Yellen Warns Debt Ceiling Failure Would Be ‘Catastrophic’

By Yuval Rosenberg

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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