Debt Ceiling Crisis Heating Up Already; The Joe Biden Document Puzzle
Author: Greg Valliere
January 17, 2023
THE IMMEDIATE THREAT: The nation’s $31.4 trillion debt ceiling will be hit within the next few days, but Treasury officials will shift funds from one account to another, which should keep the government open until early summer. Then the crisis will really heat up.
AS WASHINGTON ANALYSTS GAME OUT a late-summer crisis, the first question is what do House Republicans want. The simple answer is that they want a budget surplus within a decade, but getting there will require massive spending cuts. Social Security won’t be on the table, but Medicare payments may be. What about the Trump tax cuts that expire in two years? What about defense spending?
AS ON MANY ISSUES, the Republicans are badly divided, especially on defense outlays; a Pentagon spending freeze would prompt some GOP House members to vote against a budget bill. Our best guess is that the rate of increase for defense – and everything else, for that matter – will slow but not actually decrease.
HOUSE LEADERS, FEARFUL THAT A DOZEN RADICALS could prompt a politically disastrous government shutdown and debt default, are floating a plan that would prioritize spending if there’s a default. Debt interest payments would be made, Social Security checks would be mailed, veterans would get their benefits, but discretionary spending would take a massive hit.
DEMOCRATS WE TALKED WITH THIS WEEKEND speculated about an alliance this summer between virtually all Democrats and just enough House Republicans to pass a debt ceiling extension. Another option could be a “discharge petition,” which would require only a simple House majority to bring a debt ceiling hike to the floor.
THE NEXT CHAPTER IN THIS SAGA will be a document from Republicans specifying what spending they propose to cut. That will get enormous pushback from Democrats and quite a few Republicans.
AS THIS FIGHT SIMMERS, it’s inevitable that officials at the Federal Reserve will be paying attention. The prospect of a government shutdown, then a default crisis, could make the central bankers a little less likely to hike rates much more — as the jittery markets brace for Washington’s self-inflicted budget crisis.
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AS WE WROTE ON FRIDAY, Democrats in this town are stunned by the inept White House handling of secret documents, some of which were found in Joe Biden’s garage. This crisis probably won’t cost Biden the Democrats’ nomination, but there’s one very big lingering puzzle — some of the documents were discovered last Nov. 2, which wasn’t revealed until nearly a week later, after the mid-term elections.
WHO MADE THE DECISION TO HIDE THE DOCUMENTS FOR A WEEK? As Biden stonewalls, refusing to talk with reporters, a suspicion persists that he played a role in keeping the documents from the public just before the elections.
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