Yellen Warns Debt Ceiling Failure Would Be ‘Catastrophic’

Yellen Warns Congress: Failure to Raise Debt Ceiling Would Be ‘Catastrophic’

Treasury Secretary Janet Yellen told lawmakers Wednesday that they must raise or suspend the debt limit before August 1 or risk incurring “absolutely catastrophic economic consequences.”

A two-year agreement to suspend the debt ceiling expires after July 31, at which point the Treasury would take what it calls extraordinary measures to keep paying the government’s bills. In the past, the Treasury’s extraordinary measures have provided a cushion of several months, but massive spending on Covid relief programs has muddied the financial picture. Speaking to a Senate subcommittee, Yellen said the government could run out of money at some point in August, possibly when Congress is out of town on its summer recess.

“I believe it would precipitate a financial crisis, it would threaten the jobs and savings of Americans, and at a time when we're still recovering from the COVID pandemic,” Yellen said of a default.

“I would plead with Congress simply to protect the full faith and credit of the United States by acting to raise or suspend the debt limit as soon as possible.”

With Time Running Short, Paying for Infrastructure Deal Remains a Roadblock

Lawmakers and the White House continue to haggle over an infrastructure deal, with differences over how to pay for the proposed spending still the major sticking point. The pressure to make progress is building as time draws short before senators are set to leave town late Thursday for a two-week July 4 recess.

“We all feel that very strongly. We have to have a deal before we leave tomorrow,” said Sen. Joe Manchin (D-WV), according to The Wall Street Journal. Sen. Jon Tester (D-MT) similarly said it was essential to make some progress quickly: “Tomorrow people are going to be leaving, we’re going to be gone for two weeks,” he said. “It ain’t like I’m going to be easy to get a hold of. And so I think today is pretty critical.” And White House Press Secretary Jen Psaki told reporters Wednesday President Joe Biden needs to see "progress over the next couple days."

Some optimism remains: “Inch by inch we’re making progress and it’s my hope that we can get something done by the end of the day,” Sen. Mitt Romney (R-UT) told reporters Wednesday, according to the Journal. And Republicans said they had agreed to up their estimate of how much revenue could be raised through increased IRS enforcement.

Still, while some Republicans said the White House is negotiating in good faith, others reportedly are questioning Biden’s desire to reach a bipartisan deal. Politico reports that “a growing number of GOP senators say the Biden administration isn’t showing enough flexibility when it comes to how to pay for any agreement, rejecting their proposals to raise user fees on drivers and resisting their push to raid coronavirus relief accounts for infrastructure.”

In a concession to Republicans, Democratic negotiators have taken Biden’s proposed tax hikes off the table but have pushed back on other GOP financing proposals. “The Romney-Manchin group came up with pay-fors, and the White House keeps knocking them down like bowling pins,” Sen. John Kennedy (R-LA) said, according to Politico. “One after the other, boom boom boom, until there’s nothing left besides 'sic the IRS on half the Western Hemisphere to raise the money'.”

The White House has also made clear it won’t let talks with the bipartisan Senate group drag on for long before shifting to focus on a plan to pass infrastructure legislation via the budget reconciliation process, which could avoid the need for Republican support. Senate Majority Leader Chuck Schumer (D-NY) and House Speaker Nancy Pelosi (D-CA) were scheduled to meet with administration officials late Wednesday to discuss the bipartisan deal and the Democratic plan.

Government Health Care Coverage Nearly Matches Private Insurance Now

The surge in Medicaid enrollment during the Covid-19 pandemic has pushed the U.S. health care system closer to what could be a significant tipping point: when more people get their health insurance through publicly funded programs than through the private sector.

Looking at the issue Tuesday, Yahoo Finance’s Rick Newman noted that enrollment in Medicaid and the Children’s Health Insurance Program now exceeds 80 million, while Medicare covers about 64 million. More than 13 million people get coverage through the marketplaces established by the Affordable Care, and about 19 million get their care through the Defense Department and the Veterans Administration.

Accounting for duplicates, such as the 11 million who are covered by both Medicaid and Medicare, the number of people covered through the government comes to at least 150 million, Newman says, and it could be several million higher.

By contrast, the private sector covered about 158 people in 2019, although that number has likely decreased due to pandemic-related job losses, falling to perhaps 153 million.

In the end, the numbers are very close to equal.

“Our system is not nearly as private as people might think,” Larry Levitt of the Kaiser Family Foundation told Newman. “The government plays a huge role in our health care system. We’re at or very close to the point where more people are getting coverage sponsored by the government than by employers.”

Biogen Says It May Work With Medicare on Alzheimer’s Drug Costs

Facing a backlash over the potential costs of its newly approved Alzheimer’s treatment Aduhelm, drugmaker Biogen said Wednesday that it was open to working with Medicare and other insurers to adjust the price of drug, which it set at $56,000 a year.

The Food and Drug Administration approved the drug earlier this month despite uncertainty about whether it works, raising the prospect that Medicare could face billions of dollars in increased costs.

“In the event that our fundamental assumptions on population size and rate of adoption are significantly different than expected, we stand ready to work with public and private payers to address pricing in order to achieve both patient access and support budget sustainability,” the company said in a statement.

It added: “We are committed to engaging with [the Centers for Medicare and Medicaid Services] on innovative price and access agreements, including but not limited to, volume-based agreements that would help support continued sustainability of Medicare budgets.”

The company also said it is prepared to work with Medicare and other payers to “create innovative agreements” to lower out-of-pocket costs for patients taking Aduhelm.

It did not provide details on how it might modify Aduhelm’s pricing or out-of-pocket costs.

Biogen estimated that 1 million to 2 million Alzheimer’s patients with mild cognitive impairment could fit the criteria to take Aduhelm, but that not all those patients will be prescribed the drug and “patient uptake will be gradual over a number of years.”

Quote of the Day: Inflation Expectations

“Temporary is going to be a little longer than we had expected initially. So rather than it being a two- to three-month, it may be a six- to nine-month factor.”

— Atlanta Fed President Raphael Bostic, speaking about the expected duration of the recent spike in inflation, in an interview on National Public Radio's “Morning Edition” Wednesday.

Number of the Day: $7.1 Billion

Roll Call reports that appropriations earmark requests by House members have grown by $1.2 billion and now total over $7.1 billion, an increase of about 20% over initial requests made in late April. More than half of the increase comes from just one lawmaker, Rep. Brian Mast, a Florida Republican who has requested about $725 million for a long-running restoration project in the Everglades.

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• Earmark Requests Grow as House Appropriations Panel Begins Work – Roll Call
• Yarmuth: House Budget Blueprint Won’t Veer Too Far From Senate’s – Roll Call
• House Democrats Propose Increasing IRS Budget for Fiscal 2022 – The Hill
• House Democrats Unveil Spending Bill to Boost Staff Pay, Maintain Lawmaker Pay Freeze – The Hill
• SALT Cap Opponents Pull In Union Support to Promote Repeal – Bloomberg
• SALT Deduction Relief Included in Sanders Budget Proposal – Bloomberg
• House Panel Includes $500 Million Election Security Grant in Proposed Appropriations Bill – The Hill
• House Passes Bill to Bolster State Plans to Ward Off Infrastructure Attacks – The Hill
• This Week Is a Proof Point on Infrastructure Spending, Sen. Coons Says – NPR
• Pelosi Challenges Democrats on Economic Messaging – The Hill
  
• Fed’s Kaplan Sees Hike in 2022, Taper Starting Sooner Than Later – Bloomberg
• A Higher Minimum Wage Can Lead Employers to Lower Compensation – Bloomberg Businessweek
• Watchdog Calls on Pentagon to Detail 'Forever Chemicals' Cleanup Expenses – The Hill
  
• Models Predict U.S. Coronavirus Infections Could Surge This Fall if Vaccination Rates Lag, Former FDA Chief Says – Washington Post
  
• Drugmakers Broaden Pitch for Covid Therapy as Case Rate Slows – Bloomberg
• CDC Says Heart Issues After Covid Shots Surpass 1,200 Cases – Bloomberg

• Republicans Want You (Not the Rich) to Pay for Infrastructure – Brian Highsmith, New York Times
• The Gas Tax is Obsolete. Here’s a Better Idea. – Pete K. Rahn, Politico
• Why We Need the Infrastructure Bill to Pass – Samuel Cohn, The Hill
• Biden's Corporate Tax Rate Hike: Searching for a Spending Plan – John A. Tatom, The Hill
• America's Drug Rebate System Is Broken – David Balto and Wayne Winegarden, The Hill
• We Approved the Alzheimer’s Drug Even Though It Didn’t Show Strong Clinical Benefits. Here’s Why. – Patrizia Cavazzoni, Billy Dunn and Peter Stein, Washington Post
• White House Chief of Staff Flubs Tweet on Biden’s Child Tax Credit – Salvador Rizzo, Washington Post
• Americans Are On the Cusp of Another Borrowing Binge – Conor Sen, Bloomberg
• Biden Is Rushing America’s Return to Normalcy – Scott Duke Kominers, Bloomberg