Today may be the first day of fall, but the clouds have been gathering for a while now above President Joe Biden and the Democratic majorities in Congress. Here’s the latest.
Biden Scrambles to Save His Agenda
With his economic agenda — and very possibly his presidential legacy — hanging in the balance, President Joe Biden on Wednesday jumped into the middle of the fray between progressives and moderates in his party, hoping to quell disputes that threaten to derail both a $1 trillion bipartisan infrastructure bill and a larger package of social spending and tax increases.
Biden hosted a series of meetings Wednesday with Democrats, from House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer to key members of the moderate and liberal factions clashing over major elements of his agenda.
The centrist Democrats meeting with Biden included Sens. Joe Manchin (WV) and Kyrsten Sinema (AZ) as well as Reps. Josh Gottheimer (NJ), leader of the Problem Solvers Caucus, Suzan DelBene (WA), leader of the New Democrat Coalition, and Stephanie Murphy (FL), leader of the Blue Dog Coalition. Biden was then scheduled to meet in the evening with liberals including a handful of senators and Rep. Pramila Jayapal (WA), chair of the Congressional Progressive Caucus.
The meetings come as the House is set to vote next week on the Senate-passed infrastructure bill.
Pelosi had committed to hold a vote on the infrastructure bill by September 27 in order to resolve an earlier revolt by a group of moderates, who threatened to oppose the budget resolution paving the way for the social welfare package. With that date rapidly approaching, though, it’s not clear that Democrats will have the votes they need.
"We're calm and everybody's good and our work's almost done," Pelosi told reporters after her White House meeting. Schumer was similarly effusive. “We made some good progress,” he said. Move along, nothing to see here.
Progressives playing hardball: Leadership’s assurances aside, progressives are still threatening to vote against the infrastructure bill as they seek leverage to ensure adoption of the larger package — still far from being finished — that contains their priorities on health care, education and climate change. Democrats can only afford to lose three votes, and Jayapal told reporters late Tuesday that perhaps half of her 95-member caucus is willing to vote against the infrastructure bill. And Rep. Mark Pocan (WI), another progressive set to meet with Biden Wednesday evening, told CNN that 50 Democrats would oppose the bill. “At the end of the day, if we don’t have the reconciliation bill done, the infrastructure bill will not pass,” Jayapal said.
House Republican leaders, meanwhile, are urging their members to vote against the infrastructure bill, putting more pressure on Democrats — and, Bloomberg’s Erik Wasson suggests, raising the odds that Pelosi will have to postpone the infrastructure vote.
But as Democratic leaders look to unite their caucus and avoid an embarrassing defeat or retreat, Pelosi may be more likely to press progressives to fall in line. She already signaled in a letter to colleagues earlier this week that the cost of the proposed $3.5 trillion budget reconciliation package may need to be trimmed in order to pass the Senate.
“There will not be a positive reaction to help coalesce our caucus if the infrastructure bill goes down,” House Majority Leader Steny Hoyer (D-MD) said Tuesday. “I don’t agree with the judgment of those who think that somehow it will compel the moderate wing of the caucus to be more supportive. I think the moderate wing is supportive.”
Progressives aren’t inclined to give in this time. “Try us,” Jayapal told The Washington Post after a two-hour meeting with Pelosi late Tuesday.
Eleven Senate Democrats voiced their support for the progressive position in a joint statement Wednesday: “The House of Representatives should wait to pass the bipartisan infrastructure bill until the budget reconciliation bill, which enacts the rest of the President’s Build Back Better agenda, is sent to the President’s desk.”
Shutdown Watch: Eight Days and Counting
The House Tuesday night passed a stopgap measure to fund the government through December 3 and suspend the federal debt limit until December 22. But with Senate Republicans continuing to insist that they won’t help raise the borrowing limit, the 220-211 party-line vote in the House only prolongs the high-stakes game of chicken that’s been going on between the two sides.
The combined bill is likely to be blocked in the Senate later this week, forcing Democrats to decide if they then want to turn to a “clean” government funding bill — one without the suspension of the debt limit — to avoid a shutdown on October 1.
Growing Alarm Over Looming Debt Default Threat
Two former Treasury secretaries who served in Republican administrations reportedly attempted to intervene in the long-simmering standoff over the debt limit, meeting with current Treasury Secretary Janet Yellen and Senate Minority Leader Mitch McConnell (R-KY) in recent weeks in an attempt to find some kind of compromise.
According to The Washington Post’s Jeff Stein Wednesday, the talks involving the Bush administration’s Henry Paulson and the Trump administration’s Steven Mnuchin did not produce any breakthroughs, and the threat of default on the country’s payment obligations continues to hang over the U.S. economy.
After his meeting with McConnell, Paulson reportedly told the Biden administration that the Kentucky Republican is not bluffing when he says Republicans will not support any efforts to raise the debt ceiling, and that Democrats must handle the debt limit on their own.
Mnuchin reportedly came to the same conclusion after speaking with McConnell.
“The backchanneling by Mnuchin and Paulson — who had previously worked together at Goldman Sachs — reflects the widespread alarm among economists and U.S. business interests about the consequences of an unprecedented default on the federal debt,” Stein writes.
A letter to Congress: In another sign of the growing alarm over the failure to resolve the looming crisis, six former Treasury secretaries sent a joint letter to Congressional leaders Wednesday urging lawmakers to act quickly to raise or suspend the debt ceiling
The letter from former Treasury Secretaries Paulson, Timothy Geithner, Lawrence Summers, Jack Lew, Robert Rubin and Michael Blumenthal warned that the country was running the risk of “serious economic and national security harm” if Congress fails to act swiftly. (As Reuters noted, the letter’s signatories did not include former Republican Treasury Secretaries Mnuchin, John Snow, Nicholas Brady or James Baker.)
“Even a short-lived default could threaten economic growth,” the former Treasury secretaries warned. “It creates the risk of roiling markets, and of sapping economic confidence, and it would prevent Americans from receiving vital services. It would be very damaging to undermine trust in the full faith and credit of the United States, and this damage would be hard to repair."
Yellen appeals to Wall Street: Treasury Secretary Yellen called the leaders of major financial firms in recent days as part of an effort to pressure Republicans to work with Democrats on a bipartisan solution to the debt ceiling crisis, Bloomberg’s Joe Light and Hannah Levitt report.
The executives contacted by Yellen include Jamie Dimon of JPMorgan Chase, Jane Fraser of Citigroup, Charlie Scharf of Wells Fargo and Brian Moynihan of Bank of America. Yellen reportedly asked them to speak out publicly on the issue.
“The calls are the latest sign of mounting pressure on the U.S. government to avert a potential crisis if it’s no longer able to borrow money to pay its bills,” Light and Levitt say. “Yellen has said the Treasury could exhaust its capacity to pay U.S. obligations sometime in October.”
Quote of the Day
“We took on this debt in a bipartisan way. We’re prepared to expand the debt in a bipartisan way. I don’t see why it’s justified to refuse to acknowledge reality. Reality is not a partisan thing. Raising the debt limit is acknowledging reality, not making a partisan choice.”
— Former Treasury Secretary Lawrence H. Summers, speaking to The Washington Post about the Republican refusal to help raise the debt limit.
Poll of the Day: The Debt Limit Blame Game
A new Politico/Morning Consult poll finds that more voters say they’d blame Democrats than Republicans if the United States was to default on its debt. While 42% of those polled said they’d blame both parties equally, another 33% pointed the finger at Democrats, compared to 16% who said they’d blame Republicans more.
The same poll also finds that nearly 70% of voters support raising taxes on the wealthy while more than 60% support raising the corporate tax rate.
Nearly 60% of voters say they back the Democratic plan to raise more than $2 trillion over 10 years through higher taxes, though a smaller percentage, 42%, favors using the taxes to offset the $3.5 trillion cost of Democrats’ proposals to expand the social safety net and combat climate change.
Fed Signals It Could Slow Bond Purchases
Federal Reserve Chair Jerome Powell said Wednesday that the central bank could start to taper its recession-fighting purchases of bonds as soon as the next Fed meeting in November, and that the $120-billion-per-month asset-purchasing program could be unwound by the middle of next year.
“With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen,” the Federal Open Market Committee said in a statement. However, the “path of the economy continues to depend on the course of the virus. Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain.”
Assuming the economy continues to improve, “the Committee judges that a moderation in the pace of asset purchases may soon be warranted.”
The Fed also announced, as expected, that it would not raise interest rates this month, keeping them near zero. However, members of the Federal Open Market Committee signaled a growing likelihood of raising interest rates at some point in 2022, with half of them projecting rate increases at some point by the end of next year.