Good evening! On this date in 1915, the first official transcontinental phone call in the U.S. took place between Alexander Graham Bell in New York and his former assistant, Thomas Watson, in San Francisco.
Here’s what’s happening today.
McCarthy Agrees Not to Cut Social Security, Medicare in Debt Talks, Manchin Says
Democratic Sen. Joe Manchin, the West Virginia centrist, played a key role in an evenly divided Senate over the last two years. Democrats may have gained a seat in the Senate, but Manchin appears to still be right in the middle of critical policy talks.
While other Democrats have rejected the idea of negotiating with Republicans over raising the debt limit, Manchin has urged the White House to engage in talks, and on Wednesday the senator himself met with House Speaker Kevin McCarthy (R-CA) to discuss the issue.
Manchin told reporters afterward that McCarthy agreed not to include cuts to Social Security and Medicare in his upcoming — though as yet unscheduled — talks with President Joe Biden. “He was very receptive and wants to negotiate and wants to sit down and talk,” Manchin said. “My sense is Kevin McCarthy wants this place to work. He doesn't want to go through this theatrics to the point to where we have come to the cliff and how much damage is done by getting to the cliff.”
Manchin said earlier this week that he thinks the debt ceiling provides a good opportunity to talk about important fiscal issues, though he’d prefer not to include cuts to Social Security and Medicare. “No cuts to anybody that's receiving their benefits, no adjustments to that. They've earned it. They paid into it. Take that off the table,” he told CNN last weekend. “But everyone's using that as a leverage.”
At the same time, “We have to negotiate,” Manchin said. “This is the democracy that we have. We have a two-party system, if you will, and we should be able to talk and find out what our differences are.”
In order to increase revenues for these key programs, Manchin has proposed raising the income limit on the payroll tax, an option favored by many Democrats. “Social Security and Medicare basically is running out of cash because we stop at a certain level where people pay into FICA,” Manchin said, referring to the payroll tax. “[T]he easiest and quickest thing we can do is raise the cap.”
Conservatives push for big cuts – and a showdown: A group of conservative senators including Rand Paul (R-KY), Ron Johnson (R-WS), Mike Braun (R-IN) and Rick Scott (R-FL) on Wednesday urged House Republicans to consider across-the-board spending cuts as part of their negotiations over the debt ceiling— including cuts in defense. “We have an opportunity here,” Paul told reporters. “Republicans have to give up the sacred cow that says we’ll never touch a dollar in military” spending. “Everything would have to be looked at across the board,” he said.
Sen. Ted Cruz (R-TX) said that GOP senators want Republicans to use the debt ceiling as leverage in their negotiations. Cruz cited the formal rules of the Republican conference, which he said call for using “the debt ceiling as leverage to force real and meaningful structural reforms to fix the underlying problems,” suggesting that a showdown could be part of the strategy.
Still, there are more moderate Republicans looking for fiscal reforms that won’t involve huge spending cuts or big confrontations, Bloomberg’s Mackenzie Hawkins reports. Ideas under discussion include limiting growth in the debt ceiling to growth in GDP and indexing spending growth to inflation, as well as modest cuts to discretionary spending.
Rep. Don Bacon (R-NE) backs the indexing idea. “It would be a compromise, I believe, that you can get many people on board,” he told Bloomberg. “Democrats and Republicans. Because you’re not making draconian cuts, but you’re reducing spending. It’s under inflation, so in the long run, you’re pointing the ship in the right direction.”
Bacon has also called for a joint committee to address funding for the Social Security and Medicare trust funds, a proposal that could gain traction across party lines. Sen. Mitt Romney (R-UT) is working on a bill backed by Manchin that would set up “rescue committees” to address shortfalls in the major entitlement programs that could spark payment cuts for beneficiaries in upcoming years.
“We want to make sure we don’t ever cut Social Security benefits,” Romney said Tuesday. “We need to make sure that we do not reach that point [of automatic spending cuts], and that’s what this bill does.”
Quotes of the Day
“There’s a need to both refresh what people understand about it and, certainly for newer members, get a better understanding. … It’s such an arcane issue that it’s fully understandable that they don’t have all the ins and outs down to memory.”
– Shai Akabas, director of economic policy at the Bipartisan Policy Center, quoted in a Washington Post article about an “education campaign” being undertaken by House Republican leaders “to make sure their members understand how the debt limit works, the consequences of failing to raise the ceiling, and the difference between a garden-variety government shutdown and a potential debt default.” Akabas reportedly said he’s spoken with some lawmakers recently to lay out the potential consequences of a debt default.
The educational outreach comes after “some GOP members have made statements on social media or in interviews that show a lack of understanding about the policy details regarding the legal limit on how much the government can borrow and what could happen if that cap isn’t increased in time,” Leigh Ann Caldwell and Theodoric Meyer write.
“It gives the Democrats such an easy talking point—because it’s factually accurate—because it would raise taxes on tens of millions of seniors and the working poor and dependents. … This is what happens when you have an idea written on the back of a Burger King place mat.”
– Ryan Ellis, a conservative tax activist, as quoted by The Wall Street Journal in an article about the so-called FairTax, a Republican proposal to replace the federal income, estate and payroll taxes with a national sales tax.
Column of the Day: The US Needs to Collect More in Taxes
House Republicans are insisting on spending cuts in exchange for raising the debt limit. Writing at The New York Times, Binyamin Appelbaum responds by arguing that, while the debt is a problem, slashing spending isn’t the solution.
“Indeed, Americans need more federal spending, he writes. “The United States invests far less than other wealthy nations in providing its citizens with the basic resources necessary to lead productive lives. Millions of Americans live without health insurance. People need more help to care for their children and older family members. They need help to go to college and to retire. Measured as a share of G.D.P., public spending in the other Group of 7 nations is, on average, more than 50 percent higher than in the United States.”
But borrowing to pay for federal spending is getting more expensive, Appelbaum says. “The United States paid $475 billion in interest on its debts last fiscal year, which ran through September. That was a record, and it will soon be broken. In the first quarter of this fiscal year, the government paid $210 billion.” By historical standards, the interest costs aren’t that high as a share of economic output, but still, “[t]hat’s a lot of money that could be put to better use,” Appelbaum writes.
Instead of borrowing to pay for federal spending, he argues, the government should collect more in taxes.
Number of the Day: 16.3 Million
A record 16.3 million people signed up for an Affordable Care Act plan during the open enrollment period that ran from November 1, 2022, through January 15 of this year, according to the Centers for Medicare and Medicaid Services. The signups represent a 13% increase over this time last year and include 3.6 million new enrollees (22% of the total) and 12.7 million people (78%) who had coverage in 2022.
The administration on Wednesday touted the signups through HealthCare.gov as an increase of nearly 50% since President Joe Biden took office.
- Manchin Meets With McCarthy on Debt Limit – The Hill
- Six Senate Conservatives Laid Out Their Expectations on Raising the Debt Limit – Politico
- Senators Eye Social Security Reforms as Some in House GOP Consider Cuts – The Hill
- Kevin McCarthy's Math Problem – Axios
- Republicans' Plans to Slash Social Security and Medicare Are Becoming Clearer – Insider
- National Sales-Tax Plan Gains Attention in House GOP – Wall Street Journal
- Markets Are Worried About the Debt Ceiling. These Charts Will Show How Much – Bloomberg
- White House Zeroes In on Its Next Top Economist – Washington Post
- Biden Finally Gets a Win Against Inflation – Politico
- Bipartisan Group Gears Up for Uphill Push on Paid Family Leave – The Hill
- White House Unveils New Tenant Protections Amid Soaring Rental Costs – Washington Post
- Why the IRS Says to Expect Smaller Tax Refunds This Year – The Hill
- Emailing Your Doctor May Carry a Fee – New York Times
Views and Analysis
- America Has a Debt Problem, and the Answer to It Starts With Form 1040 – Binyamin Appelbaum, New York Times
- Five Ways Federal Government Can Try to Avoid Default – Sylvan Lane, The Hill
- Democrats Have a Two-Part Plan to Use the Debt Ceiling Against Republicans – Jennifer Rubin, Washington Post
- Budget School Is in Session — House GOP Seeks to Educate Members About Debt Ceiling – Leigh Ann Caldwell and Theodoric Meyer, Washington Post
- Republicans Are Hardly Unified on Wanting to Cut Medicare – Rachel Roubein, Washington Post
- Biden Could Act to End a Social Security Tax Break for the Rich – David Sirota, Jacobin
- How to Pay All of the Treasury’s Bills Without Raising the Debt Limit – Alex J. Pollock and Paul H. Kupiec, The Hill
- The White House Debt Limit Strategy: Dismiss but Don’t Reject – David Dayen, American Prospect
- A Debt Ceiling Strategy Manual – Robert Kuttner, American Prospect
- Economists Finally Have a Good Excuse for Being Wrong – Tyler Cowen, Bloomberg
- CBO's Budget Options to Improve Trust Fund Solvency – Committee for a Responsible Federal Budget