Nearing the End of the Debt Limit Saga

Happy Tuesday! For readers suffering from Succession withdrawals, this story about Japanese Prime Minister Fumio Kishida firing his own son after an ethics scandal is giving us real Logan-Kendall vibes.

Quick Hits: Today’s Top Stories

• The Ukrainian military shot down at least a dozen cruise and ballistic missiles over Kyiv on Monday, the country’s top military official said—the 16th such attack on the capital city this month as Russian forces attempt to exhaust Ukraine’s air defenses ahead of the now-imminent Ukrainian counter-offensive. Russia reportedly launched 75 drones and missiles at Ukrainian military facilities and other targets across the country, with Ukrainian forces downing 67.
• More than 30 NATO peacekeepers were injured in clashes with protestors in northern Kosovo on Monday. The NATO forces—made up of servicemembers of several nationalities—were deployed to four Kosovo municipalities after protesters attempted to prevent ethnic Albanian mayors from taking office in Serb-majority areas of the country following recent elections, which were widely boycotted by ethnic Serbs. 
• Ugandan President Yoweri Museveni signed sweeping anti-LGBT legislation into law on Monday, prompting backlash from President Joe Biden, the European Union, and the United Nations Human Rights Office. Same-sex relationships were already illegal in the East African nation, but the new bill introduces the death penalty for so-called “aggravated homosexuality,” which includes same-sex relations with children or disabled people, or while one party is unconscious, and repeated intercourse between two people of the same sex when one of the parties is HIV-positive. The bill also mandates up to 20 years in prison for anyone “promoting homosexuality,” a vague term which activists fear could be used to target sexual health workers and AIDS healthcare providers.
• Spanish Prime Minister Pedro Sánchez called a snap election for July 23—roughly six months ahead of the predicted end of his government’s term—after conservatives routed his Socialist Workers’ Party in regional and local elections over the weekend. Sanchez is likely aiming to catch his Popular Party opponents off guard, banking on centrists’ distaste for the possibility of a right-wing coalition in national government that includes the far-right Vox Party. The campaign will coincide with the beginning of Spain’s six-month term as president of the European Union, which starts in July.

Debt Deal Reached 

In a May 1993 comic strip, Calvin and Hobbes—his stuffed tiger—are negotiating how to divide up the winnings of an art competition they entered together. Both characters think they deserve the larger share, but eventually settle on a 50-50 split. “A good compromise leaves everybody mad,” Calvin huffs as he storms off.

So it is with the long-awaited debt limit agreement struck between President Biden and House Speaker Kevin McCarthy over the weekend. Hard-right lawmakers have labeled the deal “devastating” and an “insult to the American people,” arguing it puts the United States’ “financial future at risk.” Far-left progressives have claimed the agreement is full of “bad policy” that will “push poor [people] deeper into poverty” and “cripple Biden’s presidency.” The majority of lawmakers between those two poles have some mild frustrations with the legislation, but think it’s generally fine and will—in all likelihood—vote to advance it later this week.

After weeks of talks and a lengthy negotiating session on Saturday, Biden and McCarthy finally came to a tentative “agreement in principle” on legislation suspending the debt limit until January 2025—after the next presidential election—in exchange for a number of modest, but symbolic, cuts to Democratic priorities. By Sunday evening, that “agreement in principle” had been translated into legislative text: the Fiscal Responsibility Act.

“It takes catastrophic default off the table,” Biden told reporters Sunday. “No one got everything they wanted, but that’s the responsibility of governing.” McCarthy initially spiked the football a bit—he told Fox News Sunday “not one” Democratic priority made it through—but later argued there’s “a lot” in the deal “for both sides.” With Treasury Secretary Janet Yellen pushing back the “X date”—potential day of federal default—until June 5, the two leaders have a little more breathing room as they seek to sell the package to their respective corners.

A number of the spending cuts pushed by Republicans during the negotiations do feature in the final deal, albeit in a compromise format. The age limit for food stamp work requirements would be increased from 50 to 54 for able-bodied adults under the agreement, though it contains some carve-outs for parents, veterans, the homeless, and young people transitioning out of foster care. Medicaid work requirements were left unchanged.

Additionally, some $28 billion in unspent COVID relief funds would be clawed back and student loan and interest payments would be reinstated. Another Republican goal—trimming a funding boost for the IRS—is reflected in the final deal: $21.4 billion of the $80 billion in new funding for the tax agency would be cut or reprogrammed over the next two years. The agreement also includes reforms to streamline the permitting process for energy projects. Democratic Sen. Joe Manchin and Republican Sen. Shelley Moore Capito, both of West Virginia, notched a big victory for their state by successfully lobbying to include the expedited approval of permits necessary to complete a 303-mile natural gas pipeline from West Virginia to Southern Virginia.

The draft deal also contains new items such as applying the congressional “pay as you go” rule to the presidency, which would require executive actions that increase spending to be offset by spending reductions in other areas.

But despite the planned spending cuts, the structure of the agreement and reported “side deals” on future appropriations make it far from clear how much federal spending will actually decrease. “It’s a choose your own adventure bill, where the official spending numbers look pretty conservative, but there seems to be some handshake agreements to circumvent the numbers and increase spending,” Brian Riedl, a senior fellow at the Manhattan Institute and former chief economist for Republican Sen. Rob Portman, told The Dispatch. “The true measure of how much money this bill saves won’t be known until the actual appropriations bills are finished at the end of this year and the end of next year because there seems to be openings for substantial gimmicks that were purposely left in.” 

Those gimmicks include planned “appropriations adjustments” to use the savings from the COVID clawbacks to pay for other discretionary spending. “Indications are that they may use that $28 billion as an offset for another $28 billion in spending,” Riedl explained. “Most of that money was probably never going to be spent anyway. So, if you say, ‘We’re going to take back that $28 billion and program it into $28 billion dollars in new discretionary spending,’ well what if only $10 billion of that spending was actually going to be spent, and now you’re using it to increase discretionary spending by 28 billion?” And once Congress initiates new spending on programs, it nearly always becomes a permanent increase.

Some conservative Republicans argue the bill doesn’t go nearly far enough in reducing federal spending. “This ‘deal’ is insanity,” said Rep. Ralph Norman, a Republican of South Carolina. “Not gonna vote to bankrupt our country.” Rep. Chip Roy, a House Freedom Caucus member from Texas, described the deal as a “turd-sandwich.” Both members sit on the House Rules Committee where the bill must be voted through before going before the full House, but the other seven Republican members and four Democrats have not signaled an intention to block the bill—the committee is scheduled to meet this afternoon to discuss the bill.

House progressives voiced their own concerns, but most appear more muted than conservative critics of the bill. House Progressive Caucus Chair Pramila Jayapal told CNN on Sunday before the bill text was released that Democratic leadership should “worry” about progressive support, but stopped short of saying she would oppose the deal. 

Despite the critiques, Congressional leadership is projecting confidence that the deal will garner sufficient support. “This is a good, strong bill that a majority of Republicans will vote for,” McCarthy said.

“This thing will absolutely pass,” said Rep. Dusty Johnson, a Republican of South Dakota who helped negotiate the deal. “There’s no question about that. I’ve talked to dozens of members, and listen, not every single member is on board. But when was the last time that every single member of Congress agreed on anything?”

If passed, the agreement will avoid a default—which could happen as soon as Monday–but as it avoids serious reforms to entitlement programs, will do little to reduce the national debt. “The savings only affect nonveterans, nondefense discretionary spending, which is about 12 percent of the budget,” Riedl says. “The final outcome is really a drop in the bucket.”

Another Dose of Erdoğan

It may be “the economy, stupid,” but Turkish President Recep Tayyip Erdoğan has proved it’s not just the economy.

Despite soaring inflation and his government’s lackluster response to February’s devastating earthquakes, Erdoğan secured another five-year term in Sunday’s runoff election, winning about 52 percent of the vote to opposition candidate Kemal Kılıçdaroğlu’s 48 percent. With two decades of Erdoğan’s rule to extrapolate from, Western analysts predict he’ll double down on his populist economic strategies and continue positioning himself between the West and its rivals.

Leading a broad but tenuous opposition coalition, Kılıçdaroğlu pitched his candidacy as a chance to repudiate Erdoğan’s consolidation of power and repression over his two-decade rule and instead embrace democracy and a true parliamentary system. Kılıçdaroğlu got a boost from Erdoğan’s stumbles: His government responded sluggishly to a February earthquake that killed more than 50,000 people in Turkey, and his refusal to let the country’s central bank raise interest rates—he’s fired central bank chiefs for trying it—has fueled blazing inflation. Prices increased 43 percent year-over-year in April, down from more than 80 percent late last year.

But Kılıçdaroğlu was never a dream opposition candidate—Meral Akşener of the Iyi Party, a member of the opposition coalition, briefly abandoned the campaign in early March, convinced he couldn’t win. During the two-week runoff period, Kılıçdaroğlu tried to capture a winning margin by pivoting to a nationalist message and promising to expel Syrian refugees, whom many Turks blame for the country’s economic woes. “The campaign was almost amateurish by that point,” said Sinan Ciddi, a Turkish analyst and associate professor of national security at the Marine Corps University. Ciddi argued this pitch alienated Kurdish voters without attracting others: “The Turks deserved much better than they got in this election from the opposition candidate.”

But no matter who Erdoğan’s opponents put up, they were bound to face a stacked deck. Judges appointed by Erdoğan’s party attempted to disqualify the strongest potential opposition candidate—Istanbul Mayor Ekrem İmamoğlu—on thin charges of insulting Supreme Election Council officials. State-run television, meanwhile, devoted some 32 hours of coverage to Erdoğan in a month, and about 32 minutes to Kılıçdaroğlu. The Office for Democratic Institutions and Human Rights’ election observers concluded the initial vote was free, but “the incumbent president and the ruling parties enjoyed an unjustified advantage.”

Still, Erdoğan enjoys genuine support. “For a lot of Turks, Erdoğan has expanded freedoms,” argued Steven Cook, a senior fellow at the Council on Foreign Relations. “For example, pious women who wear [a] hijab can do so anywhere in Turkey. That was not always the case.” Erdoğan’s campaign against Kurdish terrorism and LGBTQ people appealed to his base—as did the stability of his rule. Turkey’s “heartland, long ignored in Turkish politics until Erdoğan showed up, has seen their lives demonstrably improved under him,” said James Jeffrey, a former United States ambassador to Turkey. Jeffrey added Erdoğan provided “sustained, predictable government,” stability that marked a change from the complicated and confusing coalitions that preceded him.

To blunt economic pain ahead of the election, Erdoğan boosted retirement benefits and pension payments, raised minimum wages, and put up billboards promoting his promise of a natural gas subsidy. Post-election, Cook predicted he’ll continue attempting to hold together the fraying economy by selling state assets and relying on credit swaps and delayed payments to friendly nations—China, the Gulf states, and Russia. Turkey could be a candidate for help from the International Monetary Fund, but the IMF would likely require interest rate hikes Erdoğan still staunchly opposes. “No way will he surrender to what he calls ‘the interest rate lobby,’” said Cook. “Erdoğan has proven that he can mismanage an economy and still get elected.”

Erdoğan’s reelection likely also means he’ll continue playing off Turkey’s strategic location and relationships with both the West and its opponents. Within hours of his victory, he’d received congratulations from Iran, Hamas, and Russia—and President Biden and Secretary of State Antony Blinken. The United States booted Turkey from a purchase program for F-35 jets after Erdoğan purchased a Russian air defense system, and it’s possible Turkey will push to be allowed to purchase F-35s—or at least F-16s—in exchange for dropping its block on Sweden’s accession to Ukraine. “Trying to leverage Sweden for planes will not garner goodwill on Capitol Hill, in particular,” Cook argued. “The Turks have a problem reading the room in Washington.”

Still, despite Erdoğan’s personal enthusiasm for anti-Western rhetoric, Jeffrey hopes he’ll have more desire to cooperate with election season pressures behind him. And given Turkey’s strategic position and participation in NATO, the U.S. considers that cooperation essential. “We have really important existential things to do in Eurasia,” Jeffrey said. “It’s hard to see how you do it without Turkey.” (For more on Turkey’s election and what it means, see this analysis from Eric Edelman, former U.S. Ambassador to Turkey, and read this piece from Charlotte Lawson, both published on The Dispatch website over the weekend.)

Worth Your Time

• Fifty-four years ago, Rep. Dean Phillips’ biological father died in a helicopter crash in Vietnam. In March, Phillips, a Democrat from Minnesota, visited Dragon Mountain, the place where his father and seven other soldiers died. “Phillips had hoped to pick up sunflowers to take to the site, but the group was late as it rushed from the hotel to the Hanoi airport to catch a flight to central Vietnam,” Scott Wong, Julie Tsirkin, and Kate Santaliz report for NBC News. “At a stoplight though, an old woman on a motorbike pulled alongside the group’s van holding a bouquet of sunflowers. Phillips jumped out and bought them. Just outside Pleiku on the path to Dragon Mountain, the group had no idea where the crash site was. But they bumped into a man coming down the path named Pyek Rocham, who told them he had lived on the mountain for 60 years and had scavenged the crash site for scrap metal and MREs with his brothers in 1969. He pointed out exactly where it was, now part of a coffee plantation. Walking to the site, they came across two red peppers on the path. They picked them up, and Phillips’ friend reminded him that pepper in German is ‘Pfeffer’—his father’s last name. On Dragon Mountain, Phillips laid down his sunflowers and buried a congressional coin in the red dirt where his father’s Huey helicopter went down those many decades ago.”
• The Biden administration, Kori Schake argues, is too preoccupied with the threat of Russian nuclear escalation in Ukraine. “ The true cost of the Biden administration’s focus on escalation may be one of prolonging the war,” she writes in The Atlantic. “Former Defense Secretary Robert Gates has assessed that F-16s are ‘a decision that could have been made six months ago. Truth is, if they had begun training pilots on F-16s six months ago, then those pilots would be able to get into those airplanes this spring.’ Our hesitance telegraphs to Russia that by continuing to assault Ukraine, it can wait us out—a lesson consistent with the course of the U.S. withdrawals from Iraq and Afghanistan. For the leader of the free world to be more worried than the leaders of Poland, Denmark, France, Sweden, the Netherlands, and the United Kingdom is not a great look. Those countries are already considering offering fighters or training to Ukraine—and are at greater risk of Russian retaliation than the United States is.”

Presented Without Comment

Politico: Russia Issues Arrest Warrant for Lindsey Graham Over Ukraine Comments

Also Presented Without Comment

New York Post: Trump Compares His Political Battles to Fallen Troops’ Sacrifices in Memorial Day Rant

Toeing the Company Line

• It’s Tuesday, which means Dispatch Live (🔒) returns tonight at 8 p.m. ET/5 p.m. PT! Kevin will join Jonah to offer observations from his trip to Ukraine, and the Dispatch Politics team will break down the latest 2024 developments. And as always, there’ll be plenty of time for viewer questions! Keep an eye out for an email later today with information on how to tune in.
• In the newsletters: Writing from Kyiv, Kevin pens a stunning description of Ukraine at war. “Ukraine will suffer setbacks, surely. And maybe Zelensky will disappoint us. A very careful audit of aid to Ukraine is going to turn up things we do not like,” he writes. “But we do not have to be romantics about this. There are people who broadly share our values and who want to live in the kind of world we want to live in, however imperfect their government and however urgently in need of reform their institutions may be. And then there are the people who fire rockets into maternity hospitals, who train sniper fire on those attempting simply to bury the dead.”
• On the site: Price covers state-level efforts to regulate artificial intelligence. “Public interest in and concern about artificial intelligence continues to grow, and not just at the federal level,” he writes. “In fact, some state and local governments are moving faster than policymakers in Washington, D.C.”

Let Us Know

Do you favor the debt ceiling deal? What, if anything, can be done to change the perverse incentives that lead to governance by emergency deal?