The Hill’s Morning Report — Biden, McCarthy talk debt divisions without breakthrough

by Alexis Simendinger and Kristina Karisch - 02/02/23 6:25 AM ET

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President Biden says it shouldn’t happen. Speaker Kevin McCarthy (R-Calif.) says no one wants it to happen. And the Federal Reserve chairman said on Wednesday that it’s up to Congress to prevent U.S. default by voting to let the Treasury Department borrow to pay the country’s bills.

After spending an hour together in the Oval Office during a much-anticipated tête-à-tête about the debt limit and other topics, Biden and McCarthy agreed they see the problem differently.

“I don’t want to put any words in his mouth,” McCarthy told reporters while standing in the White House driveway on a cold day after a meeting he sought, The Hill’s Brett Samuels reported.

“I thought it was a very good discussion and we walked out saying we would continue the discussion,” McCarthy said. “I think there is an opportunity here to come to an agreement on both sides. … My role right now is to make sure we have a sensible, responsible ability to raise the debt ceiling but not continue this runaway spending.”

Biden told the Speaker that he would not negotiate on the limit, but is open to a “separate discussion with congressional leaders about how to reduce the deficit and control the national debt while continuing to grow the economy,” according to a White House summary of the meeting.

McCarthy would not make any explicit commitments that the U.S. would not default, which the president wants. But the Speaker spoke positively.

The New York Times: Biden, McCarthy discuss debt limit as financial crisis looms.

“There is nothing in there with me walking away that does not believe that at the end of the day we can come to an agreement,” McCarthy said.

What that agreement will be is still months away, according to veterans of previous debt ceiling battles. Senate Minority Leader Mitch McConnell (R-Ky.) — who helped broker last-minute compromises during past budget impasses and the 2011 debt ceiling battle (Vox) — called for good-faith negotiations on Wednesday while accusing Senate Majority Leader Charles Schumer (D-N.Y.) of hypocrisy when it comes to the statutory cap on borrowing, which Treasury reached last month (The Hill).

Federal Reserve Chairman Jerome Powell put the responsibility on Congress to lift the borrowing limit. “There is only one way forward here and that is for Congress to raise the debt ceiling,” he said Wednesday during a press conference to announce another interest rate hike. “Any deviations from that path would be highly risky and no one should assume that the Fed can protect the economy” (The Wall Street Journal).

Anxieties that the United States might default because of the partisan impasse over accumulated debt and federal spending have revived talk that the Treasury could prioritize debt payments to prevent disaster. Treasury officials and the administration have rejected that possibility.

“I believe that Congress will wind up acting as it must in the end to raise the debt ceiling,” Powell said, eager to discourage the idea that the central bank would resolve political stalemate. “I believe it will happen” (Yahoo Finance).

McCarthy says the Pentagon’s budget is on the table as Republicans seek to negotiate savings over a 10-year budget window. His caucus has not identified where members envision cuts but have said Social Security and Medicare will not be touched. McCarthy has agreed with conservative lawmakers to cap all new discretionary spending at fiscal 2022 levels, which would amount to a $75 billion cut in the defense budget. The Speaker has disputed that specific figure, reports The Hill’s Brad Dress.

▪ The Hill: In a dramatic move served cold, McConnell removed GOP Sens. Rick Scott (Fla.) and Mike Lee (Utah) from the powerful Senate Commerce Committee. The pair had attempted to oust him as GOP leader.

▪ The New York Times: Meet the women on the House and Senate Appropriations committees who want to avoid a spending train wreck.

▪ The Hill: Republicans on Wednesday advanced a resolution to the House floor that would oust Rep. Ilhan Omar (D-Minn.) from the House Foreign Affairs Committee based on past comments critical of Israel, for which she apologized.

Truth & consequences? Another day, another headline about Rep. George Santos (R-N.Y.). FBI agents are investigating the congressman’s role in an alleged GoFundMe scheme involving a disabled U.S. Navy veteran’s dying service dog, Politico reported on Wednesday. Two agents contacted former service member Richard Osthoff on behalf of the U.S. Attorney’s Office in the Eastern District of New York.

New York Democrat Robert Zimmerman lost to Santos by more than 7 percentage points in November before the world caught wind of Santos’s lies and résumé inventions. “We’re going to get him out of office,” Zimmerman assured a woman during a recent League of Women Voters luncheon. “As you should!” she replied (The Washington Post).

The investigators: The Hill’s Emily Brooks and Rebecca Beitsch report on House Judiciary Committee Chairman Jim Jordan (R-Ohio), a pugnacious former wrestling coach, defender of former President Trump and now a McCarthy ally who vows to wield GOP subpoena power against the White House and Biden. Jordan chaired his panel’s first hearing on Wednesday, focused on the administration’s immigration and border policies (The Hill). The House investigative fireworks will continue on that subject next week.

Related Articles

▪ The Hill: The FBI found no classified documents on Wednesday at the president’s house in Rehoboth Beach, Del., according to Biden’s personal lawyer.

▪ Axios: Biden today expanded federal workers’ potential access to paid and unpaid family and medical leave benefits, including during employees’ initial year of federal employment and for reasons related to personal “safety.” Family and medical leave was among themes in the president’s State of the Union address last year and is a topic of pending legislation (Ms. magazine).

▪ The Hill: An amendment that would have allowed guns in the House Natural Resources Committee room failed on a party-line vote on Wednesday after lawmakers debated that question.

▪ Time: Sen. John Fetterman (D-Pa.) is using assistive technology in the Capitol as part of his stroke recovery.

▪ Axios: Biden’s electric vehicle surprise: New federal tax credits designed to be an incentive for carmakers to scale up domestic battery manufacturing are popular (and more expensive for the government than initially projected).

▪ The Hill: House Democrats named the members of the select committees on Intelligence, China, COVID-19 and the “weaponization” of government.

▪ Politico: McCarthy’s detractors landed on these House committees.

LEADING THE DAY

➤ ECONOMY

Some who listened to Powell’s news conference at the Fed on Wednesday said they were puzzled. “Certainty is just not appropriate here,” he told reporters. The dovish takeaway among market investors, despite cautious Fed language, was a sunny-side-up bet that the central bank is nearing the end of rate hikes to tame inflation.

The Federal Open Market Committee announced a quarter-point rate hike, moderated from six consecutive larger rate increases in an effort to bring down inflation. It’s the smallest rate hike since March, which will lift the federal funds rate to a range of 4.5 to 4.75 percent as the central bank pushes toward a projected target rate of 5.1 percent (The Hill).

Powell cautioned that while it is “good” that “deflationary” conditions are evident in some economic sectors, price stability has not been attained and “the job is not fully done.” His upshot: “Given our outlook, I don’t see us cutting rates this year, if our outlook comes true.”

“The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time,” the FOMC said in its statement.

“[Powell] did go back and forth giving you both sides of the argument,” said former Goldman Sachs Chief Operating Officer Gary Cohn, a former economic adviser in the Trump White House. “The only thing he kept hanging his hat on was the labor market. At this point it feels like we are just labor dependent” (CNBC).

▪ The Hill: Five things from the Fed rate hike that raised eyebrows.

▪ CBS News: Stocks rise after Fed acknowledges “disinflationary process has started.”

▪ The Hill: The Fed can’t fix inflation alone. Here’s why.

▪ The Hill: Here’s how Fed rate hikes are hurting tech firms.

▪ Politico: Biden is leaning toward Fed Vice Chairwoman Lael Brainard as National Economic Council director and longtime adviser and labor economist Jared Bernstein to be chair of the Council of Economic Advisers.

➤ POLITICS

Florida Gov. Ron DeSantis’s (R) record on the COVID-19 pandemic is about to come under increased scrutiny, especially if he runs for president. Former President Trump accused DeSantis over the weekend of trying to “rewrite history” on his pandemic record. In recent weeks, DeSantis has tried to portray himself as someone who resisted COVID-19 restrictions to the maximum extent, but Trump asserted that “Florida was closed for a long period of time.” The Hill’s Niall Stanage has put together a timeline of what DeSantis actually did and said about COVID-19.

Vox: Remember the Stormy Daniels “hush money” case against Trump? It’s back.

Virginia Gov. Glenn Youngkin (R) announced this month that he turned down a Ford electric vehicle battery plant in the state, writes The Hill’s Zack Budryk. While Youngkin cited concerns over connections with the Chinese government, environmentalists and Democrats in the state are accusing the governor of picking fights on environmental issues as a prelude to a possible 2024 White House run.

Meanwhile, former Maryland Gov. Larry Hogan (R) told Fox News on Tuesday that he was giving the 2024 presidential election “very serious consideration.”

The New York Times: Former South Carolina Gov. Nikki Haley is expected to join the 2024 race this month, but other GOP contenders are taking a wait-and-see approach. Some anti-Trump Republicans worry that too much dithering could be costly.

“I don’t think he [Trump] is going to be the nominee,” Hogan said. “But, you know, look, I’m not one of the folks that focused my time just attacking the president. I just was one of the few Republicans that was willing to stand up and say when I disagreed.”

▪ The Hill: GOP moves to stop unelectable Senate candidates.

▪ The Hill: Sen. Dianne Feinstein (D-Calif.) raises $600, with less than $10K in funds amid Senate 2024 speculation.

A new internal report prepared by the Republican National Committee proposes creating a permanent infrastructure in every state to ramp up “election integrity” activities in response to the GOP’s disproven claims of ranks of widespread fraud and abuse of the electoral process, The Washington Post reports. The report proposes a new party organization involving state-level “election integrity officers” and intensive new training models for poll workers and observers — based on unsubstantiated claims that Democrats have implemented election procedures that allow for rigged votes.

Meanwhile hundreds of local election officials across the country are about to confront a political challenge that will put their management skills and their campaign chops to the test — administering the 2024 presidential vote while running for reelection themselves. The large slate of below-the-radar campaigns will test how much money and attention will be available for these critical roles in a presidential election year.

“The concerns about being primaried is absolutely on the mind of very dedicated and very middle-of-the-road, nonpartisan-functioning” election officials in Florida, Mark Earley, the election supervisor in blue-leaning Leon County, Fla., told Politico.

▪ The Kansas City Star: How did someone steal $700,000 from Sen. Jerry Moran’s (R-Kan.) campaign in the midst of an election?

▪ The New Yorker: What Ron Klain learned in the White House. Biden’s departing chief of staff is a case study in the slow accumulation of expertise.

▪ CNN: “Go on offense”: Inside Democrats’ strategy to try to undercut GOP investigations and protect Biden.

IN FOCUS/SHARP TAKES

➤ INTERNATIONAL

A private memo on Friday from an Air Force general telling his charges to prepare for war with China in just two years stoked worst-case fears for rising global tensions over Taiwan and the South China Sea, writes The Hill’s Ellen Mitchell. The forecast from Air Mobility Command head Gen. Mike Minihan set off debate among U.S. lawmakers and current and former defense officials. But foreign policy experts said they see little evidence that China is poised to engage in a fight over Taiwan in that timeframe.

“I will say that most of my colleagues who are in the China circle do not believe that a Chinese attack on Taiwan is likely in the next five years,” Yun Sun, director of the Stimson Center’s China program, told The Hill.

▪ The Hill: All eyes on Secretary of State Antony Blinken’s upcoming China trip.

▪ The New York Times: U.S. to boost military role in the Philippines as fears over Taiwan grow.

▪ Reuters: “Nobody wants to come this way”: Some Afghans risk an 11-country trek to seek haven in the U.S.

▪ The New Republic: Israeli Prime Minister Benjamin Netanyahu says not to get “hung up” on peace.

▪ Bloomberg News: Israeli jets bomb Hamas targets in Gaza Strip amid rising strife.

As Western allies rush heavier weapons to help Ukraine reclaim occupied territory, Moscow’s forces are intensifying assaults along the eastern front in what Ukrainian President Volodymyr Zelensky has described as the opening moves of a new Russian offensive. Both sides have been readying for heavier ground combat for months, and Moscow is expected to press on with its goal of capturing the entire Donbas region of eastern Ukraine as Kyiv aims to expel Russian troops completely (The New York Times).

“Russia really wants some kind of big revanche,” Zelensky said this week. “I think it has started.”

▪ The Hill: Netanyahu says he’d consider mediating Ukraine-Russia peace if asked.

▪ The Washington Post: In visit to wartime Kyiv, the EU sells an “European dream” that remains distant.

OPINION

■ It’s past time to reduce over-classification, by former Rep. Jane Harman (D-Calif.), opinion contributor, The Hill. https://bit.ly/3Dw64K4

■ Florida’s treatment of Black history calls for an African-centered response, by Roger House, opinion contributor, The Hill. https://bit.ly/3HPEc6w

WHERE AND WHEN

📲 Ask The Hill: Share a news query tied to an expert journalist’s insights: The Hill launched something new and (we hope) engaging via text with Editor-in-Chief Bob Cusack. Learn more and sign up HERE.

The House will convene at 9:30 a.m.

The Senate meets at 10 a.m. to begin consideration of the nomination of Joseph Falk to be a member of the board of directors of the United States Institute of Peace.

The president will receive the President’s Daily Brief at 7 a.m. Biden and Vice President Harris will attend the National Prayer Breakfast on Capitol Hill at 8 a.m. At 12:30 p.m., the president will eat lunch with King Abdullah II of Jordan and His Royal Highness Crown Prince Hussein. Biden and Harris will deliver remarks at 2:15 p.m. in the East Room to mark the 30th Anniversary of the Family and Medical Leave Act. At 4:30 p.m., they will meet with Congressional Black Caucus members in the Oval Office.

The secretary of state will meet with Jordan’s King Abdullah II at 9:40 a.m.At 11 a.m., the secretary will address the Thursday Luncheon Group’s 50th anniversary celebration at the State Department.

Transportation Secretary Pete Buttigieg will speak at 9 a.m. ET during a newsmaker online conversation with Punchbowl News. Information is HERE.

Economic indicator: The Labor Department at 8:30 a.m. will report on filings for unemployment benefits in the week ending Jan. 28.

The White House daily press briefing is scheduled at 12:45 p.m.

ELSEWHERE

➤ STATE WATCH

In New Jersey, a federal judge on Tuesday temporarily blocked a state law signed in June that allowed lawsuits against gun manufacturers for creating a “public nuisance” with the sale and marketing of firearms. The law also allows liability for gun industry members who fail to “establish, implement, and enforce reasonable controls” on those products (The Hill).

In Florida, a state judge on Wednesday ordered the Agency for Health Care Administration to produce by Feb. 14 documents related to its determination that gender-affirming health care cannot be covered under Medicaid because treatments are “experimental and investigational” (The Hill).

California water agencies on Tuesday issued a separate, alternate proposal for dividing usage of the Colorado River, two days after six other states in the basin issued a joint proposal (The Hill).

Politico: The Biden administration is caught between California and its neighbors in Colorado River fight.

The vice president on Wednesday spoke briefly at the Memphis, Tenn., funeral for Tyre Nichols, the 29-year-old Black man who died three days after being beaten by Memphis police officers in January. With the families of other victims of police violence in attendance, Harris and several other speakers called for passage of a police reform bill that cleared the House in 2021 and stalled in the Senate..

“This violent act was not in pursuit of public safety. … When we talk about public safety, let us understand what it means in its truest form,” Harris said of the police violence in Memphis before Nichols’s death. “Tyre Nichols should have been safe.”

Nichols’ beating was captured on videos that were released publicly last week, sparking protests. Biden said in a statement that the footage left him “outraged and deeply pained” (The New York Times and Politico).

▪ ABC24: Nichols’s family speaks at his funeral in Memphis.

▪ NPR: Four of the five officers charged in Nichols’s death had prior violations at work.

▪ The New York Times: Memphis gathers in grief at Nichols’s funeral.

▪ The Hill: Jon Stewart blasts media for playing Nichols video “like wallpaper.”

In a new survey, two-fifths of millennials say their parents still pay one or more of their monthly bills, writes The Hill’s Daniel de Visé. The most common parental subsidy is the largest one: 41 percent of millennials say a parent or parents pay their rent or mortgage. Smaller shares receive parental help with their auto insurance and car payments, utility bills and streaming services. This is partly about adult children living at home and partly a sign of the high cost of living for America’s younger adults.

USA Today: About 18 million college students received a financial boost from the COVID-19 rescue law.

🎩 At Gobbler’s Knob in Punxsutawney, Pa. — where Groundhog Day with “Phil” continues a 137-year tradition featuring critters that belong in the squirrel family — the furry rodent makes his prediction at approximately 6:30 a.m. Tune in HERE, and read CNN’s roundup of the bizarre history of Groundhog Day.

➤ PANDEMIC & HEALTH

The practice of telehealth may be in legal limbo. A federal emergency declaration in January 2020 waived the requirement for healthcare providers to meet patients in person before prescribing tightly regulated drugs known as controlled substances, ranging from opioids to benzodiazepines. Psychiatrist Adam Pruett, who is based in Vermont, built a nationwide telehealth practice prescribing ketamine as a mental health treatment, but once the pandemic emergency declaration expires, Pruett’s practice could be in a legal gray zone (The Washington Post).

“My office is going to plan to operate as normal and follow the law, whatever that may be,” Pruett told the Post.

As global demand for COVID-19 vaccines dries up, Gavi, the international immunization organization that bought the shots on behalf of the vaccination program Covax, has been urgently negotiating to try to get out of its deals with pharmaceutical companies for shots it no longer needs. But drug companies have so far declined to refund $1.4 billion in advance payments for now-canceled doses (The New York Times).

▪ The Atlantic: Pandemic-era outdoor dining is doomed.

▪ The Washington Post: Ultra-processed foods may increase ovarian, other cancer risks, study says.

▪ The New York Times: To prevent cancer, more women should consider removing their fallopian tubes, experts say.

▪ NPR: Nursing home owners drained cash while residents deteriorated, state filings suggest.

▪ Vox: Insulin is way too expensive. California has a solution: Make its own.

▪ Nexstar: The Centers for Disease Control and Prevention warns consumers not to use EzriCare Artificial Tears while it investigates dozens of reported U.S. eye infections.

Information about the availability of COVID-19 vaccine and booster shots can be found at Vaccines.gov.

Total U.S. coronavirus deaths reported as of this morning, according to Johns Hopkins University (trackers all vary slightly): 1,108,512. Current U.S. COVID-19 deaths are 3,756 for the week, according to the Centers for Disease Control and Prevention. (The CDC shifted its tally of available data from daily to weekly, now reported on Fridays.)

THE CLOSER

Take Our Morning Report Quiz

And finally … It’s Thursday, which means it’s time for this week’s Morning Report Quiz! As February starts, we’re looking for expert puzzlers who recognize endings in this week’s headlines.

Be sure to email your responses to asimendinger@digital-stage.thehill.com and kkarisch@digital-stage.thehill.com — please add “Quiz” to your subject line. Winners who submit correct answers will enjoy some richly deserved newsletter fame on Friday.

What did the Biden administration say will conclude in May?

Debt limit
Pandemic public health emergency
Suspense about the president’s reelection plans
White House use of Twitter

Who on Wednesday announced, “I’m retiring for good”?

Charlie Crist
Clint Eastwood
Tom Brady
Judy Woodruff

Which 50-year-old workhorse recently ended life as No. 1,574?

Boeing 747
Sesame Street
Dodge Durango Hellcat
Susan B. Anthony dollar

Which daytime TV celebrity this week announced a spring finale after a 21-year run?

Ellen DeGeneres
Al Roker
Dr. Phil
Judge Judy

Stay Engaged

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