Biden Says GOP Is ‘Manufacturing a Crisis’

Biden Says GOP Is ‘Manufacturing a Crisis’

President Biden met with Senate Democrats and Majority Leader Chuck Schumer on Thursday
By Yuval Rosenberg and Michael Rainey
Thursday, March 2, 2023

Happy Thursday! Let's jump right in.

Biden Says Republicans Are ‘Manufacturing a Crisis’

As he prepares to release his budget next week, President Joe Biden is continuing to try to grab the mantle of fiscal responsibility and frame the battle ahead with House Republicans over both a federal spending plan and raising the debt limit.

Biden huddled with Senate Democrats for a strategy lunch session on Thursday and spoke to the House Democratic caucus at a retreat in Baltimore on Wednesday evening. In his Wednesday evening speech, her touted the accomplishments of the last two years, promised lawmakers that he would sell voters on the benefits of major legislation they had passed, repeatedly praised party members for "sticking together" and urged them to continue doing so.

"Our economy is growing at a solid clip. But it’s not an accident. It’s because we’ve all worked together," he said. "If we did nothing — nothing — but implement what we’ve already passed and let the people know who did it for them, we win. But we’re way beyond that. It’s not just about winning."

Biden again pledged that his budget proposal next week would cut the deficit by more than $2 trillion over 10 years and sought to contrast his fiscal bona fides with the GOP.

"We're not going to sit here and be lectured by those folks about fiscal responsibility," he said. "They're sure not acting like the party that cares about fiscal responsibility. Because the truth is, if you look at their record, it's clear they're not the party who cares about fiscal responsibility, especially not when they're threatening our economic recovery by manufacturing a crisis over whether we're going to pay our debts — our 200-year accumulated debt."

What do Republicans want to cut? Biden has repeatedly called for Republicans to put forth their own budget blueprint. He has sought to gain leverage by asking what will inevitably be a critical question as the two sides square off: What is it that Republicans want to cut? "Are they going to cut Medicaid? Medicaid? Are they going to — Affordable Care Act? Are they going to cut Medicare or veterans benefits? Aid to rural communities? Well, we're going to see what they're going to do," he said Wednesday.

Republicans, partly as the result of pressure from Biden, have abandoned the idea of cutting Social Security and Medicare. House Speaker Kevin McCarthy (R-CA) has said those programs should be left alone even as he presses for spending cuts as a prerequisite for raising the debt limit.

And in a CNBC op-ed on Wednesday, Rep. Jason Smith (R-MO), chair of the House Ways and Means Committee, backed up that pledge: "As the chairman of the House Ways and Means Committee with jurisdiction over the debt ceiling, Social Security, and Medicare, no debt ceiling legislation that passes through my committee will include cuts to these vital programs. Period."

Smith’s op-ed called for Biden to negotiate over raising the debt ceiling, something the White House has insisted it will not do. And the piece again pressed Biden to agree to cut spending. "Simply raising our credit limit without examining ways to reduce inflationary deficit spending means we are just scheduling America’s next debt crisis," Smith wrote.

For now, though, the two sides are left trying to law blame for any potential crisis.

"The moment to act is now, and Democrats’ failure to engage in meaningful dialogue about our unsustainable spending endangers the federal programs millions of America’s seniors rely on now and benefits they expect in the future," Smith wrote. "For Washington Democrats to engage in politics as usual is manifesting the very crisis they claim they want to avoid."

Biden, meanwhile, says that Republicans are precipitating a crisis by holding the debt limit hostage. "Let's be real clear about one thing: There is no actual crisis here," he told Democrats. "This is entirely a crisis of their making, if it occurs."

The bottom line: We’re still too far away from a debt limit deadline and too early in the budget process for any potential talks to really heat up. Instead, we’re left with the politicking. "Without many new initiatives to propose, Biden is determined not to see the party backslide into bickering and disappointment," the AP’s Lisa Mascaro and Seung Min Kim say. "Instead, Democrats appear ready to focus on a Hippocratic oath-style strategy of doing no harm — playing up what they have accomplished so far while portraying Republicans as being led by extremists beholden to the Trump-era ‘Make America Great Again’ agenda."

Quote of the Day: ‘Raise the Debt Limit Promptly’

"We have a wide range of views on economic policies, some 'conservative' some 'liberal,' but we all agree that Congress should raise the debt limit promptly and without conditions in order to eliminate the risk of default.

"The economic consequences of a federal default are unpredictable, but frightening. A swift and severe economic downturn could follow, with unnecessary layoffs across the economy. Chaos in world financial markets is highly likely. Higher borrowing costs for the federal government, and indeed for all Americans, could remain with us for a long time—an unwanted legacy of a foolish decision. We should not run the experiment. ... We urge Congress, on a bipartisan basis, to act quickly and decisively to raise the federal debt limit."

– More than 200 economists in a letter to congressional leaders Thursday. The group, led by the Washington Center for Equitable Growth, includes many prominent names in the field: former Federal Reserve Chairman Ben Bernanke, former Fed vice chairs Alan Blinder and Roger Ferguson, former Labor Secretary Robert Reich and a number of Nobel laureates, such as Joseph Stiglitz and Robert Solow.

Biden Wants $1.6 Billion to Combat Covid Aid Fraud

In its upcoming budget request for 2024, the Biden administration plans to ask Congress to provide $1.6 billion to clean up the massive fraud in Covid aid programs and to help prevent similar problems in the future.

While the more than $5 trillion in emergency spending Congress authorized in response to the Covid-19 crisis cushioned the economy from the initial shock of the pandemic and helped speed a historically rapid recovery, the relief programs funded by that tidal wave of cash were marred by high levels of fraudulent activity that siphoned off billions of dollars.

In a statement, the White House pinned the blame for the explosion of fraud in the Covid relief programs on a long history of weak controls on government spending, in addition to the need to get the aid out the door as quickly as possible at the time. "Past underinvestment in basic government technology and the crush of demand during the pandemic, combined with ill-considered decisions to take down basic fraud controls at the onset of the pandemic led to a historic degree of outright fraud and identity theft of emergency benefits," the White House said.

Noting that the relief programs were "essential," the White House called for "a bipartisan response to punish those who engaged in major and systemic fraud against the American people during a time of national emergency," as well as an effort to protect government programs from fraud and identity theft in the future.

The use of false identities played a major role in many of the Covid-era scams, which focused on programs that provided aid to unemployed workers and to businesses facing an uncertain future.

According to one estimate, the federal government made at least $191 billion in wasteful payments to people claiming unemployment benefits using fake or stolen identities, a problem that was compounded by outdated technology used at the state level. The business aid programs were rife with fraud, as well, with the undersized Small Business Administration tasked with overseeing the disbursement of roughly $1 trillion as rapidly as possible, which led to billions of dollars in payments to ineligible firms as well as known fraudsters.

Spend to save: Speaking to reporters Thursday, White House American Rescue Plan coordinator Gene Sperling said he hopes that Congress sees the proposed spending as an investment that will more than pay for itself. "It’s just so clear and the evidence is so strong that a dollar smartly spent here will return to the taxpayers, or save, at least $10," Sperling said, referring to ongoing efforts that have recovered more than $200 million from fraudsters.

The request for funds will be part of the 2024 budget proposal, but the money would be spent over a period of years, Sperling said. The plan calls for spending $600 million on prosecuting those who committed fraud, an effort that would include the creation of 10 new strike forces at the Justice Department. Another $600 million would be used to "invest in better prevention of identity theft and all forms of major fraud involving public benefit programs," the White House said. And $400 million would go toward providing aid for those who have been victims of identity theft.

Whatever the merits, the prospects for the proposal are poor. Congress rejected a plea last year from the White House to provide the Justice Department with more funds to pursue Covid aid fraud, and House Republicans appear to have no interest in increasing spending of any kind, even if that spending more or less pays for itself while providing stronger protections against fraud in the future, as the White House claims.

Number of the Day: 600,000

Legislators in North Carolina announced Thursday that they have reached an agreement to expand the Medicaid program in their state, potentially providing health coverage to an additional 600,000 residents.

North Carolina has been one of 11 states that declined to expand their Medicaid coverage to include a larger number of low-income people, as allowed under the Affordable Care Act. These people typically earn too much money to qualify for conventional Medicaid, but not enough to qualify for the heavy subsidies provided by Obamacare.

The federal government will cover 90% of the cost of the expansion, as it does in other states. Under the terms of the agreement in North Carolina, which still needs to be approved by the full legislature, the remaining 10% of the cost would be raised through an assessment on hospitals. North Carolina hospitals would receive more money from the Medicaid program as they treat more low-income patients, and the agreement calls for raising the reimbursement rate for those patients, producing an estimated $3.2 billion in revenues in the program’s first year.

North Carolina Gov. Roy Cooper, a Democrat, hailed the agreement, saying it "is a monumental step that will save lives."

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