of-year vote and a lifeline for the lobster industry.

    This is the bizarre way your government works. Rather than pass spending bills in regular order or throughout the year, the leaders on Capitol Hill punt on the process until the last possible moment when it’s vote “yes” or shut down the government.

    Democrats are the ringleaders this year, but next year it will be Republicans in charge of the House and they’ll have to either make good on pledges never to do it this way again or we’ll find members of Congress and senators right back here again, aching to be home for the holidays rather than voting on things they should have done earlier in the year.

    The Senate passed the massive year-long funding bill Thursday and is waiting for the House to do the same before it can go to President Joe Biden’s desk. But, having been down this road before, senators also tried to buy a little extra time by also clearing on Thursday afternoon a bill to extend the government funding deadline by one week, to December 30. The House is expected to do the same on Friday before voting on the broader funding bill.

    House Republican leader Kevin McCarthy, however, could draw out the last-minute work with a lament on the House floor, known as a “magic minute,” which allows party leaders to speak as long as they want. The California Republican, who’s hoping to become speaker in the new year, has promised not to let government funding work this way.

    Recent memory is littered with such threats. President Donald Trump promised to veto any “omnibus” bill, endured a government shutdown and then ended up signing versions throughout the rest of his presidency.

    The Senate leaders are proud of the bill.

    “A lot of Sturm und Drang, a lot of ups and downs, but the end, a great result that really helped the American people,” said Senate Majority Leader Chuck Schumer.

    Senate Minority Leader Mitch McConnell, facing criticism from fellow Republicans about the process, argued he wouldn’t have done it this way.

    “But given the reality of where we stand today, senators have two options this week, just two,” the Kentucky Republican said on the Senate floor. “Give our armed forces the resources and certainty that they need or we will deny it to them.”

    McConnell focused on the defense spending, but there was so much more, including billions earmarked by lawmakers for projects in their home states and districts.

    The return of the earmarking progress, now called Community Project Funding, allows even those lawmakers who will vote against the omnibus to direct spending back home. Rep. Elise Stefanik of New York, for example, lists her requests for appropriations on her website. They include taxpayer money for a wastewater plant in Greenwich, a police station in Moriah, a childcare facility in Ogdensburg, among others. But she’s expected to join other House Republicans and oppose the final bill.

    The difficulty for lawmakers like Stefanik and McCarthy will come next year when they face calls among hardline Republicans to refuse raising the debt ceiling without steep federal spending cuts.

    Schumer said he will wait to negotiate with McCarthy on that topic until next year, but had this warning that the House GOP leader must listen to more moderate Republicans.

    “There is a large chunk of Republicans, perhaps a majority in the House and the Senate who are not MAGA,” Schumer, a New York Democrat, said. “And this election showed them – I’ve talked to them – that following MAGA is like Thelma and Louise, going over a cliff.”

    The omnibus was not just about spending and keeping the government’s lights on. Lawmakers also threw in some extra packages, mostly bipartisan efforts they didn’t have time to turn to during the year.

    This year those included:

    • Electoral Count Act – a bipartisan effort to avert Insurrection 2.0 and clarify that no, the vice president cannot simply reject election results
    • 401(k)s – much-needed updates to federal rules about retirement accounts
    • Tech – a ban on TikTok from federal government devices
    • Education – higher maximum Pell grant awards
    • Ukraine aid – an additional $45 billion, which will allow the Pentagon to back Ukraine for some time
    • Military and veterans – funding for a 4.6% pay raise for troops and a 22.4% increase in support for VA medical care
    • And that lifeline for the lobster industry.

    There’s a lot more. No human has read the entire thing, which GOP Sen. Rick Scott of Florida pointed out, is “three times the size of the Bible.”

    That doesn’t mean many of its parts, which were cobbled together from committees’ work throughout the year, haven’t been scrutinized.

    But for many reasons – lawmakers are frequently distracted by other matters like judicial nominations, for instance – these things get delayed until the last minute.

    But mostly, it seems like leaders have found it’s easier to ram something through when the vote is framed as must-pass and it’s the only thing standing between them and the holidays.

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  • Congress has so much to do before Christmas | CNN Politics

    Congress has so much to do before Christmas | CNN Politics

    A version of this story appears in CNN’s What Matters newsletter. To get it in your inbox, sign up for free here.



    CNN
     — 

    It is the most productive time of year on Capitol Hill – after the election and before Republicans take over the House of Representatives – when the current Congress tries to cram some of its most vital work into a few short weeks.

    The US government is up against some hard deadlines, a narrow timeline and a whole lot of unfinished business.

    Lawmakers need to avert a government shutdown, authorize Pentagon policy, decide what to do with former President Donald Trump’s tax returns and wrap up the work of the House January 6, 2021, committee.

    If they can find the time, lawmakers could also raise the debt ceiling and safeguard future elections.

    Here’s what to watch for in the twilight of 2022:

    First, the government runs out of authority to spend money on Friday, December 16. The House and Senate will have to act before then to avert a government shutdown.

    Second, the newly elected Congress will be sworn in on January 3. Republicans will then be in charge of the House, and Democrats will have a narrow 51-49 majority in the Senate. Everything resets in the new Congress, and lawmakers will have to start from scratch on anything they don’t finish up this month.

    Rather than pass a dozen funding bills in turn, lawmakers are poised to roll all the spending bills for the massive federal government into one bill that could approach or exceed $1.5 trillion.

    The problem is that they’re still negotiating, and Republicans and Democrats in the Senate have not reached an agreement on how much the government can spend, much less the specifics. They’re still $26 billion apart, according to Republican Sen. Richard Shelby of Alabama. The most likely current scenario is the House and Senate each pass short-term, one-week funding bills to keep the lights on while they continue to hash out the larger funding bill.

    While officials have emphasized a government shutdown is unlikely, federal agencies have been warned to prepare for one per standard procedure.

    One major looming question is whether Senate Republicans and Democrats can agree on a bill to fund the government for a full year or whether they have to punt to the next Congress. Democrats will want to avoid that fate since the GOP-controlled House will likely insist on spending cuts as soon as it can. Read more in CNN’s full report that includes reporting from Capitol Hill and the White House.

    It’s not yet clear who will lead Republicans in the House next year, much less how they would react to an immediate funding fight if only a short-term spending bill can get through by January.

    The current GOP leader, Kevin McCarthy, does not yet have the votes of many of the most conservative Freedom Caucus Republicans, and he’s being encouraged to take more concrete stands against spending. Finding a funding agreement that can pass through the House and the Senate and get President Joe Biden’s signature gets much more difficult starting January 3.

    In addition to writing checks, Congress authorizes government activity through policy bills, including the must-pass National Defense Authorization Act, which authorizes $858 billion in annual defense spending.

    It’s a sprawling endeavor, and this year’s version passed by the House gives members of the military a 4.6% pay raise, gives new support to Ukraine and NATO, and retools US air power and land defense efforts. It also rescinds a Covid-19 vaccine requirement for service members, a move that Biden has opposed.

    Senators are expected to take up the bill this week. It should get bipartisan support, but will also eat up valuable time on the Senate floor, where Democrats also want to push through judicial nominees. Read more about the defense bill.

    One thing Democrats would like to do – but probably, at this point, cannot – is raise the debt ceiling.

    Republicans, particularly in the House, plan to use the nation’s borrowing limit as a bargaining chip to force spending cuts next year. The current debt ceiling of $31.4 trillion will likely be reached in the coming weeks, which means raising it will be a major fight early in 2023.

    How much more does the government spend than it takes in? This is from a CNN Business report Monday: “For fiscal year 2023, which started in October, the government is running a deficit of $336 billion, which is $20 billion narrower than the comparable year-ago period.”

    Republicans will shut down the House select committee investigating the January 6, 2021, insurrection when they take control in January. GOP lawmakers plan to flip the script and investigate the committee’s activity.

    But first, the committee, which features Democrats and two anti-Trump Republicans, will issue its much-anticipated report on December 21. Also look for the committee to recommend the Department of Justice prosecute Trump or members of his inner circle.

    Meanwhile, Jack Smith, the newly appointed special counsel, has been busy ramping up a pair of criminal probes involving the former president, all of which could explode into public view if charges are ultimately brought. Read the latest on Smith’s work.

    Now that the House Ways and Means Committee has six years of Trump’s tax returns, it must figure out what to do with them in just a few weeks.

    There’s probably no time for a thorough review, and Republicans will have little appetite for a Trump tax investigation when they take control of the House.

    Democrats could move to make some of Trump’s tax information public – on top of what was already published by The New York Times in 2020. But there could be a political cost to simply releasing the returns since Democrats obtained them in order to scrutinize IRS audit policy. Read more about Trump’s taxes.

    It’s a bipartisan idea to make some major clarifications to election law and cut down on the possibility of another January 6, 2021. Read here about what’s in the bill, which is specifically designed to guard against Insurrection 2.0.

    But there may be no time to pass the proposal – there are similar but competing versions in the House and Senate. The Senate version, in particular, has bipartisan support. Republicans in the House may not be interested in the legislation once they take control in January.

    If the Electoral Count Act can pass, it could be slipped into that massive spending bill. It hasn’t gotten the attention it deserves, but this could be a good example of lawmakers working together.

    But that’s a very open question, since that massive spending bill has not yet been put together.

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  • It’s time to review government shutdown plans, federal agencies are formally warned | CNN Politics

    It’s time to review government shutdown plans, federal agencies are formally warned | CNN Politics



    CNN
     — 

    While congressional leaders continue to negotiate a spending deal, the federal government has begun the process of preparing for a potential shutdown, participating in the mandatory but standard process of releasing shutdown guidance to agencies ahead of this Friday’s funding deadline.

    Lawmakers on both sides currently acknowledge they are going to need to pass a week-long stopgap measure to give themselves more time for talks, and officials have emphasized that there is no real likelihood of a government shutdown, but the standard procedure laying out the steps toward bringing non-essential government functions to a halt is underway.

    “One week prior to the expiration of appropriations bills, regardless of whether the enactment of appropriations appears imminent, OMB will communicate with agency senior officials to remind agencies of their responsibilities to review and update orderly shutdown plans, and will share a draft communication template to notify employees of the status of appropriations,” a budget circular document from the Office of Management and Budget states.

    That standard guidance was circulated last Friday, marking seven days before a shutdown could occur absent congressional action.

    Every department and agency has its own set of plans and procedures. Those plans include information on how many employees would get furloughed, which employees are essential and would work without pay (for example, air traffic controllers, Secret Service agents, US Centers for Disease Control and Prevention laboratory staff), how long it would take to wind down operations in the hours before a shutdown, and which activities would come to a halt.

    It’s not the first time the government has been on the brink of a shutdown, and it has happened on multiple occasions. Recently, the government shut down for 35 days, a record length, from December 2018 to January 2019 amid a congressional stalemate over funding for then-President Donald Trump’s border wall. The government also shut down for three days over deadlock during the Trump administration in January 2018. And in 2013, then-President Barack Obama presided over a 16-day partial government shutdown caused by a dispute over the Affordable Care Act and other budget disagreements.

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  • Congress faces looming government shutdown deadline at end of the week | CNN Politics

    Congress faces looming government shutdown deadline at end of the week | CNN Politics



    CNN
     — 

    Lawmakers face a Friday at midnight deadline when government funding is set to expire – and the House and Senate will likely have to pass a short-term extension to avert a shutdown at the end of the week, which would give negotiators more time to try to secure a broader full-year funding deal.

    The other major legislative item lawmakers are working to wrap up before the end of the year is the National Defense Authorization Act, the massive annual must-pass defense policy bill. The NDAA is expected to get a vote in the Senate this week and be approved with bipartisan support.

    The House has already approved the measure so once the Senate votes to pass it, the bill can go to President Joe Biden to be signed into law.

    The approaching deadline had members of Congress and their staffers from both parties, as well as Biden administration officials, continuing to slog through negotiations over the weekend to try to get to an agreement on a spending package.

    “This is the time of the year when there’s no weekends for folks who work on appropriations,” one administration official closely involved in the talks told CNN.

    Over the weekend, both Democrats and Republicans were sharing with one another their “bottom lines” on various fronts, and the White House remained publicly optimistic that an agreement could be reached on an omnibus: “There is absolutely still a path and time for a deal.”

    But if Biden administration officials are still keeping their eyes on the ball on Congress ultimately reaching a deal on a government spending deal, there is also real recognition that lawmakers will need an extra few days – perhaps even a week – of cushion to buy themselves more time. That would be achieved through passing a short-term stop-gap measure called a continuing resolution, or a CR.

    Particularly with that in mind, administration officials also continue to maintain that they do not see any real likelihood of a government shutdown.

    Congressional aides acknowledged to CNN that the weekend talks went better than days prior, which is why Democrats have announced they will not introduce their own Democratic-only omnibus plan on Monday. Republicans on Capitol Hill had been reading a threat for Democrats to introduce their own bills as a messaging exercise that would only further divide negotiators, and by avoiding that messaging exercise, Republicans see a sign that Democrats are serious about trying to get to yes.

    For now, a bipartisan deal on government funding remains elusive. Lawmakers have not yet been able to reach a negotiated agreement for a comprehensive, full-year funding package – known on Capitol Hill as an omnibus – amid a dispute between the two parties over how much money should be spent on non-defense, domestic priorities. Sen. Richard Shelby of Alabama, the ranking Republican member on the Senate Appropriations Committee, has told reporters the two sides are roughly $26 billion apart.

    Republicans are critical of recent domestic spending by Democrats and argue that measures Democrats have passed while they have been in control both chambers of Congress, like the $1.9 trillion pandemic relief bill and the sweeping health care and climate bill, are wasteful and will worsen inflation. Democrats counter by saying those measures were necessary to help the country recover from the devastating impact of the pandemic as well as to tackle other critical priorities. And Democrats said that money to respond to Covid, health care and climate should not mean there should be less money next year for government operations and non-defense, domestic spending.

    The impasse over a broader funding deal is likely to force both sides to agree to pass a short-term funding extension – known as a continuing resolution, or CR – before the fast-approaching Friday deadline on Friday.

    The key question will be how long such an extension would last. It could be as short as one week, a timeframe that would keep the pressure dialed up for lawmakers to reach a broader deal, while still allowing more time for negotiations. Or it could extend the shutdown deadline into the next Congress, which will convene on January 3, and when Republicans take control of the House.

    That change in majority in the House would dramatically alter the dynamic for negotiations and likely make it far harder to reach a broader funding deal. Lawmakers could pass a full-year CR if it looks like a bipartisan funding deal can’t be reached, but leaders in both parties hope to avoid that scenario since it would keep spending flat for the Pentagon as well as domestic priorities.

    Senate GOP leader Mitch McConnell laid out the GOP position in remarks on the Senate floor Thursday. “Our commander-in-chief and his party have spent huge sums on domestic priorities outside the normal appropriations process without a penny for the Defense Department. Obviously, we won’t allow them to now hijack the government funding process, too, and take our troops hostage for even more liberal spending,” McConnell said.

    Senate Appropriations Committee Chairman Patrick Leahy, a Vermont Democrat, outlined the argument for his party in his own floor remarks on Thursday. Republicans, Leahy said, are “demanding steep cuts to programs the American people rely on.”

    Referring to Democratic-passed legislation that Republicans have criticized, Leahy said, “Those bills were meant to get us out of the pandemic, get the nation healthy, and get our economy back on track, and I believe they are accomplishing that goal. They were not meant to fund the basic functions of the American government in fiscal year 2023.”

    While lawmakers continue to negotiate, the federal government has begun the process of preparing for a potential shutdown, participating in the mandatory but standard process of releasing shutdown guidance to agencies ahead of Friday’s funding deadline.

    Officials have emphasized that there is no real likelihood of a government shutdown, but the standard procedure laying out the steps toward bringing non-essential government functions to a halt is underway.

    “One week prior to the expiration of appropriations bills, regardless of whether the enactment of appropriations appears imminent, OMB will communicate with agency senior officials to remind agencies of their responsibilities to review and update orderly shutdown plans, and will share a draft communication template to notify employees of the status of appropriations,” a document from the Office of Management and Budget stated.

    That standard guidance was circulated last Friday, marking seven days before a shutdown could occur absent Congressional action.

    Every department and agency has its own set of plans and procedures. Those plans include information on how many employees would get furloughed, what employees are essential and would work without pay (for example, air traffic controllers, Secret Service agents, US Centers for Disease Control and Prevention laboratory staff), how long it would take to wind down operations in the hours before a shutdown, and what activities would come to a halt.

    This story has been updated with additional developments.

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  • Congress faces time crunch on government funding and sweeping defense policy bill | CNN Politics

    Congress faces time crunch on government funding and sweeping defense policy bill | CNN Politics



    CNN
     — 

    Lawmakers on Capitol Hill are scrambling to try to fund the government and pass a sweeping defense policy bill before a new Congress is sworn in, but there are signs that both sides have struggled to reach agreement over these key outstanding issues.

    Government funding expires at the end of next week on December 16 – and it appears all but certain that lawmakers will have to pass a short-term extension as they try to reach a broader full-year funding agreement.

    Separately, the House has been expected to take up the National Defense Authorization bill for fiscal year 2023 this week, but it’s not yet clear when a vote will take place amid questions over whether certain controversial policy provisions will be included in the legislation – like eliminating a Covid-19 vaccine mandate for the military. Once the House has passed the bill, it would next have be taken up by the Senate.

    Senate GOP leader Mitch McConnell warned on Tuesday that rather than passing a full-year funding bill, lawmakers may have to pass a short-term stop-gap measure to kick the can into early next year. This would set up a huge funding fight and create fears of a government shutdown early in the new Congress, when Republicans will take control of the House and would have to cut a deal with Democrats who run the Senate.

    On government funding legislation, McConnell said: “We don’t have agreement to do virtually anything, which can only leave us with the option of a short-term CR into early next year,” referring to a short-term bill known as a continuing resolution.

    He added: “We don’t even have an overall agreement on how much we’re going to spend, and we’re running out of time.”

    Despite the threat of a stop-gap, Senate Majority Leader Chuck Schumer reiterated on Tuesday that senators are “working very hard” to reach a deal to fully fund the government before the upcoming deadline, but acknowledged that “there’s a lot of negotiating left to do.”

    Senate Republican Whip John Thune signaled Tuesday that he doesn’t have a “high level of confidence” both parties will be able to reach a deal on an omnibus government funding bill, as time is running short to pass that massive bill.

    “I don’t have a high level of confidence because I’m looking at the calendar,” the South Dakota Republican said. “It’ll be a very heavy lift, but who knows? I guess I would say is, you know, bring your Yuletide carols and all that stuff here because we may be singing to each other.”

    McConnell complained Tuesday that Democrats were preventing quick passage of the National Defense Authorization Act by trying to add unrelated items at the last minute that Republicans oppose.

    “Senate Democrats are still obstructing efforts to close out the NDAA by trying to jam in unrelated items with no relationship whatsoever to defense. We’re talking about a grab bag of miscellaneous pet priorities,” McConnell said in remarks on the Senate floor.

    “My colleagues across the aisle need to cut their unrelated hostage taking and put a bipartisan NDAA on the floor,” he added.

    Lawmakers released text of an agreement for the NDAA Tuesday night.

    The summary, released by the Senate Armed Services Committee, said it “requires the Secretary of Defense to rescind the mandate that members of the Armed Forces be vaccinated against COVID-19.”

    CNN reported earlier this week that the mandate was likely to be rescinded as part of the defense policy bill.

    In a tweeted statement Tuesday night, House GOP leader Kevin McCarthy said that “the end of President Biden’s military COVID vaccine mandate is a victory for our military and for common sense.”

    House Majority Leader Steny Hoyer, a Maryland Democrat, said earlier Tuesday that the House was considering eliminating the Covid-19 vaccine mandate for military members in order to gather enough Republican votes to pass the annual defense authorization. Republicans have said they will not support the NDAA with the vaccine mandate in place.

    Hoyer said at his weekly pen and pad with reporters that Democrats were not “willing” to give up the mandate, but that a compromise is required to get the NDAA across the finish line.

    “We’re not willing to give it up. This is not a question of will; it’s a question of how can we get something done? We have a very close vote in the Senate, very close vote in the House. And you just don’t get everything you want,” he said.

    Thune said of the defense policy bill, “I think the ransom the Democrats wanted for stripping the vaccine mandate is a whole bunch of things to include the permitting reform, but also some other things that are just going to be non-starters on our side, and I don’t think we’re going to get in the business of, you know, allowing them to hold us hostage.”

    This story has been updated with additional developments.

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  • US trade deficit edged up to $78.2 billion in October | CNN Business

    US trade deficit edged up to $78.2 billion in October | CNN Business


    New York
    CNN Business
     — 

    The US trade gap edged only slightly higher in October than the month before, to $78.2 billion.

    The latest reading was up just 5.4%, less than half the pace of increase from the revised September reading, when the trade deficit jumped by 12.7% to $74.1 billion.

    A strong dollar and weaker global demand weighed on exports both months. A strong dollar makes US goods more expensive to foreign buyers and it also makes imports more affordable for US buyers. But economic slowdowns in overseas markets also hit US exports in the most recent readings.

    The latest report shows exports fell 0.7% in October compared to the month before, and are down nearly 2% from the record exports set in August. Most of the drop was in the export of goods, rather than services, which fell 4.4% compared to August.

    Oil prices have come down since earlier this year, according to data released in the report. The average price of crude oil imports in the month was $82.05 a barrel, down 5.7% from September, and down 21.7% from the peak in June.

    But the United States now exports more petroleum products, by dollars, than it imports. So a lower price of crude no longer helps the trade deficit the way it might have done in the past, when crude and petroleum product imports vastly exceeded exports.

    The deficit in the movement of goods between the United States and China narrowed significantly in the latest report, falling 22.6% to $28.9 billion from $37.3 billion, one factor in the smaller trade gap increase.

    Although most of that narrowing was due to a 31.3% jump in the export of US goods to China, compared to September, a 9.5% decline in US imports of Chinese goods was also a factor in the smaller trade deficit between the two countries.

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  • These are the end-of-year political showdowns that will help decide America’s future | CNN Politics

    These are the end-of-year political showdowns that will help decide America’s future | CNN Politics



    CNN
     — 

    America is heading for a year-end political collision that will set the stage for showdowns between the new Republican-led House and the Democrats who still wield power in the Senate and White House.

    A fraught coda to the political battles of 2022 will decide who holds the government purse strings and how far the US will go in funding Ukraine’s war with Russia. It will showcase extremism in the incoming GOP-run House and the size of the Democratic Senate majority. And the 2024 presidential campaign is grinding into gear with ex-President Donald Trump stirring controversy on multiple fronts and President Joe Biden pondering a reelection bid.

    In Congress, a lame-duck session will see standoffs that could risk a government shutdown and over the must-lift US government borrowing limit, with grave implications for the economy.

    Meanwhile, House Republican leader Kevin McCarthy is scrambling to solidify support in his bid to become speaker in January, with a smaller-than-expected incoming majority giving his extreme pro-Trump colleagues extra power.

    And the House January 6 committee is poised to soon unveil its final report on Trump’s negligence and incitement leading up to the US Capitol insurrection. The findings, amid signs of acrimony inside the panel, could further color sentiment towards the ex-president as he seeks to build momentum after an underwhelming 2024 campaign launch – and as powerful donors, as well as prominent Republicans considering their own White House ambitions, are openly castigating Trump for hosting and then failing to disavow White nationalist and Holocaust denier Nick Fuentes. The special counsel probe into his hoarding of classified documents and 2020 election chicanery is also gathering pace.

    Trump is also one of the factors playing into the Georgia Senate runoff election on December 6 that could give Democrats slender breathing room in the chamber or extend the 50-50 split broken only by Vice President Kamala Harris’ tie-breaking vote that made Biden’s agenda so precarious for the last two years.

    These next few weeks will show the country has failed to fully process the trauma of the Trump presidency or to arrive at the sense of normality that Biden promised during the 2020 campaign – even as the two rivals maneuver ahead of a possible rematch in 2024. They will also stress the near impossibility of governing at a time when America is deeply split between two political poles since big questions are likely to get pushed down the road.

    Big issues not solved this December will be pitched into an even more volatile atmosphere by an aggressive GOP-controlled House primed to slam the White House with partisan investigations.

    There’s also the renewed threat of a freight rail strike that could again clog supply lines and fresh Democratic calls for more action on gun control after a tragic new spate of mass shootings. The Democrats have a massive agenda before relinquishing the House but have little political room or time to accomplish it.

    Still, Congress is expected to mark one milestone in the coming weeks. The Senate is expected to vote to codify rights to same-sex and interracial marriage after a procedural vote on the measure earlier in November demonstrated strong bipartisan support.

    Here is what to look out for in the coming weeks.

    Congress must pass a bill to fund the government by December 16 or risk a partial government shutdown. The administration has asked for $37.7 billion in aid for Ukraine, $10 billion for extended efforts to combat Covid-19 and an unspecified amount for disaster relief after hurricanes hit Florida and Puerto Rico.

    Democrats will remain in control of the House until the new Congress in 2023, but a major spending package will also still likely require agreement from 10 Republicans to beat a Senate filibuster. GOP senators are especially skeptical about the administration’s warnings that the US will suffer a relapse in its exit from the pandemic without billions more dollars in funding. And even getting a Democratic majority in the chamber to sign on could be a challenge since West Virginia Sen. Joe Manchin could make another stand against another spurt of government spending, especially since he would face a tough race if he decides to run for reelection in 2024.

    There is likely sufficient support for new aid to Ukraine in the Senate, but funding President Volodymyr Zelensky’s war for democracy against Russia is set to become far less routine next year as pro-Trump House members, like Georgia Rep. Marjorie Taylor Greene, are vowing to halt aid needed for vital weapons and ammunition. They want the cash sent to reinforce the southern US border instead.

    The most serious showdown of the new Congress could come over raising the government’s borrowing limit that is due to be reached sometime next year. Failure to do so could trash faith in America’s willingness to pay its bills and send shockwaves through the US and global economy.

    McCarthy has already warned he will require spending concessions on key programs in return for allowing the government to borrow more money – a scenario that triggered several damaging fiscal showdowns during the Obama administration.

    To avoid a repeat, Democrats could use the waning days of their control of both chambers to raise the debt ceiling themselves, using a budgetary process known as reconciliation that could bypass a Senate filibuster. But the process is hugely complex, in terms of congressional choreography and time.

    Democratic Senate Majority Leader Chuck Schumer said before Thanksgiving that the “best way to get it done, the way it’s been done the last two or three times is bipartisan.” But Senate Republican leader Mitch McConnell didn’t express much interest in Schumer’s invitation sit down to sort out the issue, saying “I don’t think the debt limit issue is until sometime next year.”

    The House Republican leader has a big problem – finding the votes in the new GOP majority to fulfill his dream of becoming speaker.

    McCarthy staked out a series of hardline positions heading into the holiday in an apparent effort to appease pro-Trump lawmakers after several declared they won’t vote for him. The California lawmaker can afford to lose only a few GOP votes if he wants to be speaker.

    During a trip to the border last week, he warned Homeland Security Secretary Alejandro Mayorkas to resign or face possible impeachment next year. And he said he’ll follow through on a threat to throw high-profile Democrats, such as Reps. Adam Schiff, Eric Swalwell and Ilhan Omar, off of top committees next year.

    Speaking on CNN’s “State of the Union” on Sunday, Schiff accused McCarthy of adopting extremist positions for his own naked political gain.

    “Kevin McCarthy has no ideology, has no core set of beliefs,” Schiff told CNN’s Dana Bash, saying the top House Republican will do “whatever he needs to do to get the votes of the QAnon caucus within his conference.”

    McCarthy’s struggle to confirm his speakership lies partly in the smaller-than-expected GOP majority following the lack of an expected “red wave” in this month’s election. And it could be a preview of a volatile majority and the extent to which his tenure, if he does win the speakership, will be hostage to the whims of the far-right Freedom Caucus and pro-Trump lawyers who want to use their majority as a weapon against Biden. But McCarthy also has to worry that two years of relentless, partisan investigations could turn off voters and lead them to snatch away the party’s fragile edge in the House in the 2024 election.

    But before the 2024 election gets into full swing, there’s unfinished business from 2022. Democratic Sen. Raphael Warnock and Republican challenger Herschel Walker go head-to-head in a runoff on December 6 after neither broke the 50 percent threshold the first time around.

    Former President Barack Obama, who was the most effective Democratic messenger in the midterms, is due to campaign for Warnock on Thursday. Walker’s chances could depend on whether he is able to win over a significant block of Republican voters who couldn’t bring themselves to vote for him despite backing Republican Gov. Brian Kemp. Walker’s problem is that he’s a protégé of Trump, from whom Kemp kept a good distance.

    After Trump announced his 2024 campaign days after the midterms, Warnock and his supporters started framing the runoff as the first chance for Democrats to stop Trump’s bid to return to the White House. Their argument recalled complaints by many Republicans that Trump’s intervention in two 2020 Senate runoffs in Georgia cost the GOP the chance to control the Senate.

    This might all be about one seat. But holding the Senate 51-49 rather than 50-50 would be huge for Democrats because it would insulate them from the incapacitation of one of their members and could diminish the power of Manchin, who has been a stubborn brake on Biden’s aspirations for two years.

    The former president finds himself under unusual political pressure inside the Republican Party he has dominated since 2015. His backing of several losing, election-denying and unpolished candidates in the midterms angered many key figures in the party. His hosting of Fuentes at the same time as rapper Kanye West at his Mar-a-Lago estate worried Republicans who fear that while he may be a formidable candidate for the GOP presidential nomination, Trump’s empathy for the far-right will again doom him before a national electorate.

    Another potential Republican presidential candidate, outgoing Arkansas Gov. Asa Hutchinson, condemned the incident as “very troubling” on CNN’s “State of the Union.”

    “I don’t think it’s a good idea for a leader that’s setting an example for the country or the party to meet with (an) avowed racist or anti-Semite,” Hutchinson said. “You want to diminish their strength, not empower them. Stay away from it.”

    Trump acknowledged the meeting in a Truth Social post, but claimed he knew nothing about Fuentes. He also did not disavow him or his views.

    This latest storm comes as the new special counsel Jack Smith, blasted by Trump as a “political hitman,” gets up to speed on the serious legal challenges facing the ex-president, who’s suffered several recent defeats in court in his bid to delay accountability. Trump’s early declaration of a campaign – apparently to quell the buzz around possible alternative Republican candidates like Florida Gov. Ron DeSantis – leaves the former president needing a way to create some traction in December and in the early months of the year when he might find it hardest to win political exposure.

    The opening stages of the campaign will begin to answer the central question of Trump’s 2024 run – whether his so far rock solid appeal to the GOP base will counter concerns in the wider party about his broader viability.

    Trump’s decision to jump in the race has also increased scrutiny of whether Biden, who turned 80 earlier this month, will decide to run for reelection. The president was asked by CNN’s Betsy Klein during his holiday vacation in Nantucket how his conversations about 2024 were going with his family.

    “We’re not having any. We’re celebrating,” Biden replied.

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  • What midterm elections could mean for the US economy | CNN Business

    What midterm elections could mean for the US economy | CNN Business

    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 Business
     — 

    Tuesday’s midterm elections come at a time of economic vulnerability for the United States. Recession predictions have largely turned to “when” not “if” and inflation remains stubbornly elevated. Americans are feeling the pain of rising interest rates and are facing a winter filled with geopolitical tension.

    The results of Tuesday’s election will determine the makeup of a Congressional body that holds the potential to enact policies that will fundamentally change the fiscal landscape.

    Here’s a look at what policy issues investors will pay particular attention to as they digest election results.

    Tax changes: Last week, President Joe Biden suggested he may impose a windfall tax on Big Oil companies after they recorded record profits on high gas prices. Republicans would be less likely to approve that windfall tax on oil company profits and also are generally not in favor of tax hikes on the wealthy, reports my colleague Paul R. La Monica.

    “What do midterms mean for the markets? If Republicans get the House, tax hikes are dead in the water,” said David Wagner, a portfolio manager with Aptus Capital Advisors.

    What about tax cuts? If Republicans do take control of Congress, it would be difficult to enact any major tax reductions without some backing from Democrats or President Biden, meaning there could be grandstanding without much action.

    Debt limit: The federal debt ceiling was last lifted in December 2021 and will likely be hit by the Treasury at some point next year. That means it will need to be raised again in order to ensure that America can borrow the money it needs to run its government and ensure the smooth operation of the market for US Treasuries, totaling roughly $24 trillion.

    A fight seems to be brewing between Democrats and Republicans. House Republicans indicate that they may ask for steep spending cuts in exchange for boosting the ceiling.

    If the government ends up divided and brinkmanship continues, there could be bad news for markets. The last time such gridlock occurred, under the Obama administration in 2011, the United States lost its perfect AAA credit rating from Standard & Poor and stocks dropped more than 5%.

    Spending: Democrats have indicated that they intend to focus on parts of the fiscal agenda proposed by President Biden in 2021 that have not yet become law, including expanding health coverage and child care tax credits. A Republican win or gridlock could table that. Goldman Sachs economists also note that a Democratic victory could likely increase the federal fiscal response in the event of recession, while Republicans would be more likely to avoid costly relief packages.

    Social Security: Popular programs like Social Security and Medicare face solvency issues long-term and the topic has become a hot-button issue on both sides of the aisle. The topic is so closely watched that even debating changes could impact consumer confidence, say analysts.

    Democratic Senator Joe Manchin said last week that spending changes must be made to shore up Social Security and other programs which he said were “going bankrupt.” He said at a Fortune CEO conference that he was in favor of bipartisan legislation within the next two years to confront entitlement programs that are facing “tremendous problems.” Republican Senator Rick Scott has proposed subjecting almost all federal spending programs to a renewal vote every five years. Analysts say that could make Social Security and Medicare more vulnerable to cuts.

    The Federal Reserve: Lawmakers have been increasingly speaking out against the pace of the Federal Reserve’s interest rate hikes meant to fight inflation. Democratic Senators Elizabeth Warren, alongside Banking Chair Sherrod Brown, John Hickenlooper and others have called on Fed Chair Jerome Powell to slow the pace of hikes.

    Now, Republicans are getting involved. Senator Pat Toomey, the top Republican on the Banking Committee, asked Powell last week to resist buying government debt if market conditions remain subdued. Expect more scrutiny from both parties after the elections.

    The stock market under President Biden started with a boom, but as we head into midterm elections, markets are going bust, reports my colleague Matt Egan.

    As of Monday, the S&P 500 has fallen by 1.2% since Biden took office in January 2021. That marks the second-worst performance during a president’s first 656 calendar days in office since former President Jimmy Carter, according to CFRA Research.

    Out of the 13 presidents since 1953, Biden ranks ninth in terms of stock market performance through this point in office, besting only former Presidents George W. Bush (-32.8%), Carter (-8.9%), Richard Nixon (-17.2%) and John F. Kennedy (-2.1%), according to CFRA.

    By contrast, Biden’s two immediate predecessors headed into their first midterm election with stock markets surging. The S&P 500 climbed 52.2% during the first 656 calendar days in office for former President Barack Obama and 23.9% under former President Donald Trump, according to CFRA.

    American consumers borrowed another $25 billion in September, according to newly released Federal Reserve data, as higher costs led to further dependence on credit cards and other loans, reports my colleague Alicia Wallace.

    In normal economic times, that would be a concerningly large jump, said Matthew Schulz, chief credit analyst for LendingTree, wrote in a tweet. “However, it is actually the second-smallest increase in the past year.” Economists were anticipating monthly growth of $30 billion, according to Refinitiv consensus estimates.

    The data is not adjusted for inflation, which is at decade highs and weighing heavily on Americans, outpacing wage gains and forcing consumers to rely more heavily on credit cards and their savings.

    In the second quarter of this year, credit card balances saw their largest year-over-year increases in more than two decades, according to separate data from the New York Federal Reserve. The third-quarter household debt and credit report is set to be released Nov. 15.

    Correction: A previous version of this article incorrectly stated the number of calendar days in the analysis as well as the stock market performance under various US presidents during that period.

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  • Rep. Nancy Mace says she supports Kevin McCarthy’s debt ceiling strategy to force spending cuts | CNN Politics

    Rep. Nancy Mace says she supports Kevin McCarthy’s debt ceiling strategy to force spending cuts | CNN Politics



    CNN
     — 

    Rep. Nancy Mace on Sunday said she supports Republican Leader Kevin McCarthy’s strategy of refusing to lift the debt limit, if Republicans win back the House, unless Democrats in the White House agree to spending cuts.

    “And I can tell you, I sit on the Oversight Committee, where we look at waste, fraud, and abuse in the federal agency level, and there is waste in every single agency,” Mace said to CNN’s Jake Tapper on “State of the Union.”

    The Republican from South Carolina said that when Covid-19 began, businesses had to make tough decisions about how they would keep their doors open, and the federal government continued to get record revenue without making those tough decisions.

    “We can find ways to be more responsible with our spending, just like we forced companies and businesses to during Covid. So, that’s one of the ways that I would approach it,” she said.

    President Joe Biden said on Friday that he will not relent to Republican lawmakers threatening to send the nation into default if he doesn’t meet their demands but he doesn’t support Democrats’ efforts to abolish the debt limit entirely.

    When asked by Tapper about legislating and meeting with leaders of the Senate and people in the White House to come up with a way to reduce spending, Mace noted Republicans had been “shut out of many of those conversations.”

    “We have seen Republicans for a year-and-a-half now talk about more responsible spending, looking at the deficit spending in these bills that have been passed talking about how we can move this country forward. And we have been shut out.”

    In a separate appearance on “State of the Union” on Sunday, Vermont Sen. Bernie Sanders said he sided with increasing the debt ceiling.

    “But what Republicans are basically doing – and I hope everybody understands this – they are saying look, we are prepared to let the United States default on its debt, not raise the debt ceiling, unless – you talk about making cuts.”

    Sanders added “You know what they’re talking about? Cuts in Social Security, Medicare, and Medicaid. Is that irresponsible? It is absolutely irresponsible. You don’t use the debt ceiling to do that.”

    Mace also indicated to Tapper that she would not automatically be on board with impeaching Biden if Republicans take the House in November. However, she didn’t dismiss it completely either, noting allegations of high crimes and misdemeanors “would have to be investigated.”

    “I am not interested in playing tit-for-tat. I am not interested in retaliation. Impeachment has been weaponized over the years, and we’ve seen that. I really want us to be focused on the economy, on tackling inflation with responsible policy,” she said.

    Mace, who has travelled to Ukraine since the war began, dodged when asked if she supported McCarthy’s comment to Punchbowl that House Republicans would not write a “blank check” to Ukraine if they are in the majority.

    “It is something that we’re going to have to find balance on next year,” she said, due to the threat of a recession and Republican promises to cut government spending.

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  • Democrats predict an ‘extremely busy’ lame duck. Here’s what’s on the agenda | CNN Politics

    Democrats predict an ‘extremely busy’ lame duck. Here’s what’s on the agenda | CNN Politics



    CNN
     — 

    A packed legislative to-do list awaits Congress when it returns to session after the midterms – and Democrats, who currently control both chambers, will face a ticking clock to enact key priorities if Republicans win back the House or manage to flip the Senate in the upcoming elections.

    Senate Majority Leader Chuck Schumer has predicted an “extremely busy” lame duck session – the period of time after the midterms and before a new Congress begins in January.

    “We still have much to do and many important bills to consider,” Schumer said in remarks on the Senate floor at the end of September. “Members should be prepared for an extremely, underline extremely, busy agenda in the last two months of this Congress.”

    The jam-packed agenda for the lame-duck session includes: Funding the government to avert a shutdown before the end of the calendar year, passage of the National Defense Authorization Act, or NDAA, the annual must-pass legislation that sets the policy agenda and authorizes funding for the Department of Defense, as well as a vote in the Senate to protect same-sex marriage and the potential consideration of other key pieces of legislation.

    Democrats are still limited in what they can achieve, however, given their narrow majorities in both chambers. With a 50-50 partisan split in the Senate, Democrats lack the votes to overcome the filibuster’s 60-vote threshold – and do not have the votes to abolish the filibuster. As a result, major priorities for liberal voters – like the passage of legislation protecting access to abortion after the Supreme Court overturned Roe v. Wade – will still remain out of reach for the party for the foreseeable future.

    Government funding is the most pressing priority that lawmakers will confront during the lame duck. The current deadline for the expiration of funding is December 16 after the House and Senate passed an extension to avert a shutdown at the end of September.

    Since the funding bill is viewed as must-pass legislation it will likely become a magnet for other priorities that lawmakers may try to tack on to ride along with it. It’s possible that further aid for Ukraine could come up as Ukraine continues to counter Russia’s invasion of the country. While that funding has bipartisan support, some conservatives are balking at the pricey contributions to Ukraine and may scrutinize more closely additional requests from the administration, a dynamic that is dividing Republicans on this key issue.

    Democrats also want more funding for pandemic response, but Republicans have pushed back on that request.

    One issue that may come up during the government funding effort is money for the Department of Justice investigation into the January 6, 2021, attack on the Capitol.

    A House Democratic aide told CNN that final fiscal year 2023 funding levels have yet to be determined. Justice Department needs and resources are part of this ongoing conversation, but under the leadership of Rep. Matt Cartwright, chairman of the House Appropriations subcommittee on commerce, justice, science, and related agencies, the House bill included $34 million that would allow DOJ to fund these prosecutions without reducing their efforts in other areas.

    House Appropriations Committee Chairwoman Rosa DeLauro told CNN in a statement, “I look forward to working with my colleagues on the House and Senate appropriations committees and passing a final 2023 spending package by the December 16th deadline.”

    Meanwhile, the Senate has begun work on the NDAA, and is expected to pass the massive piece of legislation during the lame duck. Consideration of the wide-ranging bill could spark debate and a push for amendments over a variety of topics.

    Republican Sen. Chuck Grassley of Iowa has called for punishing OPEC for its production cut by passing legislation that would hold foreign oil producers accountable for colluding to fix prices – and the senator has said he believes the measure can pass as an amendment to the NDAA. The legislation would clear the way for the Justice Department to sue Saudi Arabia and other OPEC nations for antitrust violations.

    Senate Democrats will also continue confirming judges to the federal bench nominated by President Joe Biden, a key priority for the party.

    A Senate vote to protect same-sex marriage is also on tap for the lame-duck session. In mid-September, the chamber punted on a vote until after the November midterm elections as negotiators asked for more time to lock down support – a move that could make it more likely the bill will ultimately pass the chamber.

    The bipartisan group of senators working on the bill said in a statement at the time, “We’ve asked Leader Schumer for additional time and we appreciate he has agreed. We are confident that when our legislation comes to the Senate floor for a vote, we will have the bipartisan support to pass the bill.” The bill would need at least 10 Republican votes to overcome a filibuster.

    Schumer has vowed to hold a vote on the bill, but the exact timing has not yet been locked in. Democrats have pushed for the vote after the Supreme Court overturned Roe v. Wade, sparking fears that the court could take aim at same-sex marriage in the future.

    The Senate could take up legislation during the lame duck in response to the January 6, 2021, attack by a mob of pro-Trump supporters attempting to overturn the results of the 2020 presidential election.

    Over the summer, a bipartisan group of senators reached a deal to make it harder to overturn a certified presidential election. The proposal would still need, however, to be approved by both chambers. Notably, the Senate proposal has the backing of Senate Minority Leader Mitch McConnell, a Kentucky Republican.

    “I strongly support the modest changes that our colleagues in the working group have fleshed out after literally months of detailed discussions,” McConnell said at the end of September. “I’ll proudly support the legislation, provided that nothing more than technical changes are made to its current form.”

    If the bill passes the Senate, it would also need to clear the House, which in September, passed its own version of legislation to make it harder to overturn a certified presidential election in the future by proposing changes to the Electoral Count Act.

    Passing a bill to to restrict lawmakers from trading stocks is a priority for a number of moderate House Democrats – who may continue to push for the issue to be taken up during the lame duck, though whether there will be a vote is still to be determined and other pressing must-pass items like government funding could crowd out the issue. The House did not vote on a proposal prior to the midterm elections.

    “It’s a complicated issue, as you can imagine, as a new rule for members they have to follow, and their families as I understand, so I think it deserves careful study to make sure if we do something, we do it right,” House Majority Leader Steny Hoyer told CNN last month.

    Meanwhile, it’s not yet clear when exactly the nation will run up against the debt limit and it appears unlikely for now that Congress will act to resolve the issue during the lame-duck session, especially as other must-pass bills compete for floor time. But political battle lines are already being drawn and maneuvering is underway in Washington over the contentious and high-stakes issue.

    A group of House Democrats recently sent a letter to House Speaker Nancy Pelosi and Schumer calling for legislation to “permanently undo the threat posed by the debt limit” during the post-election lame-duck session. The letter, led by Pennsylvania Rep. Brendan Boyle, was signed by several prominent House Democrats, including Caucus Chair Hakeem Jeffries of New York.

    Biden on Friday gave a window into how he’s preparing for a looming political showdown over the debt ceiling, stating unequivocally that he will not relent to Republican lawmakers threatening to send the nation into default if he doesn’t meet their demands, but adding that he doesn’t support efforts from within his own party to abolish the debt limit entirely.

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  • How meltdown in a $1 trillion market brought the UK to the brink of a financial crisis | CNN Business

    How meltdown in a $1 trillion market brought the UK to the brink of a financial crisis | CNN Business


    London
    CNN Business
     — 

    Pension funds are designed to be dull. Their singular goal — earning enough money to make payouts to retirees — favors cool heads over brash risk takers.

    But as markets in the United Kingdom went haywire last week, hundreds of British pension fund managers found themselves at the center of a crisis that forced the Bank of England to step in to restore stability and avert a broader financial meltdown.

    All it took was one big shock. Following finance minister Kwasi Kwarteng’s announcement on Friday, Sept. 23 of plans to ramp up borrowing to pay for tax cuts, investors dumped the pound and UK government bonds, sending yields on some of that debt soaring at the fastest rate on record.

    The scale of the tumult put enormous pressure on many pension funds by upending an investing strategy that involves the use of derivatives to hedge their bets.

    As the price of government bonds crashed, the funds were asked to pony up billions of pounds in collateral. In a scramble for cash, investment managers were forced to sell whatever they could — including, in some cases, more government bonds. That sent yields even higher, sparking another wave of collateral calls.

    “It started to feed itself,” said Ben Gold, head of investment at XPS Pensions Group, a UK pensions consultancy. “Everyone was looking to sell and there was no buyer.”

    The Bank of England went into crisis mode. After working through the night of Tuesday, Sept. 27, it stepped into the market the next day with a pledge to buy up to £65 billion ($73 billion) in bonds if needed. That stopped the bleeding and averted what the central bank later told lawmakers was its worst fear: a “self-reinforcing spiral” and “widespread financial instability.”

    In a letter to the head of the UK Parliament’s Treasury Committee this week, the Bank of England said that if it hadn’t interceded, a number of funds would have defaulted, amplifying the strain on the financial system. It said its intervention was essential to “restore core market functioning.”

    Pension funds are now racing to raise money to refill their coffers. Yet there are questions about whether they can find their footing before the Bank of England’s emergency bond-buying is due to end on Oct. 14. And for a wider range of investors, the near-miss is a wake-up call.

    For the first time in decades, interest rates are rising quickly around the world. In that climate, markets are prone to accidents.

    “What the previous two weeks have told you is there can be a lot more volatility in markets,” said Barry Kenneth, chief investment officer at the Pension Protection Fund, which manages pensions for employees of UK companies that become insolvent. “It’s easy to invest when everything’s going up. It’s a lot more difficult to invest when you’re trying to catch a falling knife, or you’ve got to readjust to a new environment.”

    The first signs of trouble appeared among fund managers who focus on so-called “liability-driven investment,” or LDI, for pensions. Gold said he started to receive messages from worried clients over the weekend of Sept. 24-25.

    LDI is built on a straightforward premise: Pensions need enough money to pay what they owe retirees well into the future. To plan for payouts in 30 or 50 years, they buy long-dated bonds, while purchasing derivatives to hedge these bets. In the process, they have to put up collateral. If bond yields rise sharply, they are asked to put up even more collateral in what’s known as a “margin call.” This obscure corner of the market has grown rapidly in recent years, reaching a valuation of more £1 trillion ($1.1 trillion), according to the Bank of England.

    When bond yields rise slowly over time, it’s not a problem for pensions deploying LDI strategies, and actually helps their finances. But if bond yields shoot up very quickly, it’s a recipe for trouble. According to the Bank of England, the move in bond yields before it intervened was “unprecedented.” The four-day move in 30-year UK government bonds was more than twice what was seen during the highest-stress period of the pandemic.

    “The sharpness and the viciousness of the move is what really caught people out,” Kenneth said.

    The margin calls came in — and kept coming. The Pension Protection Fund said it faced a £1.6 billion call for cash. It was able to pay without dumping assets, but others were caught off guard, and were forced into a fire sale of government bonds, corporate debt and stocks to raise money. Gold estimated that at least half of the 400 pension programs that XPS advises faced collateral calls, and that across the industry, funds are now looking to fill a hole of between £100 billion and £150 billion.

    “When you push such large moves through the financial system, it makes sense that something would break,” said Rohan Khanna, a strategist at UBS.

    When market dysfunction sparks a chain reaction, it’s not just scary for investors. The Bank of England made clear in its letter that the bond market rout “may have led to an excessive and sudden tightening of financing conditions for the real economy” as borrowing costs skyrocketed. For many businesses and mortgage holders, they already have.

    So far, the Bank of England has only bought £3.8 billion in bonds, far less than it could have purchased. Still, the effort has sent a strong signal. Yields on longer-term bonds have dropped sharply, giving pension funds time to recoup — though they’ve recently started to rise again.

    “What the Bank of England has done is bought time for some of my peers out there,” Kenneth said.

    Still, Kenneth is concerned that if the program ends next week as scheduled, the task won’t be complete given the complexity of many pension funds. Daniela Russell, head of UK rates strategy at HSBC, warned in a recent note to clients that there’s a risk of a “cliff-edge,” especially since the Bank of England is moving ahead with previous plans to start selling bonds it bought during the pandemic at the end of the month.

    “It might be hoped that the precedent of BoE intervention continues to provide a backstop beyond this date, but this may not be sufficient to prevent a renewed vigorous sell-off in long-dated gilts,” she wrote.

    As central banks jack up interest rates at the fastest clip in decades, investors are nervous about the implications for their portfolios and for the economy. They’re holding more cash, which makes it harder to execute trades and can exacerbate jarring price moves.

    That makes a surprise event more likely to cause massive disruption, and the specter of the next shocker looms. Will it be a rough batch of economic data? Trouble at a global bank? Another political misstep in the United Kingdom?

    Gold said the pension industry as a whole is better prepared now, though he concedes it would be “naive” to think there couldn’t be another bout of instability.

    “You would need to see yields rise more quickly than we saw this time,” he said, noting the larger buffers funds are now amassing. “It would require something of absolutely historic proportions for that not to be enough, but you never know.”

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  • The bond market is crumbling. That’s bad for Wall Street and Main Street | CNN Business

    The bond market is crumbling. That’s bad for Wall Street and Main Street | CNN Business

    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 Business
     — 

    The global bond market is having a historically awful year.

    The yield on the 10-year US Treasury bond, a proxy for borrowing costs, briefly moved above 4% on Wednesday for the first time in 12 years. That’s a bad omen for Wall Street and Main Street.

    What’s happening: This hasn’t been a pretty year for US stocks. All three major indexes are in a bear market, down more than 20% from recent highs, and analysts predict more pain ahead. When things are this bad, investors seek safety in Treasury bonds, which have low returns but are also considered low-risk (As loans to the US government, Treasury notes are seen as a safe bet since there is little risk they won’t be paid back).

    But in 2022’s topsy-turvy economy, even that safe haven has become somewhat treacherous.

    Bond returns, or yields, rise as their prices fall. Under normal market conditions, a rising yield should mean that there’s less demand for bonds because investors would rather put their money into higher-risk (and higher-reward) stocks.

    Instead markets are plummeting, and investors are flocking out of risky stocks, but yields are going up. What gives?

    Blame the Fed. Persistent inflation has led the Federal Reserve to fight back by aggressively hiking interest rates, and as a result the yields on US Treasury bonds have soared.

    Economic turmoil in the United Kingdom and European Union has also caused the value of both the British pound and the euro to fall dramatically when compared to the US dollar. Dollar strength typically coincides with higher bond rates as well.

    So while we’d normally see a rising 10-year yield as a signal that US investors have a rosy economic outlook, that isn’t the case this time. Gloomy investors are predicting more interest rate hikes and a higher chance of recession.

    What it means: Portfolios are aching. Vanguard’s $514.5 billion Total Bond Market Index, the largest US bond fund, is down more than 15% so far this year. That puts it on track for its worst year since it was created in 1986. The iShares 20+ Year Treasury bond fund

    (TLT)     (TLT) is down nearly 30% for the year.

    Stock investors are also nervously eyeing Treasuries. High yields make it more expensive for companies to borrow money, and that extra cost could lower earnings expectations. Companies with significant debt levels may not be able to afford higher financing costs at all.

    Main Street doesn’t get a break, either. An elevated 10-year Treasury return means more expensive loans on cars, credit cards and even student debt. It also means higher mortgage rates: The spike has already helped push the average rate for a 30-year mortgage above 6% for the first time since 2008.

    Going deeper: Still, investors are more nervous about the immediate future than the longer term. That’s spurred an inverted yield curve – when interest rates on short-term bonds move higher than those on long-term bonds. The inverted yield curve is a particularly ominous warning sign that has correctly predicted almost every recession over the past 60 years.

    The curve first inverted in April, and then again this summer. The two-year treasury yield has soared in the last week, and now hovers above 4.3%, deepening that gap.

    On Monday, a team at BNP Paribas predicted that the inverted gap between the two-year and 10-year Treasury yields could grow to its largest level since the early 1980s. Those years were marked by sticky inflation, interest rates near 20% and a very deep recession.

    What’s next: The bond market may face fresh volatility on Friday with the release of the Federal Reserve’s favored inflation measure, the Personal Consumption Expenditure Price Index for August. If the report comes in above expectations, expect bond yields to move even higher.

    The Bank of England held an emergency intervention to maintain economic stability in the UK on Wednesday. The central bank said it would buy long-dated UK government bonds “on whatever scale is necessary” to prevent a market crash.

    Investors around the globe have been dumping the British pound and UK bonds since the government on Friday unveiled a huge package of tax cuts, spending and increased borrowing aimed at getting the economy moving and protecting households and businesses from sky-high energy bills this winter, reports my colleague Mark Thompson.

    Markets fear the plan will drive up already persistent inflation, forcing the Bank of England to push interest rates as high as 6% next spring, from 2.25% at present. Mortgage markets have been in turmoil all week as lenders have struggled to price their loans. Hundreds of products have been withdrawn.

    “This repricing [of UK assets] has become more significant in the past day — and it is particularly affecting long-dated UK government debt,” the central bank said in its statement.

    “Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy.”

    Many final salary, or defined-benefit, pension funds were particularly exposed to the dramatic sell-off in longer dated UK government bonds.

    “They would have been wiped out,” said Kerrin Rosenberg, UK chief executive of Cardano Investment.

    The central bank said it would buy long-dated UK government bonds until October 14.

    Steep drops in bond prices may be signaling doom and gloom for the economy, but some analysts say short-term bonds are still looking more attractive than equities right now.

    “Record low yields have kept fixed income in the shadow of equities for decades,” said analysts at BNY Mellon Wealth Management in a research note. “But the aggressive shift in Fed policy is beginning to change this.”

    Central banks around the globe have responded to elevated inflation by hiking interest rates– and bond yields have increased alongside them. The two-year US Treasury bond is currently yielding nearly 4%. That’s still a relatively low return, but better than the S&P 500’s dividend yield of around 1.7%.

    “For the first time in several years, bonds are attractive investment options. In addition to providing diversification versus equities…you now get paid for owning them,” wrote Barry Ritholtz of Ritholtz Wealth Management on Wednesday.

    Consider the alternative: the S&P is down more than 20% year to date.

    The US Bureau of Economic Analysis releases its third estimate for Q2 GDP and US weekly jobless claims.

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  • Biden expected to meet with Hill leaders Tuesday following ‘productive’ debt limit meetings among staff | CNN Politics

    Biden expected to meet with Hill leaders Tuesday following ‘productive’ debt limit meetings among staff | CNN Politics



    CNN
     — 

    President Joe Biden is expected to meet Tuesday with congressional leaders on the debt ceiling limit following “productive” staff-level negotiations over the weekend, two sources familiar with the talks told CNN on Sunday, as the US barrels toward a deadline that could come as soon as June 1.

    Negotiators have been able to pinpoint some areas on which congressional staff and the White House can find common ground, including revising the permitting process, rescinding unspent Covid-19 relief funds and potentially cutting spending, the sources said.

    Biden and the top four congressional leaders – House Speaker Kevin McCarthy, House Minority Leader Hakeem Jeffries, Senate Majority Leader Chuck Schumer and Senate Minority Leader Mitch McConnell – held talks on the debt limit last week in the Oval Office. Tuesday’s meeting, which has not yet been officially confirmed, according to the sources, comes after a planned Friday meeting was postponed as the staff-level talks continued.

    Deputy Treasury Secretary Wally Adeyemo told CNN’s Dana Bash on “State of the Union” on Sunday that talks between the two sides have been “constructive.”

    Biden, Adeyamo said, “looks forward to getting together with the leaders to talk about how we continue to make progress.”

    Biden himself indicated on Sunday that he expected principal-level debt ceiling discussions to take place Tuesday.

    “We’re working on it right now,” he said in brief remarks to reporters as he completed a bike ride in Rehoboth Beach, Delaware.

    There is still not a clear path forward to avoid a default with just four more days before June 1 when both the House and Senate are scheduled to be in session. Biden also confirmed Sunday that he expects to depart Wednesday for Hiroshima, Japan, for the G7 summit.

    “That’s my plan as it stands now,” he told reporters in Rehoboth Beach.

    It’s become increasingly clear that some spending cuts must be included for a deal to materialize, one of the sources said, and that point of discussion has been the main sticking point in negotiations so far.

    Biden said Sunday that he was waiting to hear Republicans’ exact proposals on work requirements for certain government aid programs. He said he has voted in the past for “tougher aid programs” that are now law but “for Medicaid, it’s a different story.”

    White House spokesperson Michael Kikukawa later elaborated on the president’s answer, saying in a statement that Biden would evaluate the GOP proposals guided by the principle that they would “not take away people’s health coverage” or “push Americans into poverty.”

    Negotiators recognize they will likely need to have an outline of a deal by the end of the week to ensure a bill can pass through Congress by June 1, the sources said, but they also think there are potential congressional tools that can be used to speed up the process if needed. The sources did not specify what those tools are.

    Adeyemo reiterated Sunday that the US “can’t” default on its debt but declined to provide details on areas of agreement. He echoed Treasury Secretary Janet Yellen’s assessment that default could happen “as early as June 1” but said it “can be sometime in early June,” calling on Congress to act as he warned that default would be “catastrophic.”

    Top Treasury official says debt ceiling negotiations have been ‘constructive’

    Pressed by Bash on the timing of a deal following McCarthy’s call for an agreement in principle by early this week and business leaders like JPMorgan Chase’s Jamie Dimon warning of market panic in the absence of a deal, Adeyemo said Biden “believes we should raise the debt limit as soon as possible.”

    “Because it’s not only financial markets, but the (University of Michigan) survey of consumer sentiment last week showed that consumers are now worried about the debt limit – it’s affecting the way they’re spending,” Adeyemo said.

    Meanwhile, top Biden economic adviser Lael Brainard on Sunday echoed previous White House comments on preferring a whole deal rather than a short-term fix.

    “Short-term is not a fix. It is not really addressing that core uncertainty that CEOs are talking about. It’s just really important to take default and address it, and Congress has the tools to do that,” the director of the National Economic Council said on “Face the Nation” on CBS.

    Biden expressed optimism Sunday for an eventual agreement.

    “I remain optimistic because I’m a congenital optimist. But I really think there’s a desire on their part, as well as ours, to reach an agreement. I think we’ll be able to do it,” he said in Rehoboth Beach.

    The president had indicated last week that he was prepared for talks to go down to the wire.

    “I’ve been involved in negotiations my whole career,” he told CNN during a trip to New York. “Some negotiations happen at the last second, some negotiations happen way ahead of time. So, we’ll see.”

    Biden resurfaced last week the controversial idea of lifting the borrowing cap without Congress by invoking the 14th Amendment, which some legal experts argue gives the president the authority to order the nation’s debts to be paid regardless of the debt limit Congress sets.

    But using the 14th Amendment to let the Treasury Department borrow above the debt ceiling to pay the nation’s obligations would almost certainly prompt a constitutional crisis and swift legal action.

    Asked Sunday whether the administration would consider invoking the 14th Amendment in the absence of a deal with Congress, Adeyemo said, “What the president said was that he did not think the 14th Amendment would solve our problems now. The only thing that can solve our problems now is for Congress to lift the debt limit.”

    This story and headline have been updated.

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  • Gaming the government is not going well | CNN Politics

    Gaming the government is not going well | CNN Politics

    A version of this story appeared in CNN’s What Matters newsletter. To get it in your inbox, sign up for free here.



    CNN
     — 

    Governing is not, or at least it shouldn’t be, some kind of game.

    But this week it feels like powerful people are treating it like one, running trick plays to score points, trash talking and making threats, and exploiting rules to bring things to a halt.

    In Florida, a brewing grudge match pits Disney, one of the state’s largest employers, against its governor, the ambitious Republican Ron DeSantis who is eyeing a presidential run.

    How the state government’s relationship with its notable corporate citizen turned petty is getting hard to follow.

    The basic storyline, as laid out by CNN’s Steve Contorno, is that Disney spoke out against a law DeSantis pushed to limit what teachers can say in the classroom. Faulting its “woke” corporate behavior, DeSantis and Republicans in the state moved to install their political allies onto a quasi-government board that oversees the area that includes Disney World. But the company moved to defang the board before the new appointees took on their roles.

    Rather than sending a message to Disney, DeSantis now looks outmaneuvered and is threatening more action against the company.

    It’s not clear if he’s serious or not, but the most bizarre idea he suggested is building a state prison on public land next to the Magic Kingdom. Watch him here.

    The appearance of a Republican potentially trying to sabotage a massive employer is the kind of play DeSantis’ potential rivals for the Republican presidential nomination are happy to point out.

    “I think it rightfully makes a lot of people question his judgment and his maturity,” former New Jersey Gov. Chris Christie said Tuesday in a conversation with the website Semafor.

    Christie said if DeSantis “can’t see around a corner that (Disney CEO) Bob Iger created for you,” then “that’s not the guy I want sitting across from President Xi and negotiating our next agreement with China.”

    In Washington, where the Senate rulebook has been befuddling people for centuries, Republicans are citing the Senate rules and making clear they won’t let Democrats replace, even temporarily, the ailing Sen. Dianne Feinstein on the Senate Judiciary Committee.

    Feinstein, 89, has been out of the office since early March while dealing with a case of the shingles. But since Democrats only have a one-seat majority on the panel, her absence has ground judicial nominations to a halt.

    For a rules-minded guy like Senate Minority Leader Mitch McConnell, another octogenarian just returning from his own month-plus convalescence after a fall, there’s no need to let Democrats get another vote on the committee and push through scores of nominations caught in limbo. McConnell suggested if Democrats culled the herd of nominees, they might get some confirmed.

    “They could move a number of less controversial nominees right now. Right now,” he said Tuesday on the Senate floor. “They want to sideline Senator Feinstein, so they can ram through the worst four as well.”

    Various Senate rules have been confusing people for centuries. Even if Feinstein were to resign, Sen. Mitt Romney suggested Tuesday that Republicans could block changes to the Senate Judiciary Committee.

    “I don’t think Republicans are going to lift a finger in any way to get more liberal judges appointed, so whether she’s resigned or leaves temporarily from the judiciary committee, I think we will slow walk any process that makes it easier to appoint more liberal judges,” Romney said.

    Feinstein’s absence isn’t the only problem, as CNN’s Tierney Sneed and Lauren Fox have pointed out, since Republican senators can also use the “blue slip” tradition to veto judicial nominees the Biden administration has put forward for their states.

    If the importance of judicial nominees is still in question, look no further than the furor that a Trump-appointed federal judge has caused by ruling to suspend the 23-year-old FDA authorization for mifepristone, the first drug used in a medication abortion.

    The decision by Judge Matthew Kacsmaryk out of the federal court in Amarillo, Texas, has sent the abortion issue straight back to the Supreme Court, which is expected to rule by Wednesday in a case that could remove nationwide access to a medication that American women have been using for decades, even in states that have sought to protect abortion rights.

    Kacsmaryk was all but selected by opponents of the drug to hear the case since he is the only federal district judge in Amarillo.

    It’s not the rulebook, but rather the teamwork making House Speaker Kevin McCarthy’s life difficult. He wanted to send a message of unity to Wall Street with a speech there Monday. His goal was to calm nerves about the looming debt ceiling showdown and project that Republicans have a plan to raise the debt ceiling and impose spending cuts. Their plan probably won’t get any support from Democrats.

    But almost on cue Tuesday, conservative Republicans began to poke holes in McCarthy’s plan, calling it into question as the US hurtles toward a potential default if there is no debt ceiling agreement by June. McCarthy, at least for now, seems disinclined to allow a vote on any proposal that could get support from Democrats in the House. And he seems unable to find a proposal that can get all Republicans on board. Those Senate rules make it impossible for anything to pass through that chamber without support from ten Republicans, so long as Feinstein is not voting. Read more from CNN’s Stephen Collinson.

    Suffice it to say the debt ceiling, the abortion medication and Disney’s status in Florida are issues where there’s not a winner and a loser, even if they’re being treated that way by the powerful people who are supposed to be in charge.

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  • Biden cancels visits to Australia and Papua New Guinea as debt ceiling negotiations continue | CNN Politics

    Biden cancels visits to Australia and Papua New Guinea as debt ceiling negotiations continue | CNN Politics



    CNN
     — 

    President Joe Biden is canceling his upcoming visits to Papua New Guinea and Australia due to the ongoing debt ceiling negotiations in Washington, the White House confirmed Tuesday.

    White House press secretary Karine Jean-Pierre said in a statement Biden spoke to Australian Prime Minister Anthony Albanese earlier Tuesday to inform him he will be “postponing” the trip and invited the prime minister for an official state visit “at a time to be agreed by the teams.” Jean-Pierre added that the “President’s team engaged” with the prime minister of Papua New Guinea.

    Biden will still travel to Japan starting Wednesday as part of what was supposed to be a weeklong trip through the Pacific region.

    Earlier Tuesday, National Security Council coordinator for strategic communications John Kirby told reporters that the White House was “reevaluating” the stops to Papua New Guinea and Australia.

    “What I can speak to is the G7 and going to Hiroshima. The president is looking forward to that. We are taking a look at the rest of the trip,” Kirby told reporters.

    The cancellation canes as congressional leaders met with Biden at the White House to discuss the debt limit. The Treasury Department has warned that the government default could come as early as June 1, and Treasury Secretary Janet Yellen has said a default would trigger a global economic downturn.

    This story has been updated with additional developments.

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  • White House escalates political pressure on GOP as McCarthy unveils debt limit proposal | CNN Politics

    White House escalates political pressure on GOP as McCarthy unveils debt limit proposal | CNN Politics



    CNN
     — 

    White House officials have spent weeks engaged in skirmishes with House Republicans over the looming debt ceiling battle.

    Those skirmishes have now expanded into an all-out war.

    President Joe Biden’s economic speech in Maryland on Wednesday, which leveled a series of policy and political attacks at House Republicans, serves as a critical marker for a White House moving quickly to escalate the political pressure on House Republicans as the calendar moves closer to the deadline to raise the nation’s borrowing limit.

    Months of messaging and rapid response efforts to counter nascent House GOP debt limit proposals evolved this week into a full-scale effort to undercut Speaker Kevin McCarthy’s spending cut and debt ceiling proposal at the moment of its inception.

    Biden’s remarks, though planned for several weeks, provided a window into the trigger for the escalation.

    “Just two days ago the speaker of the House Kevin McCarthy went to Wall Street to describe the MAGA economic vision for American,” Biden said in reference to McCarthy’s speech Monday at the New York Stock Exchange.

    McCarthy’s high-profile remarks, which broadly outlined the Republican push for steep spending cuts in exchange for a debt ceiling increase, set in motion the House Republican push to pass a proposal and shift the entrenched political dynamics.

    “American debt is a ticking time bomb that will detonate unless we take serious, responsible action,” McCarthy said in his New York speech, which previewed a proposal that was made public Wednesday.

    Biden’s remarks, at a union hall in Maryland, served as a clear response.

    “Massive cuts in programs you count on,” Biden said of the outlines of McCarthy’s proposal. “The threat of defaulting on America’s debt for the first time in 230 years.”

    The positions of the two sides remain unchanged – and completely incompatible. Biden and his top advisers say unequivocally they will not negotiate over a debt ceiling increase and will only accept a clean proposal to raise the nation’s borrowing limit. McCarthy and House Republicans have labeled that position a non-starter and are demanding significant spending cuts in order to sign on to any increase.

    The irreconcilable positions underscore the central importance of winning the political and messaging battle that is set to dramatically intensify. With no pathway to reconcile the respective positions, both sides are pointing to the political pressure – and potentially catastrophic economic consequences that would result in a failure to a find a resolution – as critical to crack their opposition.

    Biden’s speech was crafted to crystallize a clear political contrast and detail the legislative wins of Biden’s first two years in office and his agenda’s priorities for the years ahead.

    But the speech was also tailored to directly attack McCarthy and the broad outlines of the California Republican’s forthcoming proposal at the same moment behind the scenes efforts to keep Democrats unified and escalate outside pressure.

    “Folks, it’s the same old trickle-down dressed up in MAGA clothing,” Biden said of McCarthy’s proposal in his remarks. “Only worse.”

    White House officials quietly circulated messaging and polling memos touting Biden’s budget and tax proposal earlier this week. Biden spoke by phone with Senate Majority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries Tuesday in what people familiar with the call framed as a discussion that was equal parts ensuring total alignment and mapping out the policy and political strategy ahead.

    “President Biden, Leader Schumer, and Leader Jeffries agree that we won’t negotiate over default and Republicans should pass a clean bill like they did three times in the previous administration,” the White House said in a readout of the call Tuesday night.

    Outside advocacy groups aligned with the White House are also set to ramp up their efforts to highlight Biden’s agenda while attacking the outlines of McCarthy’s proposal.

    The tightly coordinated messaging and political escalation reflects a deadline that is growing closer, officials said. But it also underscores an understanding that McCarthy and his leadership team face their own critical intraparty moment as they attempt to coalesce around their own proposal ahead of a vote next week.

    That House Republican plan, should McCarthy whip the votes to pass it, is dead on arrival in the Senate. White House officials view the proposal less as a tangible way to shift the entrenched political dynamics and more as an opportunity to launch a whole new array of policy attacks, officials say.

    Republicans have made clear, however, they view the opposite as true. A House-passed bill should force Biden to the table and serve as a demonstration of Republican unity and resolve.

    “President Biden and Senator Schumer have no right to play politics with the debt ceiling,” McCarthy said on the House floor Wednesday, calling on Biden and Democrats to enter negotiations.

    McCarthy has insisted he can marshal the votes to pass his proposal. White House officials have privately been skeptical that’s the case given the fractious dynamics of the conference.

    But at a critical moment in a fight that is set to envelope Washington in the months ahead, White House officials are intent on making McCarthy’s job as difficult as possible.

    “The American people should know about the competing economic visions of the country that are really at stake right now,” Biden said.

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