GOP Election Win Could Bring Showdown Over Debt

GOP Election Win Could Bring Showdown Over Debt

Rep. Kevin McCarthy
Chris Kleponis - CNP/Sipa USA via Reuters
By Yuval Rosenberg and Michael Rainey
Thursday, September 8, 2022

Much of the world is mourning the loss today of Queen Elizabeth II, who died at age 96 after a reign of 70 years. "In a world of constant change, she was a steadying presence and a source of comfort and pride for generations of Britons, including many who have never known their country without her," President Joe Biden said.

In other news, the Department of Justice is appealing the decision to order a special master review of documents seized at former President Trump's Mar-a-Lago estate. And football is back tonight as the Buffalo Bills visit the Super Bowl champion Los Angeles Rams to kick off the NFL season.

Here’s what else is happening.

A Narrow GOP House Majority Would Put Fiscal Showdowns on the Agenda

With 60 days to go until the midterm elections — and Republicans still widely expected to win control of the House of Representatives — The New York Times has a warning of sorts about what a narrow GOP majority might mean: "Kevin McCarthy, who would become speaker if Republicans retake the chamber, could face a series of headaches. But beyond him, the nation might struggle to avoid a damaging default on its debt."

The danger of a debt default might rise, Jonathan Weisman reports, because the House Republican conference appears set to grow even more conservative, with additions such as Josh Brecheen of Oklahoma, who has pledged never to raise the federal borrowing limit, despite the enormous risk a U.S. default would represent to the global financial system.

Conservatives in the House Freedom Caucus challenged previous GOP speakers John Boehner and Paul Ryan. "The House Republicans’ right flank forced the shutdown of much of the federal government several times, and nearly prompted a default on government debt," Weisman notes. Now, a group of former President Donald Trump’s loyalists and far-right candidates will likely be headed to Washington, D.C. intent on similarly pressuring current leaders, both Democratic and Republican.

"[C]andidates have emerged who could revive a corps of conservatives who bedeviled past G.O.P. speakers as they tried to raise Washington’s statutory borrowing limit, keep the government funded and operating, and approve annual military and intelligence policy bills," Weisman writes. "Such prospects seem so harrowing that one former Republican leadership aide, who insisted on anonymity, said he hoped Democratic leaders would raise the debt ceiling in the lame-duck session of Congress this winter rather than risk the first-ever default on United States government debt."

House Republicans could also use their fiscal leverage in support of an agenda more centered on Trump election conspiracy theories and pursuit of political payback. As liberal columnist Greg Sargent of The Washington Post writes, "a MAGA-fied House will have another, underdiscussed tactic at its disposal: using its fiscal and investigative powers to try to defund or hobble any and all investigations and prosecutions involving Trump."

Republicans, Sargent theorizes, could seek to "zero out" salaries of specific federal officials such as Attorney General Merrick Garland. "Or they could try to "nix blocks of federal employees, functionally killing specific programs." Or they could look to defund investigations of Trump. "They could say, 'We’ll let this whole country go into default unless you stop all these probes of Trump,'" congressional scholar Norm Ornstein told Sargent.

The bottom line: Fiscal showdowns are looking likely, though the underlying fights might be political.

Yellen Promotes the Biden Economic Agenda

With the midterm elections just weeks away, Treasury Secretary Janet Yellen is hitting the road to highlight President Joe Biden’s economic agenda while reminding everyone about some of its unfinished business, including higher taxes on corporations and the wealthy.

In an appearance Thursday at Ford Motor’s Rouge Electric Vehicle Center in Dearborn, Michigan, Yellen played up the investments the Biden administration is making in things like semiconductors and green energy that will expand the productive capacity of the economy – an approach she referred to as "modern supply-side economics," which is intended to foster both growth and fairness and which stands in stark contrast to the Republican emphasis on tax cuts and deregulation.

"In layman’s terms, this approach embraces the notion that some of the best opportunities for growth occur when we invest in people and places that have been forgotten and overlooked," Yellen said. "We know that a disproportionate share of economic opportunity has been concentrated in major coastal cities. Investments from the Biden economic plan have already begun shifting this dynamic."

Priorities for the administration in the next two years are drawn from elements of the president’s agenda that were jettisoned during negotiations over what became the Inflation Reduction Act, including free preschool and community college, workforce training, low-cost child care and affordable housing.

Yellen also said the administration plans to stabilize public finances once inflation has been brought under control. "This includes closing loopholes and returning tax rates for high earners and corporations to historical norms," she said. "By making everyone pay their fair share, these reforms will provide our government with additional fiscal room to make critical investments."

Still, the voters Yellen is trying to appeal to will need to accept the administration’s sunny take on the current state of the economy, which is still experiencing inflationary pressure and threatened by a potential recession induced by the Federal Reserve’s monetary tightening campaign. Nevertheless, Yellen said she thinks recent economic gains are substantial and could pave the way for a new round of policy interventions.

"For all there is left to do, I will say this: after the progress we have made over the past few months, I am more optimistic about the course of our economy than I have been for quite a while," she said.

Number of the Day: $12.9 Billion

Annual sales of Covid-19 shots could be worth $12.9 billion per year, vaccine maker Moderna told investors Thursday. But the value could be less than half that, or roughly $5.2 billion, depending on how popular the shots are in the coming years.

As the U.S. government prepares to stop providing free vaccine and booster shots, Moderna is preparing to battle rival Pfizer for sales. Prices are expected to be in the range of $64 to $100 per shot, Bloomberg’s Angelica Peebles reports. Analysts will be watching this fall to see how much public interest there is in getting annual booster shots.

US Military Aid to Ukraine Tops $15 Billion

In an unannounced visit to Kyiv on Thursday, Secretary of State Antony Blinken said that the U.S. would be providing an additional $2.8 billion in military aid to Ukraine and other countries in Europe that are potentially threatened by Russian aggression.

The aid includes $2.2 billion in long-term military financing for Ukraine and 18 of its regional neighbors. In addition, Ukraine itself will receive another $675 million in direct military aid, including artillery, ammunition and armored vehicles.

About $1 billion of the military financing will go to Ukraine, with the rest divvied up among countries to the west of the Russian border, including Albania, Bosnia, Bulgaria, Croatia, the Czech Republic, Estonia, Georgia, Greece, Kosovo, Latvia, Lithuania, Moldova, Montenegro, North Macedonia, Poland, Romania, Slovakia and Slovenia, according to the Associated Press. The funds have already been appropriated by Congress, but lawmakers still must approve the actual spending.

Blinken noted that his surprise visit coincides with Ukraine’s counteroffensive against Russian forces in the south. "It’s early days, but we’re seeing real effectiveness on the ground, and we’re proud of the fact that our support, the support of so many other countries, is helping to enable what the Ukrainians are doing and working to liberate territory seized by Russia in this aggression," he told reporters.

Including the most recent announcement, the U.S. has now provided $15.2 billion in military aid to Ukraine, the State Department said in a statement.

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