Tag: public finance

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

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

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

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

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

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

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

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

“They’ll find I didn’t,” he said.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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May 29, 2023
White House and House Republicans strike agreement in principle to raise debt ceiling, sources say | CNN Politics

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

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

This is a breaking story and will be updated.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This story has been updated with additional information.

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May 27, 2023
Major differences remain over spending cuts and other key issues as debt limit deadline looms | CNN Politics

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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May 24, 2023
Yellen warns Congress again that default could be just days away, but others forecast a little more time | CNN Politics

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This headline and story have been updated with additional information.

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May 22, 2023
Tim Scott, the only Black Republican in the Senate, enters the 2024 GOP primary | CNN Politics

CNN
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South Carolina Sen. Tim Scott on Monday formally entered the Republican presidential primary, promising to take on “the radical left” and bring faith and conservative, business-friendly policies to the White House, as he seeks to upend a contest that has so far been dominated by coverage of former President Donald Trump and Florida Gov. Ron DeSantis, who is expected to enter the fray in the coming days.

The most prominent Black figure in the Republican Party, Scott addressed supporters at his alma mater, Charleston Southern University, in his hometown of North Charleston.

“I’m the candidate the far-left fears the most. You see, when I cut your taxes, they called me a prop. When I refunded the police, they called me a token. When I pushed back on President Biden, they even called me the ‘n-word,’” Scott said. “I disrupt their narrative. I threaten their control. The truth of my life disrupts their lies.”

Following the announcement, Scott heads to Iowa, New Hampshire and South Carolina – states he frequented on his “Faith in America” tour in the run-up to his announcement – before returning to the Hawkeye State next week for GOP Sen. Joni Ernst’s annual “Roast and Ride” gathering.

Scott, 57, is no stranger to pathbreaking campaigns. In 2010, he became the first Black Republican elected to the US House of Representatives from South Carolina in more than a century. Years later, after being appointed to his Senate seat (he won a special election to retain the seat), Scott made history as the first Black US Senator from his native South Carolina.

Ahead of his entry into the presidential race, senior campaign officials briefed reporters on their view of the path forward, acknowledging he will need to win over support from Trump and DeSantis, but vowing – in a veiled dig at both – that his candidacy will strike a more optimistic tone and condemn the culture of victimhood and grievance that, as his aides described it, has taken over both parties.

“Our party and our nation are standing at a time for choosing,” Scott said. “Victimhood or victory? Grievance or greatness? I choose freedom and hope and opportunity.”

Trump and his team will avoid going after Tim Scott for now, two sources close to the former president told CNN. The directive from Trump has been to stay away from attacks on the South Carolina senator at the moment.

Last week, the Trump-aligned super PAC, MAGA, Inc., weighed in on Scott’s looming announcement, but used it to level an attack on DeSantis, not Scott.

The former president used that approach on Monday as he wished Scott “good luck” while taking a shot at DeSantis.

“Good luck to Senator Tim Scott in entering the Republican Presidential Primary Race. It is rapidly loading up with lots of people, and Tim is a big step up from Ron DeSanctimonious, who is totally unelectable. I got Opportunity Zones done with Tim, a big deal that has been highly successful. Good luck Tim!,” Trump posted on Truth Social.

The South Carolina senator received a boost on Sunday, less than 24 hours before his kick-off event, when news broke that his colleague Sen. John Thune of South Dakota, the No. 2 Republican in the Senate, planned to endorse him.

“I think he’d be a great candidate. I’m excited about it. I’ve been encouraging him,” Thune previously told CNN. “I think he’s getting a lot of encouragement from his colleagues. He’s really well thought of and respected.”

Cory Gardner, the former Republican senator from Colorado and leader of Scott’s aligned super PAC, also argued that his old colleague posed a unique threat to liberal Democrats.

“I think they’re terrified of him, and he’s right to say that, because he defies every narrative they have,” Gardner said. “And this is exciting for conservatives who believe that they have a candidate who carries their values, can implement their values and do so in a way that will make all Americans proud.”

In pictures: Presidential candidate Tim Scott

A senior campaign official said Scott will continue to invest resources and time in Iowa, New Hampshire and South Carolina, as the campaign ramps up.

Though Scott hails from South Carolina, they won’t count on it as a firewall, according to one senior campaign official, who emphasized Scott will have to compete as a top-tier candidate in other early primary and caucus states like New Hampshire and Iowa.

Even before the official launch, Scott revealed plans to pluck from his deep campaign coffers – with millions now transferred over from his Senate account – through a series of big-dollar ad buys in Iowa and New Hampshire.

The initial $5.5 million TV ad buy – including broadcast, cable satellite and radio – will air statewide starting Wednesday and run through the first GOP debate in August.

During the same period, Scott will also launch a seven-figure digital ad campaign.

“The biggest thing going for Tim Scott right now is $22 million in the bank. He is getting ready to spend $6 million in Iowa and New Hampshire that will garner tremendous name ID, and it’s gonna be a key factor that many of the other candidates are not doing right now,” said Dave Wilson, a South Carolina conservative strategist and former president of the Palmetto Family Council.

Though he is only officially entering the race now, Scott has already gotten caught in the churn of the campaign season. Shortly after announcing an exploratory committee last month, he was tripped up by questions over his position on a potential national abortion ban.

After initially sidestepping the matter and refusing to say whether he would back a 15-week ban, Scott told WMUR he would support restrictions beginning at 20 weeks. Days later, though, Scott said in an interview with NBC News that he “would literally sign the most conservative pro-life legislation that they can get through Congress.”

Pressed on what precisely that meant, given he had applauded DeSantis for signing a six-week ban in Florida, Scott demurred – saying it was a decision for the states to make.

“I’m not going to talk about six (weeks) or five or seven or 10,” Scott said.

Back at the senator’s home church near Charleston, there are hundreds of worshipers that see him most weekends.

“I’ve heard him talk about hope and opportunity for 25 years. It’s who he is. It’s a part of his story. And so I don’t think he’s going to change,” said Greg Suratt, founding pastor of Seacoast Church.

“I think a misconception that people might have about him is that his niceness, his humility, translates as weakness. And they don’t know the Tim Scott I know, I would like to kind of see it as an iron fist in a velvet glove,” Suratt added, noting that even people who disagree with his politics tend to like him as an individual.

Scott’s faith and his humble beginnings will be a central theme in his campaign, an aide said. Scott grew up in a single parent household in North Charleston, where his mother worked long hours to keep their family afloat.

“Think about the kid whose grandmother has to open the stove to heat the home in the middle of the winter. I think to myself, it kind of feels like that now,” Scott said at a town hall in New Hampshire this month. “So many people with our energy prices doubling in just the last couple years, are experiencing a crisis similar to the one that I had when I was just a kid.”

On his listening tour, Scott said that between the ages of 7 and 14, he “kind of drifted,” failing world geography, civics, English and Spanish in his freshman year of high school. But through the “tireless” encouragement of his mother and mentor, the late John Moniz, a Chick-fil-A manager, Scott says he was able to graduate from Charleston Southern University. He would eventually open his own insurance agency affiliated with Allstate.

Scott credits Moniz with teaching him that anyone can “succeed beyond their circumstances” if they take responsibility for themselves – a message he repeated in North Charleston.

“John taught me that anyone, from anywhere, at any time, can rise above their wildest expectations and imagination,” Scott said after giving roses to Moniz’s widow and his own mother at the beginning of his speech. “But first, I had to take responsibility for myself. He told me in the most loving way possible to look in the mirror and to blame myself.”

Scott’s political career began in 1995, when he ran in a special election to the Charleston City Council, winning a seat he would keep for nearly 15 years. After one term as a state lawmaker, Scott won a US House seat representing South Carolina’s 1st district.

Fellow presidential candidate and former South Carolina Gov. Nikki Haley then appointed Scott to the US Senate in 2012 to fill a vacancy left by Sen. Jim DeMint’s retirement. He retained the seat in a 2014 special election, was re-elected to a full term in 2016 and later won for a third time last year.

“To every single mom who struggles to make ends meet, who wonders if her efforts are in vain, they are not,” Scott said after being appointed by Haley.

During his time in the Senate, Scott has amassed a strictly conservative voting record, but has also led bipartisan police reform talks alongside New Jersey Sen. Cory Booker, a Democrat.

Those talks have gone on for years now, beginning in the summer of 2020 with then-California Sen. Kamala Harris also involved, but hopes for a comprehensive deal were effectively abandoned in 2021. (The conversations reportedly continue, but there is no legislation currently in the offing.)

In 2017, his “Investing in Opportunity Act,” which had some Democratic support, was included in the controversial Republican tax cut bill. The provision called for the establishment of “Opportunity Zones,” which would create tax incentives for businesses that invested in parts of the country struggling with poverty and stalled economies.

“I was one of the lead authors of the Republican tax reform bill that slashed taxes for families, brought jobs and investment back from overseas, and created my signature legislation, the ‘Opportunity Zones,’ that’s brought billions of dollars into the poorest communities that have been left behind,” Scott said in his speech. “That was just one bill. Imagine what we could do with an entire agenda.”

Still, Democrats in South Carolina welcomed Scott to the race with harsh words about his political record – and an attempt to tie him to the GOP’s far right.

“We know how dangerous Tea Party extremist Tim Scott is,” South Carolina Democratic Party chair Christale Spain said in a statement. “From promising to sign the most conservative abortion ban possible as president, to doubling down on his role as ‘architect’ of the 2017 GOP tax scam that pushed tax cuts for the ultra-wealthy at the expense of working families, Scott has proven himself to be just as MAGA as the rest of the 2024 field.”

Though Scott has expressed more openness to working with Democrats than most Republicans in Washington, he also owns one of the most conservative voting records in Congress. He rarely broke with Trump during the latter’s presidency, though he did criticize Trump’s response to White supremacist violence in Charlottesville, Virginia, in 2017.

“What we want to see from our president is clarity and moral authority,” Scott told Vice News at the time. “And that moral authority is compromised.”

Scott largely backed off that line, though, after a meeting with Trump in the White House.

“(Trump) was certainly very clear that the perception that he received on his comments was not exactly what he intended with those comments,” Scott told CBS News.

This story has been updated with additional reporting and reaction.

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May 22, 2023
Biden and McCarthy to discuss debt ceiling Monday as staff-level talks resume | CNN Politics

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This story and headline have been updated with additional developments.

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May 21, 2023
Could the Fed raise rates again in June? | 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
—

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

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

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

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

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

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

Jim Baird, chief investment officer at Plante Moran Financial Advisors, also expects the Fed to hold rates steady in June. But that decision isn’t set in stone, and the Fed will likely monitor three key factors in making its decision, he said. Those are:
The debt ceiling. President Joe Biden and congressional leaders have maintained that the US will likely not default on its debt. But if such a scenario were to happen, it could have catastrophic consequences for the economy and financial markets that would require the Fed wait for the crisis to be resolved before taking action.

Evolving financial conditions. The collapses of regional lenders Silicon Valley Bank, Signature Bank and First Republic have accelerated the tightening of credit conditions. While that has complicated the Fed’s plan to stabilize prices, it also could benefit the central bank by doing some of its work for it by slowing spending.

Delayed impact. The Fed’s interest rate hikes flow through the economy with a lag. So, it will take some months for the full effect of its aggressive tightening cycle to show up in the economy. That means the Fed could want to take a pause to monitor the continuing impact of what it has already done.
The Fed has also maintained that its actions are data dependent, meaning it will keep close watch on economic data that comes in before it’s due to announce its next rate decision on June 14.

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

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

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

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

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

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

Read more here.

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

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

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

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

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

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

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

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

Monday: JPMorgan Chase investor day.

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

Wednesday: May Fed meeting minutes.

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

Friday: April Personal Consumption Expenditures and May University of Michigan final consumer sentiment reading.
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May 21, 2023
Zelensky makes dramatic Japan appearance as G7 leaders take aim at Russia and China | CNN Politics

CNN
—

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

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

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

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

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

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

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

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

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

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

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

China also features heavily.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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May 20, 2023
Debt ceiling talks hit a snag, negotiators press pause for now | CNN Politics

CNN
—

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

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

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

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

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

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

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

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

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

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

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

This story has been updated with additional information.

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May 19, 2023
American consumers are growing worried about a US debt default | CNN

Washington, DC
CNN
—

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

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

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

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

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

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

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

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

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

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

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

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May 12, 2023
Biden to meet with congressional leadership again on Friday as threat of national debt default looms | CNN Politics

Washington
CNN
—

President Joe Biden and top congressional leadership will meet again on Friday after they emerged from their hour-long meeting in the Oval Office on Tuesday with little to show that they’re moving toward a deal to raise the debt ceiling and avoid a default that would have catastrophic economic consequences.

House Republicans want to attach spending reductions to a debt ceiling increase and have passed a debt limit plan that does just that. But Biden and congressional Democrats have insisted on passing a clean increase on the debt limit before addressing a framework for spending.

Although expectations for the meeting were low, House Speaker Kevin McCarthy told reporters that he didn’t see any new movement since his last meeting with the president to discuss the matter in February.

“I would hope that he’d be willing to negotiate for the next two weeks so we could actually solve this problem and not take America on the brink,” McCarthy said outside the West Wing following the meeting.

The California Republican said he asked the president for areas where he’d engage on spending reductions, but “he wouldn’t give me any.”

Speaking alongside McCarthy, Senate Minority Leader Mitch McConnell attempted to assuage fears of a default, stating that “the United States is not going to default. It never has and it never will. However, elections have consequences. We now have divided government. We didn’t have a divided government last year.”

However, McCarthy would not offer concrete assurances about preventing default.

“I’m speaker of the House,” he said. “I’m not the leader of the Senate. I’m not the president … I’ve done everything in my power to make sure it will not default. We have passed a bill that raised the debt limit. Now, I haven’t seen that in the Senate.”

“So,” the speaker continued, “I don’t know.”

House Minority Leader Hakeem Jeffries and Senate Majority Leader Chuck Schumer also told reporters outside the White House that McCarthy was the only leader in the meeting who would not take default off the table.

“Instead of (McCarthy) giving us a plan to remove default, he gave us a plan to take default hostage and that is a shame, because that makes things more complicated,” Schumer said.

Jeffries said that the meeting attendees are organizing their respective teams “to have a discussion about a path forward around the budget and the appropriations process, and everyone agreed.”

“That’s progress,” he added.

Officials had indicated Biden’s goal for the meeting was to move spending negotiations onto a separate track, removing the threat of default while giving Republicans assurances he will engage in good-faith negotiations about federal spending.

Tuesday’s meeting – comprised of the four congressional leaders as well as a handful of congressional and White House aides – marked the first in-person, top-level discussions on the matter at the White House in months.

Biden had not formally held a meeting with McCarthy since February, when the two last discussed the debt ceiling at the White House.

McCarthy has signaled opposition to a short-term debt limit lift. He also said that Congress will need deal in principle to lift debt limit by next week.

Heading into Tuesday’s meeting, McCarthy had more leverage than many expected him to have and House Republicans remain largely behind him.

“There isn’t a single bright line or ‘must have’ that I am married to,” South Dakota GOP Rep. Dusty Johnson, a key McCarthy ally, told CNN. “The totality of the deal has to make real and substantial change to how our country spends and borrows. There are lots of different ways to get there.”

Many House Republicans believe the speaker has built trust within their ranks over the last several months – a testament, they say, to a leader who barely clinched the speakership after a historic 15 rounds of voting.

A source close to McCarthy said the speaker – after months of listening sessions and meetings – feels comfortable with where his conference’s hard lines and negotiable provisions lie. He’s spent the last several days touching base with Republican members across the ideological spectrum and speaking with Louisiana GOP Rep. Garret Graves, who he selected to take lead as a policy adviser on this issue.

Asked what would be a victory in negotiations with the White House, North Dakota Republican Rep. Kelly Armstrong said, “Kevin getting us the best deal he can after the White House engages in good faith negotiations.”

“I recognize what I want and what can get 60 votes in the Senate may not be the same,” he added.

McConnell – known as a Senate deal maker with stronger ties to Biden than McCarthy – has signaled that he won’t come to rescue Democrats in negotiations.

“The solution to this problem lies with two people, the president United States, who can sign a bill and deliver the members of his party to vote for it, and the Speaker of the House,” McConnell told reporters after Tuesday’s meeting. “There is no sentiment in the Senate – certainly not 60 votes – for a clean debt ceiling. So there must be an agreement and the sooner the president and the speaker can reach an agreement, the sooner we can solve the problem.”

In the Senate, all but six Senate Republicans have vowed to oppose raising the debt ceiling “without substantive spending and budget reforms,” backing McCarthy’s position.

The US hit the debt ceiling set by Congress in January. That forced the Treasury Department to begin taking extraordinary measures to keep the government paying its bills. And Treasury Secretary Janet Yellen recently warned that the US could default on its obligations as soon as June 1 if Congress doesn’t address the debt limit.

A breach of the US debt ceiling risks sparking a 2008-style economic catastrophe that wipes out millions of jobs and sets America back for generations, Moody’s Analytics has warned. The impact could include delayed Social Security payments, late paychecks for federal employees and veterans and a direct hit to Americans’ investments.

Stocks fell Tuesday morning as investors awaited updates on the debt ceiling and inflation.

Along with news about the White House, investors are also bracing for the April Consumer Price Index data due on Wednesday, which could give more clues into the Federal Reserve’s planned trajectory in its fight against inflation.

This story and headline have been updated with additional developments.

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May 9, 2023
US could default on its debt as soon as June 1 if Congress doesn’t act, Yellen says | CNN Politics

CNN
—

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This story has been updated with additional information.

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May 1, 2023
‘You’ve underestimated us’: How McCarthy’s horse-trading stopped a GOP revolt in debt fight | CNN Politics

CNN
—

Speaker Kevin McCarthy rolled the dice.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

His members are watching him closely.

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

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April 26, 2023
EXCLUSIVE: Hunter Biden lawyers to meet with Justice Department officials next week as scrutiny of investigation intensifies | CNN Politics

CNN
—

Lawyers for Hunter Biden are scheduled to meet next week with US attorney David Weiss and at least one senior career official from Justice Department headquarters to discuss the long-running investigation into the president’s son, multiple sources familiar with the matter told CNN.

The Hunter Biden legal team had reached out to Justice officials in recent weeks, asking for an update on the case. As is routine when lawyers request a status update, they were invited to meet next week, according to one source familiar with the meeting.

Weiss, the US Attorney in Delaware who was appointed by former President Donald Trump, is overseeing an ongoing criminal case into President Joe Biden’s son.

After prosecutors narrowed down the possible charges Hunter Biden could face last year, there haven’t been any public developments. According to sources familiar with the investigation, prosecutors are still weighing whether to bring two misdemeanor charges for failure to file taxes, one count of felony tax evasion related to the overreporting of expenses, and a false statement charge regarding a gun purchase.

The Justice Department did not comment. A spokesperson for the US attorney’s office in Delaware declined to comment.

Hunter Biden has not been charged with any crimes and has previously denied any wrongdoing.

The scheduled meeting comes as the Hunter Biden legal probe is back in the spotlight after an IRS supervisory special agent reached out to Congress, claiming to have information about alleged mishandling and political interference in the case. While a letter from the agent’s lawyer to Congress does not name Hunter Biden, as that could be a violation of the tax code, a source familiar with the matter previously told CNN that the case is the one involving the president’s son.

The agent is seeking whistleblower protections to share the information with Congress, according to a letter obtained by CNN.

The special agent also claims to have information that contradicts Attorney General Merrick Garland’s testimony before Congress, the source familiar with the matter told CNN. “I have pledged not to interfere with that investigation, and I have carried through on my pledge,” Garland testified in March.

The IRS agent worked on Hunter Biden’s criminal case and contends that the president’s son is being treated differently than other individuals would be in terms of violations of the tax code, sources familiar with the agent’s allegations said. The agent reported up the chain of command about his concerns of the treatment of Hunter Biden’s returns and tax filings, one of the sources added.

Congressional committees are in active conversations about when and how to interview the whistleblower. The IRS agent’s team wants him to do one interview with the committees, and have Democrats and Republicans present for it, the source said.

In recent months, as Republicans took control of the House and the federal case appeared to stall, Hunter Biden’s legal team decided to pursue a more aggressive and litigious approach to his defense, despite what one source described as objections from top White House advisers. For instance, one of Hunter Biden’s lawyers recently sued former Trump aide Garrett Ziegler, accusing him of harassment. Hunter Biden’s team also has accused in court a Delaware computer repair shop owner of trying to invade Hunter Biden’s privacy and wrongfully sharing his personal data for political purposes.

CNN has reached out to Ziegler for comment.

Sources close to Hunter Biden have attacked the IRS agent’s motives and note that even if the whistleblower has evidence of the investigation being mishandled, it would be about government conduct and not about Hunter Biden.

The IRS agent’s allegations are primarily focused on improper politicization of the case at the Justice Department and FBI instead of at the Treasury Department or IRS, according to a source familiar with the matter.

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April 21, 2023
McCarthy slams Biden in handling of US debt | CNN Politics

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

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

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April 18, 2023
The US economy could depend on McCarthy corralling his extremist Republican troops | CNN Politics

CNN
—

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The White House twisted that particular knife on Monday.

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

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

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

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

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

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April 18, 2023
McCarthy makes plea for Republicans to back debt ceiling plan | CNN Politics

CNN
—

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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April 18, 2023
Today is Tax Day. Here’s what you need to know if you haven’t filed your return yet — and even if you have | CNN Business
Editor’s Note: This is an updated version of a story that originally ran on April 14, 2023.

New York
CNN
—

It’s April 18, the official deadline to file your federal and state income tax returns for 2022. (It is also, apparently, National Animal Crackers Day for those who celebrate.)

Whether you have already filed your tax return or still need to, the good news is this tax filing season has gone much more smoothly than the past three, which were hurt by the pandemic.

“This is the first tax season since 2019 where the IRS and the nation were on normal footing,” IRS Commissioner Danny Werfel said in a call with reporters.

For instance, Werfel noted that since January, thanks to an infusion of some new funding after years of budget cuts, IRS employees have been able to answer 87% of calls from filers with questions. Last year, they answered fewer than 15%. And the wait times on those phone calls dropped to just 4 minutes this filing season from 27 minutes last filing season.

The agency also added a roster of new online tools for filers, he added.

Those online tools may be especially helpful today if you are scrambling to get your return in before midnight. Or, if you’ve come to the realization that you need to file for an extension. Either way, here are some key things to know:

Not everyone has to file on April 18: If you live in a federally declared disaster area, have a business there — or have relevant tax documents stored by businesses in that area — it’s likely the IRS has already extended the filing and payment deadlines for you. Here is where you can find the specific extension dates for each disaster area.

Thanks to many rounds of extreme weather in recent months, for instance, tax filers in most of California — which accounts for 10% to 15% of all federal filers — have already been granted an extension until Oct. 16 to file and to pay, according to an IRS spokesperson.

If you’re in the armed forces and are currently or were recently stationed in a combat zone, the filing and payment deadlines for your 2022 taxes are most likely extended by 180 days. But your specific extended filing and payment deadlines will depend on the day you leave (or left) the combat zone. This IRS publication offers more detail.

Lastly, if you made little to no money last year (typically less than $12,950 for single filers and $25,900 for married couples), you may not be required to file a return. But you may want to anyway if you think you are eligible for a refund thanks to, for instance, refundable tax credits such as the Earned Income Tax Credit. (Use this IRS tool to gauge whether you are required to file this year.) You also are likely eligible to use IRS Free File (intended for those with adjusted gross income of $73,000 or less) so it won’t cost you to submit a return.

Your paycheck may not be your only source of income: If you had one full-time job you may think that is the only income you made and have to report. But that’s not necessarily so.

Other potentially taxable and reportable income sources include:
Interest on your savings

Investment income (e.g., dividends and capital gains)

Pay for part-time or seasonal work, or a side hustle

Unemployment income

Social Security benefits or distribution from a retirement account

Tips

Gambling winnings

Income from a rental property you own
Organize your tax documents: By now you should have received every tax document that third parties are required to send you (your employer, bank, brokerage, etc.).

If you don’t recall receiving a hard copy of a tax form in the mail, check your email and your online accounts — a document may have been sent to you electronically.

Here are some of the tax forms you may have received:
W-2 from your wage or salaried jobs

1099-B for capital gains and losses on your investments

1099-DIV from your brokerage or company where you own stock for dividends or other distributions from their investments

1099-INT for interest over $10 on your savings at a financial institution

1099-NEC from your clients, if you worked as a contractor

1099-K for payments for goods and services through third-party platforms like Venmo, CashApp or Etsy. The 1099-K is required if you made more than $20,000 in over 200 transactions during the year. (Next year the reporting threshold drops to $600.) But even if you didn’t get a 1099-K you still must report all the income that you made over third-party platforms in 2022.

1099-Rs for distributions over $10 that you received for a pension, annuity, retirement account, profit-sharing plan or insurance contract

SSA-1099 or SSA-1042S for Social Security benefits received.
“Be aware that there’s no form for some taxable income, like proceeds from renting out your vacation property, meaning you’re responsible for reporting it on your own,” according to the Illinois CPA Society.

One very last-minute way to reduce your 2022 tax bill: If you’re eligible to make a tax-deductible contribution to an IRA and haven’t done so for last year, you have until April 18 to contribute up to $6,000 ($7,000 if you’re 50 or older). That will reduce your tax bill and augment your retirement savings.

Proofread your return before submitting it: Do this whether you’re using tax software or working with a professional tax preparer.

Little mistakes and oversights delay the processing of your return (and the issuance of your refund if you’re owed one). You want to avoid things like having a typo in your name, birth date, Social Security number or direct deposit number; choosing the wrong filing status (e.g., married vs single); making a simple math error; or leaving a required field blank.

What to do if you can’t file by April 18: If you’re not able to file on time, fill out Form 4868 electronically or on paper and send it in no later than today. You will be granted an automatic six-month extension to file.

Note, however, that an extension to file is not an extension to pay. You will be charged interest (currently running at 7%) and a penalty on any amount you still owe for 2022 but haven’t paid by April 18.

So if you suspect you still owe tax — perhaps you had some income outside of your job for which tax wasn’t withheld or you had a big capital gain last year — approximate how much more you owe and send that money to the IRS by the end of today.

You can choose to do so by mail, attaching a check to your extension request form. Make sure your envelope is postmarked no later than April 18.

Or the more efficient route is pay what you owe electronically at IRS.gov, said CPA Damien Martin, a tax partner at EY. If you do that, the IRS notes you will not have to file a Form 4868. “The IRS will automatically process an extension of time to file,” the agency notes in its instructions.

If you opt to electronically pay directly from your bank account, which is free, select “extension” and then “tax year 2022” when given the option.

You can also pay by credit or debit card, but you will be charged a processing fee. Doing so, though, may become much more costly than just a fee if you charge your tax payment but don’t pay your credit card bill off in full every month, since you likely pay a high interest rate on outstanding balances.

If you can’t pay what you owe in full, the IRS does have some payment plan options. But it might be smart to first consult with a certified public accountant or a tax preparer who is an enrolled agent to make sure you are making the best choice for your circumstance.

If you still owe income taxes to your state, remember that you may need to go through a similar exercise of filing for an extension and making a payment to your state’s revenue department, Martin said.

Use this interactive tax assistant for basic questions you may have: The IRS provides an “interactive tax assistant” that can help you answer more than 50 basic questions pertaining to your individual circumstance on income, deductions, credits and other technical questions.

If you’ve already filed your return, you’re probably glad to have it in the rear view mirror. But you may still have a few questions about what’s ahead.

What about my refund? If you are due a refund, the IRS typically sends it within 21 days of receiving your return. When yours does arrive, it may be smaller than last year, even if your financial life didn’t change much. That’s because a number of Covid-related tax breaks expired.

So far, the average refund paid was $2,878 for the week ending April 7, down from $3,175 at the same point in last year’s filing season.

Will I be audited?: The reasons and methods for auditing a taxpayer can vary — and many audits result in “no change,” meaning you don’t end up owing anything more to the IRS. But one thing is common for the vast majority of US tax filers: Audit rates are exceedingly low.

For filers reporting incomes between $50,000 and $200,000, only 0.1% of them were audited in 2020, according to the latest data from the IRS. Even for very high income filers, audit rates were quite low: Just 0.4% for those reporting income of between $1 million and $5 million; 0.7% for those with income between $5 million and $10 million; and 2.4% for returns with income over $10 million.

Looking ahead, the IRS commissioner noted in a press call that the agency will be using money from the Inflation Reduction Act to bolster its compliance efforts to focus more on auditing high-income individuals — defined as making $400,000 or more. As for filers with income below that level, he said he did not anticipate any change in the likelihood they would be audited.
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April 18, 2023
Opinion: Why millionaires like us want to pay more in taxes | CNN

Editor’s Note: Abigail Disney is an Emmy-winning documentary filmmaker, activist, and member of the Patriotic Millionaires. Her latest film, “The American Dream and Other Fairy Tales,” co-directed with Kathleen Hughes, made its world premiere at the 2022 Sundance Film Festival. Morris Pearl is the chair of Patriotic Millionaires, and former managing director of BlackRock. The opinions expressed in this commentary are their own. View more opinion on CNN.

CNN
—

Tuesday is Tax Day in America, one of the most stressful days of the year, when many taxpayers will finally end their procrastination, file their federal returns, and hope for a refund from the IRS. But for many of the nation’s wealthiest, it’s just another Tuesday.

Tax Day isn’t just a filing deadline — it’s also an annual reminder that the ultra-rich exist in an entirely separate world when it comes to taxes. For us, the loopholes are bigger and the rates are sometimes lower. Meanwhile, the rich keep getting richer, with the wealth of billionaires in particular growing by more than $1.5 trillion over the last few years.

This status quo is unfair, but even more importantly, it’s unsustainable. Such high levels of inequality are pushing our economy and our democracy to their breaking points. That’s why we should examine how we can set our country up for long-term stability and prosperity. And we should start by ensuring that the ultra-rich pay more of what they owe the country that made their success possible.

There are three changes to the tax code that would help us do just that:

Right now, the US tax system values money over sweat. If you work hard for your money instead of earning it passively, you’re essentially penalized for it. People who earn a salary pay significantly higher tax rates on their income than wealthy investors who passively earn capital gains income.

Inheriting money is an even better deal. Thanks to former president Donald Trump’s 2017 tax law, the first $12.92 million (or $25.84 million for a married couple) is completely exempt from any estate tax, and the stepped-up basis loophole allows wealthy families to permanently erase millions in capital gains taxes by resetting the market value of those assets to their value at the time of the original owner’s death. With this, it becomes relatively simple for the rich to inherit tens, even hundreds of millions of dollars, and pay almost nothing in taxes. Someone working for that money, on the other hand, would pay over a third of it in federal income taxes.

Why do we have a tax code that says working people should be taxed more than wealthy investors and those who got rich just by virtue of being born into the right family? At the end of the day, money is money, whether you worked for it or whether you inherited it. As an heiress and an investor, we should not be paying lower tax rates than people who earn their money from working.

It’s time for the tax code to treat all income equally by taxing all capital gains over $1 million at the same rates as ordinary income, and replacing our loophole-ridden estate tax with a simpler inheritance tax that treats inherited wealth as income.

We can’t just focus on income, however, because many of the richest Americans earn basically no taxable income of any kind in a typical year. Capital gains are only taxed when assets are sold, so instead of selling them, the ultra-rich use their assets as collateral to borrow vast sums of money at extremely low interest rates to live on, and then declare little or even negative “income” on their tax forms. This “Buy, Borrow, Die” strategy is a major reason billionaires paid a lower effective tax rate over recent years than working-class families.

By rethinking what is taxable, we can get access to the trillions of dollars of billionaire wealth that is untouchable under our current tax structure. That’s why President Biden has proposed the Billionaire Minimum Income Tax, which would tax the unrealized capital gains of the wealthiest households and why others have proposed wealth taxes on billionaires.

Finally, one of the most straightforward changes needed is to simply tax the extremely rich more than the merely rich. Our income tax caps out at a top rate of 37% for any income over $578,125 (or $693,750 for married couples). No matter how much more someone makes, they’ll never pay more than 37% in federal income taxes.

While someone earning $600,000 is certainly making enough to live a very comfortable life, they’re in a different world than someone making $600 million a year. In order to reflect the real differences between the rich and the ultra-rich, we need to return to the top rates we had through the most prosperous decades of the 20th century and add significantly more tax brackets. They should reach up to 90% for people making more than $100 million a year.

These three changes certainly won’t fix all our country’s problems on their own, but they would go a long way in stopping the steady flow of our country’s wealth toward a smaller and smaller group of people, a change that would make both our democracy and our economy more stable. The tax code can be a powerful tool for both social and economic change. We just need to use it more effectively.

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April 17, 2023
House Republicans in talks over one-year debt ceiling plan in push to challenge White House | CNN Politics

Washington
CNN
—

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

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

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

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

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

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

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

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

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

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

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

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

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

This story has been updated with additional information.

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April 16, 2023