An Anticlimactic End to the Debt Ceiling Saga

Happy Thursday! Failed Arizona gubernatorial candidate Kari Lake is taking over the keynote speaking slot at the Georgia GOP’s upcoming Victory Dinner after former Vice President Mike Pence backed out of the engagement. 

There’s a metaphor in there somewhere, but we can’t quite put our finger on it.

Quick Hits: Today’s Top Stories

• The House voted 314 to 117 on Wednesday to pass the Fiscal Responsibility Act, a bill suspending the debt ceiling until January 2025 in exchange for billions of dollars of spending cuts in the coming years. Seventy-one Republicans and 46 Democrats voted against the measure, but the Senate is expected to send it to President Joe Biden’s desk before the expected June 5 deadline to avoid default.
• A number of central bank officials suggested Wednesday that—barring an unexpectedly hot jobs report Friday—the Federal Reserve is unlikely to raise interest rates in June. “Skipping a rate hike at a coming meeting would allow the committee to see more data before making decisions about the extent of additional policy firming,” said Fed Governor Phillip Jefferson, who was recently nominated for a promotion to vice chair of the central bank.
• Former New Jersey Gov. Chris Christie reportedly plans to announce Tuesday—at an event in New Hampshire, an early primary state—that he’s running for the GOP presidential nomination. Former Vice President Mike Pence is also set to enter the race next week with a kick-off event in Des Moines, Iowa on Wednesday. According to early national surveys, both are currently polling in the low single digits, while former President Donald Trump holds a commanding lead over the field.
• Biden has nominated Gen. Eric Smith to replace Gen. David Berger as commandant of the Marine Corps. Smith is the last of several nominees tapped to replace outgoing members of the Joint Chiefs of Staff—the highest-ranked uniformed members of the armed forces who advise the president on military matters. Smith is currently assistant commandant of the Marines.
• U.S. Border Patrol head Raul Ortiz announced he will retire at the end of June after three decades with the agency. Ortiz has led the Border Patrol since 2021 and oversaw the end of the pandemic-era Title 42 policy. His replacement has not yet been named.
• Virginia’s Republican Gov. Glenn Youngkin announced this week he will eliminate college degree requirements for 90 percent of state jobs, joining eight other states—including Maryland and Pennsylvania—in a move intended to combat worker shortages and expand employment opportunities. The policy will take effect on July 1 for many of the roughly 20,000 openings Virginia state agencies advertise each year.
• The Justice Department announced Wednesday it is suing coal companies owned by West Virginia’s Republican Gov. Jim Justice and his family over unpaid fines. The 128-page civil action seeks more than $5 million in damages from 13 Justice family businesses over unpaid penalties for more than 100 federal mining regulation violations, some of which were for practices that created “health and safety” risks. The suit doesn’t mention the GOP governor but comes as he launches a Senate bid that could set him up to challenge incumbent Democratic Sen. Joe Manchin in 2024.
• The Labor Department reported Wednesday job openings rose from 9.7 million in March to 10.1 million in April, reversing three months of declines. The quits rate—the percentage of workers who quit their job during the month—ticked down to 2.4 percent, while the number of layoffs and discharges decreased from 1.8 million to 1.6 million. The figures suggest demand for workers remains high even as the economy slows slightly.

Done Deal

In the end, it wasn’t close. After weeks of pizza-fueled meetings and high-stakes negotiations, House Speaker Kevin McCarthy convinced a majority of the Republicans in his conference to support a debt-ceiling deal backed by even more Democrats in the House.  

For all the dealmaking fireworks and warnings of economic doom, the debt ceiling showdown neared its conclusion with a comfortably bipartisan vote. The House voted 314 to 117 last night to pass the Fiscal Responsibility Act of 2023, which would lift the debt ceiling and avoid what would likely be an economically catastrophic default, expected to hit as soon as June 5. A few more obstacles remain—the legislation still needs to pass the Senate—but the most difficult part of the process is now firmly in the rearview mirror.

The deal was struck via negotiations so intensive that White House negotiator Shalanda Young—director of the Office of Management and Budget—resorted to buying a new outfit at Nordstrom Rack when she couldn’t find time to do laundry. The resulting compromise, once enshrined into law, will suspend the debt limit until January 2025—notably, after the presidential election—and cut about $55 billion in spending next year and $81 billion in 2025. It will claw back some $28 billion in unspent COVID relief, trim $21.4 billion of a planned $80 billion boost to IRS funding, force the Biden administration to restart federal student loan payments, streamline energy permitting, approve a pipeline, and add work requirements for some food stamp recipients while dropping such requirements for others.

As we reported Monday, gimmicks and side deals struck to get the bill through the House could undo some of these savings—rescinded COVID aid, for instance, could get reappropriated and spent elsewhere. But as written, the Congressional Budget Office estimates the package would reduce deficits by about $1.5 trillion over the next decade barring any other changes. The Committee for a Responsible Budget published this graph to put that number in context:

Those spending cuts led 46 House Democrats to oppose the Biden-approved legislation, but 71 House Republicans thought it didn’t go far enough. Rep. Wesley Hunt of Texas, for instance, wanted the deal to rescind all of the $80 billion in new IRS funding and complained that striking a deal relinquished leverage to force extra border security. Rep. Nancy Mace of South Carolina said the bill “normalizes high spending started during the pandemic” and expressed frustration that the new debt limit is tied to a date (January 2025) rather than a specific amount of spending. Rep. Dan Bishop of North Carolina argued the bill was another example of the “unitary cartel sell[ing] out the American people,” while a number of other Republicans griped about the measure receiving more Democratic votes than Republican ones. The bill itself only made it out of the powerful Rules Committee this week after libertarian Rep. Thomas Massie broke with Bishop and fellow GOP Rep. Chip Roy to approve it.

In a sign of the importance of the GOP base in a presidential election year, several presidential candidates have also come out against it in recent days. “Is it in our best interest as a nation to allow Joe Biden, someone who we cannot trust on spending, to have an open checkbook, no limit on the credit card, until the end of his term?” asked South Carolina Sen. Tim Scott. Florida Gov. Ron DeSantis criticized the deal’s “massive” spending, and former President Trump said he would’ve let the country default instead.

Some House opponents of the deal even discussed whipping out the lower-threshold motion-to-vacate mechanism earned during the speakership fight and ousting McCarthy from his role. But while a single member can now force such a vote, he can’t actually boot McCarthy without help—and the speaker’s standing with the majority of the conference seems stable for now. GOP Rep. Jim Jordan, for example, slammed Bishop’s suggestion of removing McCarthy as a “terrible idea.” So did Rep. Marjorie Taylor Greene. “If my friends and colleagues in the Freedom Caucus want a motion to vacate over that, that is absolutely absurd, simply because we passed a debt ceiling bill that actually cuts spending,” she said. “I think they would find out that it’s not as popular as they think just because it looks good on Twitter right now. It would be a really dumb move.”

McCarthy took a victory lap after the vote, recounting President Biden’s refusal to negotiate until the House GOP conference passed a bill to cut spending and raise the debt ceiling—proving they could put forward a unified plan. “To the taxpayer, to you hard working Americans—we stood for you,” McCarthy said. “The Senate never did—they took no action.”

It’s now action time for the Senate. Senate Majority Leader Chuck Schumer and Minority Leader Mitch McConnell have both endorsed the bill and promised to usher it through the chamber swiftly, but the legislation has some vocal opponents on both sides of the aisle. GOP Sen. Josh Hawley said it doesn’t do enough to address trade deficits, while far-left Sen. Bernie Sanders said he’d vote against the compromise because it adds work requirements for food stamps and doesn’t raise taxes on the wealthy. Plenty of others have expressed frustrations with this bill but are eager to avoid default. “I just hope that my colleagues on both sides of the aisle will be mindful of the fact that we need to do this for the good of our economy and the good of our country,” said Majority Whip Dick Durbin.

Not all Republicans accept that argument. Sen. Mike Lee of Utah promised to “use every procedural tool at my disposal to impede a debt-ceiling deal that doesn’t contain substantial spending and budgetary reforms.” 

With Treasury Secretary Janet Yellen setting the “X-Date” for default as this coming Monday, there’s no time to alter the bill and send it back to the House. But opposing senators seem open to the chamber passing it quickly if they can get votes on their preferred amendments—even knowing the amendments will likely fail. “I don’t have any desire to hold it up for the sake of holding it up,” Lee told reporters. “If they’ll allow us to get votes on our amendments, I see no reason to hold it up.” Republican Sen. Lindsey Graham wants a vote to increase defense spending in the bill, while Republican Sen. Rand Paul wants the Senate to weigh in on an alternative debt ceiling proposal that would cut Social Security and Medicare. Democratic Sen. Tim Kaine, meanwhile, wants a vote on rescinding approval of the Mountain Valley Pipeline, which would cut through his state.

But at this point, even lawmakers like GOP Rep. Ken Buck who oppose the measure are confident it’ll become law. “This bill will pass,” he told CNN Tuesday. “ It will go to the Senate. It will pass in the Senate. It’ll be signed by the president and the United States will not default.”

Pakistan’s Political Strife

When we last wrote to you about unrest in Pakistan last month, the country’s popular former prime minister—Imran Khan—had just been arrested and released from police custody after days of rioting by his devotees. Weeks later, the demonstrations have died down but political instability remains. In a piece on the site today, Charlotte revisits the nuclear-armed country’s brewing crisis—and the man at its center.

Who is Imran Khan?

A former cricket star with a penchant for public speaking, Khan has been on Pakistan’s national political scene since the late 1990s. But the celebrity’s political star only began to rise after the military threw its weight behind him. It propelled Khan to the premiership in 2018 by helping him and his party craft effective social media campaigns and grievance-based appeals. 

“To understand Khan, my simplest advice to an American is to look at Trump,” says Husain Haqqani, a former Pakistani ambassador and current scholar at Washington D.C.’s Hudson Institute and the Anwar Gargash Diplomatic Academy in Abu Dhabi. “He’s offered no solutions, but he has given a voice to widespread anger and dissatisfaction.”

Why is he rallying his supporters now?

Khan racked up more than 100 charges since his ouster, including for corruption and sedition. After his arrest last month, Khan called on his supporters to fight back—and they did. They attacked public buildings, burned vehicles, wielded assault rifles, and hurled Molotov cocktails at police officers. Authorities responded with tear gas and rubber bullets, but they later released Khan on bail. He’s now staying at his Lahore residence, under what some have described as effective house arrest. 

Khan claims some 10,000 of his supporters were arrested in last month’s chaos, including 4,000 on terrorist charges (though many analysts argue those numbers are greatly inflated). While Khan says they’ve been unjustly detained, his successor—Prime Minister Shehbaz Sharif—has accused Khan’s party of trying to throw the country into civil war and likened the events of May 9 to the January 6 Capitol riots. 

How will this affect Pakistan’s path to democracy?

When Khan urged supporters to have his back in what many saw as a quasi-revolutionary cry last month, he broke an unspoken rule that leaders out of favor with the military must go quietly and wait their turn for the next election. 

This tactic and the ensuing violence has given the military pretext to crack down on Khan and his party, destabilizing the country’s already fragile democratic system. Reading the writing on the wall, dozens of members of Khan’s PTI have tendered their resignation in recent weeks—described by Khan as “forced divorces.” Pakistani Defense Minister Khawaja Asif last week said Khan and his party had attacked the “very basis” of the state and may be prohibited from taking part in this year’s elections. Interior Minister Rana Sanaullah said on Tuesday the party chair will be tried in a military court for his role in instigating the attacks.

These developments are likely to create less, not more, room for democracy going forward. “Pakistan is a national security state, its people do believe that the military is important for their survival. While they may not like its political meddling, they certainly do not like the idea of attacks on military installations,” Haqqani says. “And by doing that, Imran Khan has not only risked his own political future, but has also weakened the prospect of civilian supremacy within the political sphere.”

Worth Your Time

• Poverty shouldn’t be an excuse to give up on children, and Mississippi proves it, Nicholas Kristof reports. The poorest state in the Union, long the poster child for poor outcomes, is turning its education system around. “With an all-out effort over the past decade to get all children to read by the end of third grade and by extensive reliance on research and metrics, Mississippi has shown that it is possible to raise standards even in a state ranked dead last in the country in child poverty and hunger and second highest in teen births,” Kristof writes in the New York Times. “Mississippi has achieved its gains despite ranking 46th in spending per pupil in grades K-12. Its low price tag is one reason Mississippi’s strategy might be replicable in other states. While education reforms around the country have often been ferociously contentious and involved battles with teachers’ unions, this education revolution unfolded with support from teachers and their union. Education reformers have often thought it hopeless to tackle state public school systems directly and so have pursued the equivalent of bank shots: Run effective charter schools, for example, and public schools can adopt lessons learned. Mississippi raises the question of whether we truly need bank shots. Or maybe for the United States, the whole state of Mississippi is the ultimate bank shot.”

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• In the newsletters: Jonah offers life advice (🔒) by way of a finance metaphor, Scott debunks the notion (🔒) that corporate greed is behind today’s inflation, Nick argues DeSantis’ (🔒) high energy start should bolster the hopes of anti-Trump Republican voters, and the Dispatch Politics team details DeSantis’ increasingly pointed attacks on the former president.
• On the site: Brian Riedl argues that, when it comes to the debt ceiling, a bad deal is better than no deal.

Let Us Know

How do you think Kevin McCarthy played the cards he was dealt on the debt limit negotiation? Do you think he remains in the job at least until the new Congress is sworn in in January 2025?