Good evening! President Joe Biden’s scheduled meeting tomorrow with congressional leaders to discuss raising the debt limit has been postponed to next week to allow staff talks to continue. Meanwhile, the fallout from former president Donald Trump’s CNN town hall continues. And the Covid-19 public health emergency officially expires at the end of the day — and the Title 42 policy restricting asylum for immigrants ends along with it, leading the Biden administration to enact new policies to try to address an expected surge of migrants crossing the southern border.
Here's your evening update.
Biden’s Debt Limit Meeting With McCarthy Postponed
The planned debt limit meeting on Friday between President Biden, House Speaker Kevin McCarthy and the three other congressional leaders has been postponed to early next week to allow aides more time to try to strike a deal.
White House and congressional officials reportedly cast the delay as a sign that the staff talks are making progress in the effort to raise the debt limit and avert a default. But McCarthy told reporters that there hasn’t been “enough progress” to meet with Biden tomorrow and that the leaders agreed it would be “more productive” for their staffers to continue their work on both a spending deal and a related increase in the debt limit.
“The spending discussions are also focusing on clawing back unspent Covid-19 funds and capping spending in the upcoming federal fiscal year beginning Oct. 1,” Bloomberg News reported, citing Rep. Garret Graves, a Louisiana Republican who is a close ally of McCarthy’s. Graves reportedly added that the White House is pursuing short-term spending caps while Republicans want a 10-year deal. Any deal would likely also include permitting reforms for energy projects.
Trump Urges Republicans to ‘Do a Default’
The Donald Trump Show was back on TV last night as CNN hosted a controversial and at times testy New Hampshire town hall event with the former president, who is also the current frontrunner in the 2024 Republican presidential field.
Trump steamrolled the ratings-starved news network or dunked on it, depending on which metaphor and news purveyor you prefer. Either way, the point is that Trump lied and blustered his way through the event.
In short, Trump was Trump, inevitably. He dug in on his 2020 election lies and said he is inclined to pardon a “large portion” of the people who rioted at the Capitol on January 6, 2021. He refused to say whether he wants Ukraine to win its war against Russia. He smeared E. Jean Carroll, who was just awarded $5 million in damages by a jury who found him liable for sexually abusing and defaming her, as a “wack job.” He repeatedly played to the Republican audience — his base — and continually elicited cheers and laughter from them.
He also may have delighted Democrats by reminding swing voters of just what another Trump term might look like. “It’s simple, folks. Do you want four more years of that?” President Biden tweeted.
Trump calls for massive cuts, or default: Trump certainly made plenty of news — not least, from a fiscal perspective, because he urged Republicans to press ahead with their debt-limit brinkmanship and demands for Democrats to agree to spending cuts, despite the potentially catastrophic economic risks.
“I say to the Republicans out there — congressmen, senators — if they don’t give you massive cuts, you’re gonna have to do a default,” Trump said. “And I don’t believe they’re going to do a default because I think the Democrats will absolutely cave because you don’t want to have that happen. But it’s better than what we’re doing right now because we’re spending money like drunken sailors.”
Economists have warned that a default on U.S. obligations would lead to widespread financial and economic damage, potentially including millions of lost jobs, devastated retirement savings accounts and spiking interest rates that raise the cost of mortgages, car loans and credit cards.
CNN host Kaitlan Collins pointed out that Trump as president had once argued against using the debt ceiling as leverage. “So why is it different now that you’re out of office?” she asked.
“Because now I’m not president,” Trump deadpanned, drawing more cheers and applause.
Trump also downplayed the potential economic consequences of a default. “You don’t know,” he said. “It’s psychological. It’s really psychological more than anything else. And it could be very bad. It could be, maybe, nothing. Maybe it’s – you have a bad week or a bad day, but, look, you have to cut your costs.”
Yellen warns against default: Treasury Secretary Janet Yellen on Thursday warned that, contrary to Trump’s comments, a default would threaten the global economy.
"America should never default. It would be tremendously, economically and financially damaging," she told reporters ahead of a meeting of G-7 finance ministers in Niigata, Japan. "The notion of defaulting on our debt is something that would so badly undermine the U.S. and global economy that I think it should be regarded by everyone as unthinkable."
Yellen also expressed doubts about whether the president could invoke the 14th Amendment to essentially ignore the debt limit, saying such a move would be “legally questionable.”
She emphasized that raising the debt ceiling and avoiding what she called “a crisis of our own making” is the responsibility of Congress. “There is no good alternative that will save us from catastrophe,” she said. “I don’t want to get into ranking which bad alternative is better than others, but the only reasonable thing is to raise the debt ceiling and to avoid the dreadful consequences that will come.”
Default Could Send Housing Market Into ‘Deep Freeze’: Zillow
The interest rate on a standard 30-year mortgage would jump as high as 8.4% if the U.S. defaults on its debts this summer, raising housing costs for new buyers by 22%, according to a new analysis by economist Jeff Tucker of the real estate firm Zillow.
A default would cool the housing market overall, reducing sales 23% by September. Over the next 18 months, sales would drop by an estimated 700,000 units relative to the current, non-default projection. Home values would fall by 5% relative to the baseline.
The Zillow analyst also expects a default to trigger a recession that pushes the unemployment rate up to 8.3% this fall, though much depends on how long the default lasts.
"Much uncertainty surrounds these estimates, but there's little doubt that a default would be a major negative shock to housing market activity," Tucker said. “Home buyers and sellers finally have been adjusting to mortgage rates over 6% this spring, but a debt default could potentially raise borrowing costs even higher and send the market into a deep freeze.”
Quote of the Day: A Warning From Military Leaders
“China right now describes us in their open speeches, etc., as a declining power. Defaulting on the debt would only reinforce that thought and embolden China and increase risk to the United States.”
− General Mark Milley, chairman of the Joint Chiefs of Staff, at a Senate Appropriations Committee on Thursday.
Asked what a potential debt default would mean for the Pentagon, Defense Secretary Lloyd Austin told the Senate panel that the U.S. reputation as a source of global stability would take a hit. He added: “What it would mean realistically for us is that we won’t, in some cases, be able to pay our troops with any degree of predictability. And that predictability is really, really important for us. But this would have a real impact on the pockets of our troops and our civilians.”
More Signs of Cooling in the Economy
Applications for unemployment benefits rose last week to 264,000, the Department of Labor announced Thursday. The results were higher than expected as the weekly initial claims number jumped by 22,000 from the week before, hitting the highest level since October 2021.
In a separate report, the Bureau of Labor Statistics said the producer price index rose by 2.3% in April on an annual basis, the slowest pace since January 2021.
Some analysts say the trends point to a slowing economy. “As the second half of 2023 wears on, producers may find their customers unable to weather higher costs,” said PNC economist Kurt Rankin, per The Wall Street Journal. “Job cuts have already begun to spread beyond tech and financial services as businesses anticipate weaker demand and adjust their outlooks.”
Omair Sharif, president of Inflation Insights, said the data support the view that the Federal Reserve should pause its interest rate campaign. “If you take the totality of the data this morning and CPI yesterday as well, these numbers certainly argue that the Fed should take a breather and watch the landscape over the next few months,” he said, per Bloomberg.
- Here’s How We Know a US Default Would Be an Economic Disaster – CNN Business
- Kevin McCarthy Dodges Question About Trump Telling the GOP to 'Do A Default' – HuffPost
- Dimon Jabs at Trump on Debt Ceiling, Says JPMorgan Has War Room – Bloomberg
- Pentagon Chiefs: Debt Default Is Bad for Troops, Good for China – Politico
- Small Businesses Brace for 'Catastrophic' Scenario From Looming Debt Ceiling Crisis – NBC News
- These States Will Be Hit the Hardest if the US Debt Ceiling Standoff Isn’t Resolved – CNN Business
- As Public Health Emergency Ends, Pandemic-Era Support Programs Have Already Been Fading Away – Associated Press
- Manchin Attacked EPA’s New Rules. They Could Cost Him Millions – Politico
- Republicans, George Santos Pass Unemployment Fraud Bill – HuffPost
- Biden’s Border Plans Face a Major Test as Title 42 Restrictions End – Washington Post
- House Approves Stringent G.O.P. Border Bill, Attacking Biden on Immigration – New York Times
- The COVID Public Health Emergency Is Over in the US. Here’s What That Means for You – USA Today
- Cash for Slavery Reparations Gets Cool Response From California Officials – Politico
Views and Analysis
- R-E-S-P-E-C-T, Kevin McCarthy Finds Out What It Means to Him – Paul Kane, Washington Post
- Why Biden Is Wary of Using the 14th Amendment to Address the Debt Limit Crisis – Zeke Miller and Josh Boak, Associated Press
- As House Republicans Play Politics on Debt Limit, Democrats Take Steps to Keep Our Options Open – Rep. Mark DeSaulnier (D-CA), The Hill
- Savvy Beltway Reporters’ Debt Ceiling Duplicity – Ryan Cooper, American Prospect
- Regulators on the Verge of Bungling Drug Price Reform, Advocates Say – David Dayen, American Prospect
- These 7 Radical Changes Would Fortify the U.S. Against the Next Pandemic – Amy Maxmen, Washington Post
- We Worked on the U.S. Pandemic Response. Here Are 13 Takeaways for the Next Health Emergency – Ezekiel J. Emanuel et al, New York Times
- America Is Forgetting the Lessons of the Covid Health Emergency – Jeneen Interlandi, New York Times
- CNN Town Hall Lays Bare Trump’s Very Unpopular Agenda – Aaron Blake, Washington Post