The Hill’s Morning Report — Default warning by summer rekindles debt debate

by Alexis Simendinger and Kristina Karisch - 02/16/23 6:25 AM ET

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The U.S. could default on its debt between July and September, the nonpartisan Congressional Budget Office warned on Wednesday, adding new specificity to a partisan impasse that could harm the economy even before summer (The New York Times).

Adding to the battle over budgeting and the statutory debt ceiling, the United States is on track to add $19 trillion in new debt over 10 years, in part because of rising inflation and bipartisan spending bills now in law, according to the CBO (The New York Times).

Federal debt held by the public is projected to rise from 98 percent of gross domestic product this year to 118 percent by 2033 — an average increase of 2 percentage points per year, according to projections. To many lawmakers and economists, it’s an unsustainable path.

“Over the long term, our projections suggest that changes in fiscal policy must be made to address the rising costs of interest and mitigate other adverse consequences of high and rising debt,” concluded CBO Director Phillip Swagel.

House and Senate Republicans, looking ahead to next year’s elections and worries about economic unknowns, tell voters that now is the time to rein in federal spending. But under political pressure, they’ve vowed not to cut Social Security and Medicare, and some conservatives have backed away from cutting defense spending, which means major drivers of accumulated debt were swept off the negotiating table.

President Biden and Democratic lawmakers say policies they’ve enacted succeeded in trimming the deficit during the past two years by more than $1.7 trillion, which the president hails as “the largest deficit reduction in American history.” The president will send Congress his proposed budget for fiscal 2024 on March 9.

The U.S. economy will barely grow this year after adjusting for inflation, the CBO forecast. The unemployment rate, which was 3.4 percent in January, will rise above 5 percent before growth reaccelerates next year, according to the economic projections. The CBO attributes the slowdown in growth to the Federal Reserve’s drive to tame inflation by raising interest rates in order to cool the economy and the labor market.

Biden used his State of the Union address and two speeches this week to tell voters that laws enacted since 2021 that House Republicans propose to repeal would raise, not lower, deficits and debt. With a Democratic majority in the Senate, none of the House GOP initiatives Biden has criticized would be expected to end up on his desk.

“I don’t understand my Republican friends don’t quite get this,” Biden said on Wednesday during an event in Lanham, Md. “Bringing down the cost of prescription drugs isn’t just fair. It saves seniors a lot of money. But here’s what else it will do. It will cut the federal deficit, saving taxpayers hundreds of billions of dollars over time.”

As The Hill’s Alex Gangitano reports, the White House asserts that if Republicans got their way and repealed provisions of the law that lowered prices for many prescription drugs for seniors, it would add $159 billion to the debt. The administration says tax increases on corporations that are backed by Democrats would mean more federal revenues and a $296 billion reduction in debt. Republicans oppose tax increases on corporations and wealthy individuals.

Related Articles

▪ CNBC: Retail sales jumped 3 percent in January, smashing expectations despite inflation jump.

▪ The New Yorker: Former White House Chief of Staff Ron Klain looks back on Biden’s first two years as president.

▪ Washington Monthly: It’s Clarence Thomas’s Supreme Court — and lower courts are saluting him.

LEADING THE DAY

➤ ADMINISTRATION

Lines of communication between Biden and Chinese President Xi Jinping are in flux amid the fallout from U.S. revelations of a global Chinese balloon surveillance program and the scrambling of fighter jets to take down unidentified flying objects over the U.S. and Canada. As The Hill’s Alex Gangitano and Laura Kelly report, Biden has yet to address the nation on what his administration knows about the threat posed from China, and U.S. officials have dismissed questions over whether the president will speak with Xi, their last face-to-face occurring in November on the sidelines of the Group of 20 summit in Indonesia.

U.S. officials now suspect that the balloon was sent to spy on bases in Guam and Hawaii and that other downed objects were not surveillance machines, The New York Times reports, highlighting how Washington’s evolving view of the situation has heightened the difficulties facing the U.S. and China in discerning each other’s intentions.

Biden is considering speaking publicly as early as today about the recent downing of aerial objects and is expected to describe new rules that would deal with future such situations (NBC News). Next week he’ll be in Poland to mark the anniversary of Ukraine’s persistent defenses against Russia’s invasion (Bloomberg News).

Secretary of State Antony Blinken, meanwhile, departs for a week of meetings in Germany, Turkey and Greece. He’ll attend the Munich Security Conference alongside Vice President Harris, who arrived in Germany today. Blinken may meet top Chinese foreign policy official Wang Yi while at the conference; no meeting has been confirmed (The Washington Post).

Politico: Harris on China balloon episode: “I don’t think it impacts our relations.”

Secretary of Defense Lloyd Austin on Wednesday told “NBC Nightly News” that no one had yet claimed ownership over the most recent objects.

“No, they haven’t. No. … There are rules that people should follow, and if you’re going to want something that’s operating in those spaces, the FAA should be notified and permission should be requested. But to answer your question, nobody’s claimed,” Austin said. “We typically are focused on things that are moving fast and so it’s a bit more difficult to collect on slow moving objects like a balloon, and as they made adjustments, they were able to see some of that.”

The balloon’s discovery has forced a recalibration in how the military monitors, tracks and responds to threats from above, writes The Hill’s Brad Dress. The Defense Department said that after the alleged Chinese spy balloon flew over much of the U.S. earlier this month before it was shot down, it began paying closer attention to lower-altitude flying objects.

After the Biden administration announced this week an interagency task force to investigate the UFOs, National Security Council spokesman John Kirby said one of the team’s new tasks will be to examine how it will respond to the aerial objects.

“We’re going to learn from these three events,” Kirby said. “We’re going to have an interagency effort that helps us get around the policy implications here.”

Advocates are warning of worsening conditions at immigration detention centers, even after official internal investigations shed light on past infractions, writes The Hill’s Rafael Bernal. One facility, the Torrance County Detention Facility in Estancia, N.M., received such poor marks in a September 2022 inspection that the Department of Homeland Security Office of the Inspector General “recommended, and continue[s] to recommend, the immediate relocation of all Torrance detainees unless and until the facility ensures adequate staffing and appropriate living conditions.”

That report followed a March 2022 “management alert” by DHS Inspector General Joseph Cuffari, who recommended “that detainees should be immediately removed from this facility.” But an investigation conducted by Innovation Law Lab at the facility between January and February 2023 found “the men are subjected to conditions worse than those that formed the basis for the DHS Office of the Inspector General’s recommendation to end operations at Torrance in March 2022.”

▪ The Tacoma News Tribune: How are chemical agents used at the immigration detention center on the Tacoma, Wash., Tideflats?

▪ Bloomberg Government: Immigrant detention center flagged for “dilapidated” conditions.

Progressives want “middle class Joe” to find a worker-friendly Labor secretary to replace Marty Walsh — but they say it may take some nudging to get there. As The Hill’s Hanna Trudo reports, progressive lawmakers and advocates have appreciated Biden’s decisions on labor, and with Walsh’s expected exit, they want the president to select someone who can move their agenda ever further to the left. But some worry he may turn to former Rep. Sean Patrick Maloney (D-N.Y.), a centrist and one of their biggest rivals who has former Speaker Nancy Pelosi’s (D-Calif.) blessing.

“Can you imagine? Why would they do that?” said one nervous Democratic strategist about Maloney. “I don’t think they’ll do it. But stranger things have happened.”

The Hill: Biden’s IRS nominee draws heat — and some support — from GOP senators.

➤ POLITICS

California: The campaign of Rep. Barbara Lee (D-Calif.) filed with the Federal Election Commission on Wednesday to compete in an increasingly crowded field for a Senate seat following Tuesday’s retirement announcement by 89-year-old Sen. Dianne Feinstein (D-Calif.).

Lee has not made a formal campaign announcement. Democratic California Reps. Katie Porter and Adam Schiff announced their respective plans to compete for the seat weeks before Feinstein’s retirement announcement (The Hill).

▪ The New York Times: Senate race in California reflects fight for Democrats’ future.

▪ Politico: West Virginia Gov. Jim Justice (R) is the strongest candidate against Sen. Joe Manchin (D-W.Va.), GOP poll says.

Nikki Haley, a former U.S. ambassador to the United Nations and South Carolina governor, on Wednesday formally announced her candidacy for the Republican presidential nomination. At an event in Charleston, S.C., Haley launched her 2024 White House race by calling for a new path in American politics — one that likely sets her on a collision course with her erstwhile boss, former President Trump (The Post and Courier).

“We’re ready, ready to move past the stale ideas and faded names of the past, and we’re ready for a new generation to lead us into the future,” Haley said on Wednesday.

After her kickoff, Trump’s campaign criticized Haley as a flip-flopper who at one time supported former Speaker Paul Ryan’s (R-Wis.) idea of entitlement vouchers (Washington Examiner). Trump himself took a dig at his former Cabinet member but said the “more the merrier” in the 2024 race (Fox News).

▪ The Hill: Haley calls for “mental competency tests” for politicians over 75.

▪ The New York Times: The former president’s Republican rivals appear highly reluctant to criticize him, and Haley mostly tiptoed around him as she jumped into the race this week.

▪ Politico: Haley looks to move past Trump with a style that predates him.

▪ The Wall Street Journal: Trump changes tune on mail-in voting, ballot collection.

Republican lawmakers are wary of their party’s propensity for scoring own goals or self-inflicted wounds and are hoping for more discipline heading into the next election cycle, writes The Hill’s Alexander Bolton. Leading Republicans think that the House GOP’s raucous reception of Biden played into the president’s hands and that the proposal by Sen. Rick Scott (R-Fla.) to sunset Medicare and Social Security and a comment last week by Sen. Ron Johnson (R-Wis.) calling Social Security a “Ponzi scheme” are political gifts to Democrats.

▪ Washington Monthly: Why does Florida Gov. Ron DeSantis (R) seek to “fix” a high-ranking college?

▪ Politico: Former Vice President Mike Pence moves to claim culture war lane before DeSantis gets there.

➤ CONGRESS

House lawmakers are away from Washington this week, and Speaker Kevin McCarthy (R-Calif.) is on the road and in the air. Today he’ll take aim at Biden and Democrats with a visit to the U.S. southern border with colleagues, arguing the situation is in “crisis.” They’ll get an aerial tour from the U.S. Customs and Border Protection and fly over the Tucson area in Cochise County, Ariz. Proposed legislative changes to immigration and border policies are splintering House Republicans (The Hill).

▪ Time: Sen. Elizabeth Warren (D-Mass.) called on Senate Majority Leader Charles Schumer (D-N.Y.) and Transportation Secretary Pete Buttigieg to help Washington get tougher on monopolies.

▪ Axios: Israeli Prime Minister Benjamin Netanyahu has dialed the numbers of influential Americans as his government debates proposed judicial reforms amid public protests. Netanyahu this month called former Treasury Secretary Larry Summers, an economist, for advice about calming business jitters, and Schumer and Senate colleagues plan to travel to Israel next week to meet with the prime minister and other officials.

▪ NBC News: The Justice Department ended a sex trafficking investigation into Rep. Matt Gaetz (R-Fla.) without bringing charges, his attorneys and congressional office said on Wednesday.

IN FOCUS/SHARP TAKES

➤ INTERNATIONAL

Russia has deployed nearly its entire army in Ukraine, increasing pressure along the front line in the east of the country but falling short of a breakthrough, according to British officials. While Ukrainian officials have warned of a renewed Russian onslaught to coincide with the first anniversary of Moscow’s invasion next week, some Western authorities say the offensive is unlikely to be one single event. Russian forces have redoubled attacks along the front lines in recent weeks, eking out gains after a series of reversals last year (The Wall Street Journal).

But weeks of failed attacks on a Ukrainian stronghold have left two Russian brigades in tatters, raised questions about Moscow’s military tactics and renewed doubts about its ability to maintain sustained, large-scale ground assaults (The New York Times).

▪ BBC: Nicola Sturgeon resigns: Scotland’s first minister says politics has taken its toll.

▪ NPR: Sturgeon will resign, complicating the Scottish independence movement.

A verdant olive grove was cleaved into two during last week’s devastating earthquake in Turkey, creating a valley over 980 feet long that now divides the area. Remarkable footage of the split olive grove has emerged from Turkey’s southeast Altınozu district, which borders Syria, showing a jagged, sandy-colored, canyon-like chasm. The cleavage reaches over 130 feet deep.

Its creation is another show of the devastating power of last week’s magnitude 7.8 quake, which killed tens of thousands of people in Syria and Turkey and destroyed entire city blocks (CNN).

▪ BBC: Women pulled alive from Turkey quake debris nine days on.

▪ The Washington Post: Rising seas risk climate migration on “biblical scale,” says United Nations chief.

▪ Miami Herald: Suspect in assassination of Haiti president tried to get FBI involved in “regime change” plot.

▪ Foreign Policy: Pakistan’s government is choosing extremist Islam over economic stability.

➤ STATE WATCH

Questions linger around the derailment and explosion of a train carrying hazardous chemicals in Ohio among locals and environmentalists, who worry the Environmental Protection Agency’s response has been insufficient and confusing, writes The Hill’s Zack Budryk. On Feb. 3, a freight train owned by the Norfolk Southern railroad and carrying 14 cars of vinyl chloride derailed in the town on the border with Pennsylvania. Two days later, Ohio Gov. Mike DeWine (R) ordered the town evacuated. “Ohio EPA is confident that the municipal water is safe to drink,” the state said in a Wednesday statement after receiving test results of water used in East Palestine (The Hill). However, at a Tuesday news conference, Ohio Health Director Bruce Vanderhoff advised residents to drink bottled water “for right now.”

The federal agency has now sent a letter to Norfolk Southern informing the company it may be responsible for cleanup under the federal “Superfund” law, the Comprehensive Environmental Response, Compensation and Liability Act. “EPA has spent, or is considering spending, public funds to investigate and control releases of hazardous substances or potential releases of hazardous substances at the Site,” the agency wrote.

City officials and residents of East Palestine attended a town hall meeting Wednesday evening to discuss the ongoing cleanup efforts following a train derailment on Feb. 3, but Norfolk Southern said its representatives will not attend due to the “growing physical threat” to employees (News 5 Cleveland).

▪ CNN: National Transportation Safety Board says videos of the Ohio train derailment include one showing wheel bearing in “final stage of overheat failure.”

▪ Fox News: Rep. Bill Johnson (R-Ohio), who represents East Palestine, urged Buttigieg on Wednesday via tweet to attend the evening town hall meeting.

The gunman who killed 10 people and injured three others in a racist mass shooting at a Buffalo, N.Y., supermarket last year was sentenced on Wednesday to life in prison without parole. He also faces separate federal charges that could carry a death sentence if the Justice Department chooses to seek it. His defense attorney said in December that his client is prepared to plead guilty in federal court as well to avoid execution. Payton Gendron, a white supremacist from Conklin, N.Y., who was 18 years old at the time of the massacre, received life in prison after pleading guilty in November to all state charges brought against him (CBS News).

OPINION

■ Four reasons why Democrats aren’t lining up to run against Biden, by Perry Bacon Jr., columnist, The Washington Post. https://wapo.st/3E9u6ed

■ Japan is muscling up and locking arms with allies to face China, by David Boling, opinion contributor, The Hill. https://bit.ly/3YwX7st

WHERE AND WHEN

📲 Ask The Hill: Share a news query tied to an expert journalist’s insights: The Hill launched something new and (we hope) engaging via text with Editor-in-Chief Bob Cusack. Learn more and sign up HERE.

The House will convene for a pro forma session at 10 a.m. on Friday. McCarthy is in Tucson, Ariz., to lead a congressional delegation for a border tour, followed by a news conference.

The Senate meets at 10 a.m.

The president is scheduled to undergo a routine annual physical examination at Walter Reed National Military Medical Center (NBC News). The president and first lady Jill Biden plan to host a screening in the East Room of the film “Till,” about the 1955 murder in Mississippi by two white men of 14-year-old Emmett Till, and his mother’s Chicago-based campaign for justice (History).

The vice president is inGermany to participate in the Munich Security Conference.

The secretary of State is traveling to Germany.

Attorney General Merrick Garland will deliver a speech in St. Louis at 9 a.m. about the Justice Department’s $100 million grant program to support community violence interventions as a complement to law enforcement.

Economic indicator: The Labor Department at 8:30 a.m. will report on claims for unemployment benefits filed during the week ending Feb. 11.

Second gentleman Doug Emhoff will participate in a roundtable discussion focused on global efforts to combat antisemitism at the BBYO International Convention in Dallas at 5 p.m. CT, followed by keynote remarks at 8:40 p.m. CT.

South Dakota Gov. Kristi Noem (R) will participate in a livestreamed conversation at 11 a.m. ET with Cato senior fellow and surgeon Jeffrey Singer to discuss the federal government, health care and the pandemic. Information HERE.

ELSEWHERE

➤ TECH

Here’s the most important sentence to read this morning about the future and artificial intelligence, courtesy of The New York Times. As a tech journalist concluded after experiencing Microsoft’s new Bing search engine chatbot: “I worry that the technology will learn how to influence human users, sometimes persuading them to act in destructive and harmful ways, and perhaps eventually grow capable of carrying out its own dangerous acts.”

▪ The Verge: These are Microsoft’s Bing AI secret rules and why it says it’s named Sydney.

▪ Rolling Stone: AI chatbots are running amok — and we have no clue how to stop them.

▪ The New York Times “The Daily” podcast: The online search wars.

➤ PANDEMIC & HEALTH

Moderna on Wednesday responded to criticism with an announcement that it will continue to supply its COVID-19 vaccination for free for all consumers, including the uninsured, even after the federal government stops underwriting the drug as part of its pandemic response (ABC News). The company was reported to be considering charging up to $130 per jab. Sen. Bernie Sanders (I-Vt.) says he wants Moderna’s chief executive to testify before the Senate Health, Education, Labor and Pensions committee, which he chairs (The Washington Post).

Many American adults who were hospitalized for COVID-19 experienced lingering symptoms, physical limitations and financial problems six months after being discharged, according to a new study. The study, which looked at more than 800 adults who were hospitalized for COVID-19 between August 2020 and July 2021, found that at the six-month mark, more than 7 in 10 participants reported problems affecting the heart or lungs such as coughing, rapid or irregular heartbeat, and breathlessness. More than half of survivors reported fatigue after half a year (U.S. News).

Nature: The World Health Organization abandons plans for a crucial second phase of COVID-19 origins investigation.

Information about the availability of COVID-19 vaccine and booster shots can be found at Vaccines.gov.

In the decade before the pandemic, the share of high school students who reported persistent feelings of sadness or hopelessness increased by 40 percent to more than 1 in 3 students. The pandemic exacerbated this trend, leading the American Academy of Pediatrics to declare a national state of emergency. In 2021, according to the Centers for Disease Control and Prevention, 44 percent of high school students reported they persistently felt sad or hopeless during the past year.

Many have theorized about possible interventions, but the vast majority of proposed “solutions” focus on crisis response rather than crisis prevention. Time magazine has rounded up three concrete ways you can help them find purpose and direction in the face of an uncertain future.

The mosquitoes that transmit malaria dramatically increased their range over the past century as temperatures warmed, scientists reported in a new paper published in Biology Letters and may explain why malaria’s range has expanded over the past few decades. The results have serious implications for countries that are unprepared to cope with the disease.

“If this were random, and if it were unrelated to climate, it wouldn’t look as cleanly climate-linked,” Colin Carlson, a biologist at Georgetown University’s Center for Global Health Science and Security and the paper’s lead author, told The New York Times.

▪ The Wall Street Journal: Health startups offer diabetes drugs like Ozempic for weight loss with little oversight.

▪ CNN: Study finds link between “free sugar” intake and cardiovascular disease.

▪ The New York Times: New research affirms what doctors have long advised: Go to bed and wake up at the same time every day for big health benefits.

Total U.S. coronavirus deaths reported as of this morning, according to Johns Hopkins University (trackers all vary slightly): 1,115,638. Current U.S. COVID-19 deaths are 3,171 for the week, according to the Centers for Disease Control and Prevention. (The CDC shifted its tally of available data from daily to weekly, now reported on Fridays.)

THE CLOSER

Take Our Morning Report Quiz

And finally … 🎈 It’s Thursday, which means it’s time for this week’s Morning Report Quiz! Inspired by aerial orbs, we’re eager for some smart guesses about balloons in the headlines and in history.

Be sure to email your responses to asimendinger@digital-staging.thehill.com and kkarisch@digital-staging.thehill.com — please add “Quiz” to your subject line. Winners who submit correct answers will enjoy some richly deserved newsletter fame on Friday.

The U.S. government knew it was a Chinese balloon spotted publicly over Montana this month because it was marked with the red insignia of the Chinese Communist Party.

True
False

Which country during World War II released more than 9,000 balloons carrying incendiary bombs in a failed plan to burn down the enemy’s cities and forests using wind power?

Germany
Japan
Russia
United States

On Tuesday, a federal grand jury indicted a man and woman for conspiring to use Mylar balloons (and other means) to try to destroy a ring of _____ around Baltimore.

Childcare centers
Suspected drug dealers
Pesky geese
Electrical substations

Airspace is cluttered with a type of floating surveillance above North America and the Pacific Islands. What government entity operates 92 weather balloon sites (69 in the mainland U.S. and 13 in Alaska)?