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McCarthy Cranks Up the Pressure on Biden Over Debt Limit
House Speaker Kevin McCarthy on Tuesday tried to crank up the pressure on President Joe Biden to reengage in discussions about raising the debt limit.
In a letter to the president and an interview on CNBC, the California Republican called on the president to set a date for another meeting on the matter and do it quickly. The two men held their first and only meeting on the debt limit on February 1.
“With each passing day, I am incredibly concerned that you are putting an already fragile economy in jeopardy by insisting upon your extreme position of refusing to negotiate any meaningful changes to out of control spending alongside an increase of the debt limit,” McCarthy wrote, adding, “Mr. President, simply put: you are on the clock.”
The $31.4 trillion debt limit will need to be raised sometime this summer, before the Treasury Department exhausts the accounting maneuvers it has been using to stave off default and a potential economic meltdown.
Biden and the White House insist that Republicans must raise the debt limit as they did multiple times under former President Donald Trump and that discussions about federal spending cuts should be handled separately. Biden released his budget proposal earlier this month, including nearly $3 trillion in deficit reduction over 10 years and tax increases for the rich and corporations. He has repeatedly called on House Republicans to release their own budget and detail the spending cuts they favor.
“It’s time for Republicans to stop playing games, pass a clean debt ceiling bill, and quit threatening our economic recovery,” White House Press Secretary Karine Jean-Pierre said in a statement responding to McCarthy’s letter. “The President welcomes a separate conversation about our nation’s fiscal future.”
Senate Majority Leader Chuck Schumer called for McCarthy to release his budget. On Twitter, he asked what the point would be for Biden and McCarthy to meet otherwise: “if Speaker McCarthy comes with no specific plan—what are they going to talk about, the weather?”
In the absence of a GOP budget plan, which has also been delayed as Republicans try to hammer out their internal differences, the White House has been attacking other GOP proposals and arguing that the Republican agenda would only add to the deficit. “All we’ve heard from them is a list of devastating cuts to law enforcement and border security and proposals to take health care away from Americans and raise health care and child care costs,” Jean-Pierre said. “All to pay for their tax giveaway to the super-wealthy and corporations.”
What McCarthy wants: McCarthy told CNBC that negotiations could proceed even without a formal House Republican budget, saying that the two issues were like apples and oranges. “Let’s be very honest about it: The budget doesn’t have anything to do with the debt ceiling,” he said, even as Republicans have sought to link the two issues to force spending cuts. “I can pass a budget tomorrow and we’ll still need to pass a debt ceiling [increase].”
McCarthy’s letter touched on a handful of broad ideas that he later told CNBC would generate $4 trillion in savings.
The proposals included:
* Cutting non-defense spending to fiscal year 2022 levels and limiting future growth;
* Reclaiming unspent Covid-19 funds;
* Adding more work requirements to federal safety net programs;
* Enacting measures to lower energy costs (read: easing energy regulations);
* Securing the border “from the flow of deadly fentanyl.”
“Taken together, such policies would help the number one issue facing Americans today: stubbornly high inflation brought on by reckless government spending,” McCarthy wrote.
But his letter lacked the kind of specifics that the White House has demanded or the details that would appear in a full budget plan. “McCarthy’s letter doesn’t say how substantially House Republicans want to cut domestic spending, which programs they want to curtail with work requirements ... or what energy and border security policies they see,” Politico’s Jennifer Scholtes writes.
What it means: McCarthy is looking to negotiate now before the deadline nears and pressure builds on Republicans to raise the debt limit and avoid any economic fallout from a fiscal showdown. But the comments from both sides Tuesday show just how far apart they remain on just the idea of negotiations. At the moment, this is mostly a messaging battle. “McCarthy and his team still believe that they have the upper hand on the debt ceiling in the sphere of public opinion if they continue to show a pattern of trying to get Biden to sit down and he refuses to do so,” CNN’s Alayna Treene wrote.
But the longer such a standoff drags out without progress, the higher the chances of default, especially if McCarthy and the most conservative members of his caucus insist that their demands be met. Rep. Patrick McHenry (R-NC), chair of the House Financial Services Committee, told Punchbowl News Tuesday that he is increasingly pessimistic that a debt limit increase can get done. “I don't see how we get there,” he said. “And this is a marked change from where I've been. I don't even see a path."
Bloomberg’s Laura Litvan suggests a long-term deal to cap spending similar to the one reached in 2011 may be out of reach. “The growing partisan divide and wafer-thin majorities in each chamber are pointing the way toward a shorter-term agreement — if the two parties can reach one at all,” she writes. “The mixed success of that 2011 deal, which never lived up to its hype, suggests that could be for the best.”
The bottom line: There’s still time to raise or suspend the debt ceiling, but the two sides are dug in and Congress is heading out of town at the end of the week until the middle of April, making it unlikely that they’ll make progress anytime soon. The Republican Study Committee, a group of about 170 conservatives, reportedly plans to put out its own budget proposal when lawmakers get back to the capital. The House GOP budget may not come out until weeks after that.
$4 Trillion in U.S. Wealth Held Offshore: Report
Wealthy U.S. households hold trillions of dollars in offshore accounts, with a substantial portion of the money residing in tax havens and shielded by complex partnerships, according to a new study published by the National Bureau of Economic Research.
Written by four university-based and two-IRS affiliated researchers with expertise in business, economics and taxation, the analysis found that roughly 1.5 million U.S. households held about $4 trillion in foreign accounts in 2018, with about half of that sum located in jurisdictions typically classified as tax havens such as Switzerland and the Cayman Islands. The foreign holdings make up about 5% of total U.S. financial wealth.
The likelihood of owning such an account increases sharply with income, the researchers found, and the value of those accounts soars at the very top of the income distribution. While about one in five of those in the top 1% of income own accounts overseas, a majority (60%) of individuals in the top 0.01% own foreign accounts, with almost all their holdings located in tax havens and more than half held through a partnership of some kind. This relatively small group of individuals, who earned at least $3.3 million in 2018, controls about a third of all U.S. assets held in accounts overseas.
Financial partnerships play a significant role in foreign holdings by U.S. households. While less than 2% of all offshore accounts are controlled through financial partnerships such as hedge funds and private equity firms, those partnerships account for about a third of the total value of assets held overseas. The purpose of locating such financial partnerships offshore is typically to avoid taxes, the researchers noted.
An imperfect picture: The data for the study comes from foreign financial institutions, who as of 2015 are required to submit information to the IRS under the Foreign Account Tax Compliance Act (FACTA). The researchers combined that confidential data with information from the IRS to get a picture of who owns what overseas — a challenging task given the complexity of ownership structures such as pass-throughs and trusts.
The researchers said they are aware there are errors in their analysis, such as falsely identifying foreign owners as Americans. But they maintain that their analysis provides a far clearer picture of offshore U.S. wealth than was possible before FACTA data was made available.
“Despite … significant gaps, this paper provides a compelling look at both the magnitude of assets held overseas and the characteristics of their US owners,” says Howard Glickman of the Tax Policy Center. “And the authors conclude that a relative handful of very rich Americans stashed trillions of dollars in wealth overseas principally to avoid US taxes.”
Quote of the Day
“I can tell you I have a number of patients who are on dialysis with renal failure for the rest of their life because they couldn’t afford the medication for their blood pressure, and that caused their kidneys to go bad.”
— Dr. John Lucas, a surgeon at Greenwood Leflore Hospital in Greenwood, Mississippi, talking to The New York Times about the avoidable suffering experienced by low-income individuals in his state who have no health insurance due to the refusal of political leaders to expand Medicaid as allowed by the Affordable Care Act.
North Carolina opted to expand its Medicaid system this week, leaving just 10 states, all with Republican-controlled legislatures, that have chosen not to do so. In Mississippi, expanding Medicaid would provide health coverage to roughly 100,000 people who currently do not qualify, while giving the state’s 100-plus hospitals — many of which are losing money and in danger of closing — an infusion of $1.35 billion a year.
But Republican Gov. Tate Reeves, who is sitting on a $3.9 billion budget surplus, is adamantly opposed to Medicaid expansion. In his annual address in January, Reeves warned state lawmakers not to “cave under the pressure of Democrats and their allies in the media who are pushing for the expansion of Obamacare, welfare and socialized medicine.” Reeves argues that providing health care to more of Mississippi’s poor is not in the taxpayer’s interest, even if the cost is largely subsidized by the federal government.
- McCarthy Sends Letter to Biden Urging More Robust Negotiations on the Debt Ceiling – CNN
- McCarthy to Biden on Debt Limit: ‘You Are on the Clock’ – Roll Call
- McCarthy Demands Meeting With Biden. White House: ‘Show Us Your Budget’ – Washington Post
- As McCarthy Laments ‘No Progress,’ Here’s Where U.S. Debt Ceiling Talks Stand – CNBC
- Defense Chief Slams Tuberville’s Hold on Pentagon Nominees Over Abortion Policy – The Hill
- ‘We’re Going Away’: A State’s Choice to Forgo Medicaid Funds Is Killing Hospitals – New York Times
- Bruising Budget Battle in New York Deepens Democratic Divide – Politico
- What Is in House Republicans’ Energy Policy Package? – The Hill
- America's Airports Are Suddenly Pretty Good Now – Axios
Views and Analysis
- A Long-Term Deal to Raise the US Debt Ceiling Is Looking Unlikely – Laura Litvan, Bloomberg
- Joe Biden Attacks Republicans for Positions He Once Held About Social Security – Andrew Kaczynski and Em Steck, CNN
- Why Republicans Abandoned Their Economic Message – Alex Shephard, New Republic
- Monetary Policy Is Not Solely to Blame for This Banking Crisis – Martin Wolf, Financial Times
- $52 Billion Chipmaking Plan Is Racing Toward Failure – Bloomberg Opinion Editors
- How to Save Patients Money by Ending One Type of Insurance Coverage – Erin E. Trish and Karen Van Nuys, Washington Post
- Vulnerable People Should Be Allowed a Second Bivalent Shot This Spring – Leana S. Wen, Washington Post