Good Thursday evening. Hurricane Ian reportedly left at least a dozen dead and millions without power as it swept across Florida. It’s now regained hurricane status as it heads toward South Carolina. In Washington, D.C., with 40 days until Election Day, lawmakers are set to avert a government shutdown and then head home for the final stretch of campaigning.
Here’s your fiscal news update.
Six GOP States Sue to Stop Biden Student Debt Relief Program
Six Republican-led states filed a lawsuit Thursday that seeks to halt President Joe Biden’s plan to forgive up to $20,000 in student loan debt for millions of Americans.
Filed in federal court in Missouri, the suit seeks an immediate injunction to stop what it calls the “Mass Debt Cancellation” from moving forward. The suit claims that the program, which the Congressional Budget Office estimates could cost more than $400 billion over 30 years, is unfair and unlawful, exceeding the authority granted to the executive: “No statute permits President Biden to unilaterally relieve millions of individuals from their obligation to pay loans they voluntarily assumed,” the suit says.
Leslie Rutledge, the Republican attorney general of Arkansas — joined by the top legal officers from Iowa, Kansas, Missouri, Nebraska and South Carolina — also argues that the administration’s legal justification for the unilateral debt forgiveness is unsound. The White House is relying on the HEROES Act of 2003, a 9/11-era law that gives the Secretary of Education broad latitude to eliminate student debt during a national emergency. The lawsuit says that the administration is stretching the meaning of that law past the breaking point — and that, in any case, the national emergency is over, according to Biden himself on a recent episode of “60 Minutes.”
“It is inconceivable that when Congress passed the HEROES Act, it thought it was authorizing the President to unilaterally decree something like the Mass Debt Cancellation, which will result in around half a trillion dollars in losses to the federal treasury,” Nebraska Attorney General Doug Peterson said in a statement.
White House responds: Biden administration spokesperson Abdullah Hasan charged that the suit seeks to prevent the government from helping people who are struggling in the wake of the pandemic. “Republican officials from these six states are standing with special interests and fighting to stop relief for borrowers buried under mountains of debt,” he said. “The president and his administration are lawfully giving working- and middle-class families breathing room as they recover from the pandemic and prepare to resume loan payments in January.”
The White House is clearly concerned about legal challenges, however. Although the administration quickly addressed a separate suit filed earlier this week by making it clear that no one would be forced to have their student debt forgiven, it took additional steps to shore up its legal position Thursday. Borrowers whose loans are owned by private companies have now been eliminated from the forgiveness program, a move designed to reduce the pool of people and organizations that could claim to be harmed by it.
“Private lenders and other entities that participate in the federally guaranteed student loan program are widely seen, both inside and outside the administration, as presenting the greatest legal threat to the program,” says Politico’s Michael Stratford.
The bottom line: Opponents of Biden’s student loan forgiveness program may be just getting started, and it would be no surprise to see more lawsuits seeking to shut it down in the coming weeks.
Senate Passes Funding Bill to Avert Government Shutdown
The Senate on Thursday passed a stopgap funding bill that will keep the government open until December 16, taking a major step to avoid a shutdown less than 36 hours before a midnight Friday deadline.
The Senate vote was 72-25, with all 50 Democrats voting yes, along with 22 Republicans. All 25 no votes were from the Republican side of the aisle.
The vote was able to move forward after Sen. Dan Sullivan (R-AK) dropped his hold on the bill. Sullivan had demanded that the Biden administration provide additional emergency funding for parts of Alaska that were damaged by Typhoon Merbok last week. Sullivan said he wanted his state to receive the same treatment as Puerto Rico following Hurricane Fiona, with the Federal Emergency Management Agency covering 100% of the cost of disaster relief. The White House agreed to his request.
The House is expected to approve the bill as soon as Thursday night despite opposition from Republicans. “We’re not going to shut the government down,” House Appropriations Chairwoman Rosa DeLauro (D-CT) said late Wednesday.
The bill, known as a continuing resolution, will maintain government funding at current levels, while providing lawmakers with roughly 10 more weeks to hammer out an agreement on spending levels for the rest of the 2023 fiscal year, which starts on Saturday. Congress has failed to pass any of the 12 annual spending bills for the new fiscal year, though the House did manage to pass six of them.
The stopgap funding package includes more than $12 billion in additional military and financial aid for Ukraine, $4.5 billion for natural disaster relief and $1 billion to help low-income households cover heating costs this winter. The bill also reauthorizes a user fee that partially funds the Food and Drug Administration.
The continuing resolution is notable for what it does not include. About $27 billion that the White House wanted for the ongoing response to Covid-19 and monkeypox was dropped from the package due to Republican opposition, and a measure backed by Sen. Joe Manchin (D-WV) that would have streamlined the permitting process for energy infrastructure projects was withdrawn after most Republicans and some liberal Democrats made it clear they would not support it.
Rising Anxiety Over a Debt Limit Showdown in 2023
Republicans are widely expected to win control of the House of Representatives in November’s midterm elections. Axios’s Alayna Treene reports that, with that outcome in mind, party leaders and business groups are already preparing for the return of an all-too-familiar “nightmare scenario”: a dangerous showdown over the U.S. debt limit.
Some Republicans have already signaled such a showdown is likely — and concern about how it might play out is already on the rise, Treene reports, given that the House GOP caucus is likely to be more conservative than it was in 2011, when the right flank of the Republican Party under then-Speaker John Boehner sought to use its leverage to force President Barack Obama to agree to broad spending cuts.
As ugly as the 2011 clash was, the anxieties surrounding a possible 2023 standoff are heightened because of uncertainty about just what type of speaker Rep. Kevin McCarthy (R-CA) might be if Republicans take the House.
“Business leaders and Republican strategists say a key indicator of McCarthy's approach will be who he and the GOP steering committee back to chair the powerful House Ways and Means Committee,” Treene reports. One leading contender, Rep. Jason Smith of Missouri, told Axios that Republicans should leverage the debt limit to have the Biden administration “reverse” its “radical” agenda, indicating that he would try to lay the blame for any crisis at Biden’s feet. Another candidate for the post, Rep Vern Buchanan of Florida, “is seen as a more mainstream Republican,” Treene notes.
Reasons to worry: The debt ceiling serves little useful purpose and debt ceiling brinkmanship is generally a dangerous — and, frankly, dumb — game. It could be even worse next year.
“Compared to a decade ago, the Republican caucus is considerably more insane,” liberal New York columnist Jonathan Chait writes. “The definition of a crazy House Republican in 2011 was an Ayn Rand reader who thought Obama was turning the United States into Greece and might have been born in Kenya. The definition of a crazy House Republican today is somebody who thinks the Democratic Party is controlled by a secret cabal of pedophiles and maybe favors armed revolution. And while John Boehner, who had little in the way of principle or intelligence, was barely able to wrangle his caucus into backing down, McCarthy has an even crazier caucus and even less principles or brains than Boehner.”
A way out? Democrats could look to raise the debt ceiling on their own during a lame duck session after the elections. “Both parties are traditionally reluctant to vote for high increases in the debt ceiling because voting to authorize more debt sounds like they’re voting to increase the budget deficit,” Chait notes. “But at this point, they need to assume it will be impossible to lift the debt ceiling beginning in January, bite the bullet, and take one vote to raise it high enough that they won’t need to take the vote again.”
The bottom line: The headline on this Philip Bump column in The Washington Post is pretty spot on: “The only thing the debt limit is used for is political blackmail.”
The Opioid Crisis Cost Nearly $1.5 Trillion in 2020
The economic toll of the opioid epidemic in the United States rose to nearly $1.5 trillion in 2020, an increase of $487 billion over the prior year, according to a new report by the congressional Joint Economic Committee. The cost also represents an increase of about $400 billion, or 37%, from 2017, when the Centers for Disease Control and Prevention last measured the cost of the crisis.
The report suggests that the true cost of the opioid epidemic may be even higher — and that it’s likely to keep rising given the increase in fatal opioid overdoses in 2021, when nearly 81,000 such deaths were recorded.
“While recent policy commitments are important steps, the $1.5 trillion annual cost highlighted in this brief suggests the size and scope of the government’s response must be significantly larger,” the report says. “The federal government should address barriers to health care and expand access to evidence-based treatment by continuing a shift towards a ‘treatment instead of punishment’ approach that prioritizes medical treatment and support services over incarceration. One additional step to support treatment would be for the 12 states that have yet to expand Medicaid under the Affordable Care Act to do so, as Medicaid expansion is associated with reduced fatal opioid overdoses through greater access to treatment.”
Jobless Claims Point to a Still-Strong Labor Market
New unemployment claims hit a five-month low in the week ending September 24, falling by 16,000 to 193,000, the Labor Department announced Thursday. Analysts polled by Dow Jones had expected to see 215,000 new jobless claims, and the lower-than-expected result suggests that the Federal Reserve still has a long way to go in its effort to cool off the labor market.
“The recent decline in layoffs flies in the face of the Fed’s efforts to soften up labor market conditions and knock inflation back down toward its 2% target,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “The capital markets have heard the Fed, and investors are feeling the pain. But the jobs market? For now at least, it’s not listening.”
News
- Biden Administration Scales Back Student Debt Relief for Millions Amid Legal Concerns – Politico
- Britain’s Gamble on Tax Cuts Has Economists Warning of Past Mistakes – New York Times
- The Lesson from the U.K. Budget Meltdown: Fear Currencies, Not Bond Markets – Wall Street Journal
- CEO Says He’s Been ‘Praying for Inflation’ Because It’s an Excuse to Jack Up Prices – The Intercept
- Democrats Scrap Plan to Vote on Stock Trading Ban Before Elections – The Hill
- Biden Launches $810M Pacific Island Diplomatic Initiative – Politico
- America's Big Consumer Medical Debt Problem – Axios
- FDA Approves First ALS Drug in 5 Years After Pleas From Patients – Washington Post
Views and Analysis
- The Sad, Familiar Demise of the Expanded Child Tax Credit – Jeff Greenfield, Politico
- Is the Fed Braking Too Hard? – Paul Krugman, New York Times
- Biden’s Costly Student Loan Plan Could Use a Constitutional Review – Washington Post Editorial Board
- Biden’s Student Debt Plan Will Likely Be Defeated in Court. Good – Henry Olsen, Washington Post
- The Dark Side of American Exceptionalism: Shorter Lives – Steven H. Woolf, The Hill
- Republican House Majority Will Try to Melt Down Global Economy – Jonathan Chait, New York
- New Data Helps Solve U.S. Economic Growth Puzzle – Neil Irwin and Courtenay Brown, Axios
- Fact Check: Republican Attack Ads Against Warnock and Kelly Mislead About Medicare – Daniel Dale, CNN
- How Much More Economic Growth Can the Planet Sustain? – Mark Buchanan, Bloomberg