POLITICO NIGHTLY: Don’t freak out over the debt limit … yet

 

View in browser   BY BEN WHITE KOCH FUNDED PROPAGANDA:  DON'T BELIEVE IT! Presented by Americans for Prosperity With help from Ari Hawkins Treasury Secretary Janet Yellen. | Kevin Dietsch/Getty Images ‘EXTRAORDINARY MEASURES ’ — The U.S. breached its statutory $31.4 trillion “debt ceiling” today. And precisely nothing happened. Markets paid it little mind. Even senior White House aides privately expressed fairly breezy confidence to Nightly that they will somehow find a path with a raucous House majority to raise the borrowing cap by mid-to late summer when it will really matter. “The media wants to turn this into a central daily issue,” one top White House aide told Nightly. “It isn’t. The mechanics will come together towards the end.” Between now and sometime this summer, Treasury Secretary Janet Yellen can execute “extraordinary measures” to keep paying the nation’s bills on time and avoid a catastrophic and unprecedented debt default by Uncle Sam. This mainly entails green eyeshade accounting moves Treasury can make that are too dull to unpack here. (There are explainers all over the Internet.) In her letter to Congress today , Yellen suggested such measures may last until early June. Other forecasters say it could be as late as September. The so-called “X date,” when extraordinary measures will fail and the U.S. would default on outstanding debt, depends largely on the flow of 2022 tax receipts into Treasury’s coffers the next couple of months. It’s hard to nail with any precision. But the “X date” — to steal from the “X-Files” — is “out there.”   And it is right and good and just to fear coming even close to blowing past it. We came close in 2011 and got downgraded by bond rating firm Standard & Poor’s, the first such blow to America’s iron-clad AAA credit rating in history, rattling markets and hiking government borrowing costs. But it’s way too soon to look for windows to leap out. The arguments for not freaking out yet are stronger than those for going bonkers. So let’s start with … Why you shouldn’t worry : The short answer is that a debt limit beach — even one that includes attempts to “prioritize” payments to existing bondholders to avoid technical default — is pretty much unthinkable. It would likely send markets tanking, spike borrowing costs and undermine an economy that is already teetering near recession as the Fed boosts interest rates to fight inflation. The U.S. Treasury bond market is the foundation of the global financial system and rates on the 10-year and other heavily traded Treasury securities help determine all kinds of other borrowing costs. Treasury bonds are also considered among the safest investments in the world. Throwing that away on a fight over discretionary spending levels would be, to put it mildly, completely insane. The White House for its part, may be staying calm but it’s still taking things very seriously. Ithas a troika of officials — including Yellen, National Economic Council Director Brian Deese and legislative affairs director Louisa Terrell — assigned to getting a debt limit hike or suspension passed in a timely manner with little or nothing in the way of spending concessions to Republicans. The trio meet weekly in White House Chief of Staff Ron Klain’s office. In the White House’s view, Republicans are on very poor political ground. Unlike 2010, they scored no big mandate for spending cuts in the 2022 midterms. Republicans raised the debt limit repeatedly under President Donald Trump without any spending cuts. And they were expected to romp in 2022 and only barely snared the House. Democrats, meanwhile, will hammer them for the next several months about holding the economy hostage over giving Treasury the ability to pay for spending commitments Congress has already made . The White House team figures there will be a path to a relatively clean hike featuring Democrats and moderate Republicans from districts President Joe Biden carried. Which gets us to … Why you should worry a bit . The main reason is that, in order to get the gavel, House Speaker Kevin McCarthy (R-Calif.) agreed that he would not push through any debt limit hike without significant spending cuts. And his speakership hangs on just one Republican deciding to force a vote to push him out. So hardline fiscal conservatives in the House Freedom Caucus will have outsized power. And making a deal that features mostly Democratic votes seems like it will be quite difficult. This drama will run for the next five months and possibly more . It may look very grim and hopeless at times. It has before. But the U.S. has never defaulted. Anyone with a rudimentary understanding of economics knows it simply can’t be allowed to happen. So it’s reasonable — for now at least — to believe 2023 won’t be the year that Congress decides to vaporize the economy for absolutely no good reason. Welcome to POLITICO Nightly. Reach out with news, tips and ideas at nightly@politico.com . Or contact tonight’s author at bwhite@politico.com or on Twitter at @morningmoneyben .     KOCH FUNDED PROPAGANDA: DON'T BELIEVE IT! A message from Americans for Prosperity: DeOnomic crises of our time? For too long, conventional wisdom has been that divided government is a free pass for gridlock. You can be the Congress that bucks that trend and makes life more affordable. Americans need you to succeed. Will you? Learn more at www.Dear118Congress.com.   WHAT'D I MISS? — Supreme Court could not identify who shared draft abortion opinion: An investigation by the Supreme Court has been unable to determine who disclosed to POLITICO last year a draft opinion overturning the federal constitutional right to abortion, the court said in a statement today. The internal probe zeroed in on 82 employees who had access to electronic or hard copies of the draft majority opinion overturning Roe v. Wade , but “was unable to identify a person responsible by a preponderance of the evidence,” the high court said. — Judge denies Navarro effort to dismiss contempt case for defying Jan. 6 committee: A federal judge today rejected a last-ditch effort by Peter Navarro , a former adviser to Trump, to dismiss the contempt of Congress charges he faces for defying a subpoena from the Jan. 6 select committee, keeping his late January trial on track to begin. U.S. District Court Judge Amit Mehta said Navarro had failed to prove that the former president wanted him to assert executive privilege over his potential testimony — a key claim that Navarro has long maintained justified his decision to simply blow off the select committee’s subpoena. — HUD revamps Obama-era discrimination rule in rebuke to Trump: The Biden administration today renewed a push to require cities to address patterns of residential segregation , revamping a regulation that Trump had scrapped in a bid to woo suburban voters in the 2020 campaign. The new proposed rule from the Housing and Urban Development Department incorporates the framework of the 2015 rule, an Obama-era effort to ensure that state and local governments were meeting their obligation to “affirmatively further fair housing” under the 1968 Fair Housing Act. — Santos denies having been a drag performer: Embattled Rep. George Santos (R-N.Y.) today shot down claims that he once performed as a drag queen, the latest allegation about the freshman member whose fabrications on his own resume have embroiled him in scandal in recent weeks. “The most recent obsession from the media claiming that I am a drag Queen or “performed” as a drag Queen is categorically false,” Santos said in a tweet. “The media continues to make outrageous claims about my life while I am working to deliver results. I will not be distracted nor fazed by this.”   STEP INSIDE THE WEST WING : What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president’s ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today .     AROUND THE WORLD German tanks and soldiers during a NATO military exercise. | Sean Gallup/Getty Images PLEASE AND TANK YOU — A group of European nations is working to form a coalition to pressure Berlin to allow them to send their German-made tanks to Ukraine , as frustration mounts over Berlin’s insistence that the U.S. donate their tanks first, write Alex Ward , Lara Seligman and Paul McLeary . The group, which will likely be led by Poland, could take its first steps at a Friday meeting of 50 nations committed to helping Ukraine in Ramstein, Germany, during a regular gathering of the Ukraine Defense Contact Group. The move is part of a new multi-front campaign by U.S. and Western allies to persuade German leaders to change their minds on the tank issue. Twelve countries operate Leopard tanks, and many have said they want to donate them to Ukraine ahead of an expected spring offensive. But due to expert rules, they need Germany’s permission before they can transfer the vehicles. SEE-EU LATER — Serbian President Aleksandar Vučić said his country was “not enthusiastic” about European Union membership anymore and hit out at critics of Vladimir Putin, writes Wilhelmine Preussen . Speaking at a POLITICO panel event at the World Economic Forum in Davos, Switzerland, Vučić said: “We are not as enthusiastic as we used to be, in a way that the European Union is not as enthusiastic about us as we thought it was.” He added he was “pessimistic” about Serbia entering the European Union any time soon . Serbia was originally identified as a potential EU candidate country in 2003 and Belgrade put in a formal application for membership in 2009. But accession talks have dragged on, with Serbia’s closeness to Russia an increasingly important sticking point. The EU has made clear that would-be members must follow its line on foreign policy and sanctions. While Belgrade has said it supports Ukraine, it has refused to impose sanctions on Moscow, its longtime ally. ARDERN OUT — New Zealand’s Prime Minister Jacinda Ardern will resign from the top job “no later” than February 7, she announced today at a press conference at her party’s annual caucus meeting, saying she didn’t have “enough in the tank” to continue, writes Zoya Sheftalovich . Ardern, who became the youngest female head of government when she was elected prime minister in 2017 aged 37, confirmed New Zealanders will head to the polls for a national election on October 14 this year, and that she would not stand for reelection. Speaking to her 4-year-old daughter Neve, Ardern said she was looking forward to spending time with her when she started school this year. In a message to her fiancé Clarke Gayford, she said: “Let’s finally get married.” Ardern said that while she knew there would be “much discussion in the aftermath of this decision as to what the so-called real reason was, I can tell you that what I’m sharing today, is it. The only interesting angle that you will find is that after going on six years of some big challenges, I am human, politicians are human. We give all that we can for as long as we can. And then it’s time. And for me, it’s time,” she said. Ardern led New Zealand through the COVID-19 pandemic, as well as several crises such as the terror attack on two Christchurch mosques in March 2019 and the White Island volcanic eruption in December 2019.       KOCH FUNDED PROPAGANDA: DON'T BELIEVE IT! A message from Americans for Prosperity: T    NIGHTLY NUMBER 10.1 percent The percentage of American workers who were members of a union in 2022 , dropping from 10.3 percent in 2021, according to the Bureau of Labor Statistics. That’s the lowest figure since the agency began tracking the number nearly four decades ago, and it comes despite the highest labor union approval rate — 71 percent, according to Gallup — since 1965. RADAR SWEEP STICKY FINGERS — We’re living in the age of the shoplifter . Products from chain stores are constantly ending up on the street marked down, or just stolen. So, after years of ignoring the issue, stores like Walgreens are attempting to crack down, keeping their goods under lock and key. But this leads to its own set of problems: if you’re a paying customer, it’s much more difficult to get what you want. James D. Walsh reports for Curbed on the wide world of shoplifting, pawnshops and how these practices affect the rest of us.   LISTEN TO POLITICO'S ENERGY PODCAST: Check out our daily five-minute brief on the latest energy and environmental politics and policy news. Don't miss out on the must-know stories, candid insights, and analysis from POLITICO's energy team. Listen today .     PARTING WORDS John Kerry, U.S. special climate envoy, during a discussion at the World Economic Forum in Davos, Switzerland. | Markus Schreiber/AP Photo DAVOS DEALINGS — On the penultimate day of the World Economic Forum in Davos, Switzerland, geo-political tensions came to a slow boil at one of the world’s largest gatherings of titans of industry and heads of state, Ari Hawkins writes for Nightly. John Kerry, the U.S. special climate envoy, defended this year’s decision to host United Nations climate talks in the United Arab Emirates and said the oil-rich nation is rapidly transitioning away from fossil fuels. Hours later, Swedish climate activist Greta Thunberg, alongside three other young female climate activists, slammed the special climate envoy’s argument and called the decision “completely ridiculous” and presented a petition demanding energy companies stop new coal, oil and gas projects. Earlier this week, POLITICO reported on tensions between the president of France and Sen. Joe Manchin (D-W.V.) and rising pressure on Germany to send tanks to Ukraine. Organizers say this year’s theme “The New Global Context” refers to “the period of profound political, economic, social and technological change that the world has entered.” Today’s panel lineup also included sessions on LGBTQ+ equality, global cooperation on climate change and Ukraine’s path to recovery amid the Russian invasion. Nightly caught up with Alex Ward , who has spent the past week in Davos, to explain the conference and its relevance to global politics. This interview has been edited. What are the big takeaways or news coming out of Davos this week? As with all conferences, the events are less interesting than what happens around the event. High-powered people say a lot of nice things and rarely act on them. There’s some paeans to collective action, but generally, most Davos attendees make statements on how they will tackle climate change or poverty or global hunger, for instance. It’s really a good opportunity for businesses to do their work and for politicians to hold many meetings in a row. We also stirred up trouble ourselves, with a deeply reported piece on who would replace Klaus Schwab, the longtime WEF leader. It was the talk of the conference. Who exactly attends conferences like the World Economic Forum? The world’s elite. Globalization of true believers. Oligarchs. Business leaders, world leaders and journalists. It’s really the world gathering for a week. How likely is collective action?  In terms of new action, that really depends. It’s always the question after the WEF. Will the well-heeled and well-meaning do what they say, or will world events end the unity shown in the Swiss Alps? History suggests the worst. But there’s always room for surprise. Did someone forward this email to you?  Sign up here .     KOCH FUNDED PROPAGANDA: DON'T BELIEVE IT! A message from Americans for Prosperity: Congress at a Crossroads: Americans are facing a cost-of-living crisis. Divided government can’t be an excuse to do nothing. The 118th Congress can drive a policy agenda to make life more affordable by reining in spending to get inflation under control, cutting red tape to bring down energy costs, and expanding opportunities for fulfilling work. But to do that, Washington needs to rise above the political dysfunction to get things done. Americans can’t afford to wake up two years from now to a country on the same path. Learn how we can change course at www.Dear118Congress.com.     Follow us on Twitter Charlie Mahtesian @PoliticoCharlie Calder McHugh @calder_mchugh Katherine Long @katherinealong Ari Hawkins @_AriHawkins   FOLLOW US

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