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MORNING REPORT

Wednesday, January 18

by Alexis Simendinger & Kristina Karisch

McCarthy urges Biden to negotiate on debt

Speaker Kevin McCarthy (R-Calif.) on Tuesday stuck by his insistence that Republicans will force steep federal debt reductions by negotiating a budget accord with President Biden and Senate Democrats, which he says can avert the projected dire economic impact from a standoff: default.

"I would like to sit down with all the leaders and especially the president and start having discussions," McCarthy said Tuesday at the Capitol, telling reporters that leaders have an estimated six months before the U.S. will not be able to cover its bills without a hike in the Treasury's authority to borrow.

Who wants to put the nation through some type of threat at the last minute with the debt ceiling? Nobody wants to do that," the Speaker added.

McCarthy has been repeating conservatives' arguments for federal spending cuts or capped spending almost daily.

"We don't want to put any fiscal problems to our economy and we won't," he said last week. "But fiscal problems would be continuing to do business as usual."

The Hill: House Republicans oppose any debt limit increase without serious spending cuts.

The White House, rejecting what it says are hostage demands using the debt ceiling as a weapon, is spurning the new Speaker's push for negotiations with the president. Based on past experience, Biden's advisers insist they have the superior — and more publicly embraced — arguments about current federal spending, deficit reduction and the strength of the economy.

Biden's national economic director, Brian Deese, told Bloomberg TV on Friday that Congress will have to deal with the debt ceiling without conditions. Hitting the statutory borrowing limit and defaulting would be a "self-inflicted" economic wound, he added. "It's a sacred obligation, the full faith and credit of the United States."

Wrangling over federal spending and debt using showdowns over obligations approved during past Congresses has been a political fixture in Washington for more than a decade. But investors, businesses and the Federal Reserve worry that this is the year in which politics and fiscal policy might careen into disaster.

Bank of America analysts wrote in a note to clients this week that a default in late summer or early fall is "likely," while Goldman Sachs called the possibility that the government would not be able to make good on its bills a "greater risk" than at any time since 2011, The New York Times reported. When the nation approached the brink in that episode, its credit rating was downgraded and market gyrations pressured lawmakers to blink.

The upshot that year proved economically costly by stunting U.S. growth and roiling investors and consumer confidence. "Political brinkmanship that engenders even the prospect of a default can be disruptive to financial markets and American businesses and families," the Treasury Department explained when describing 2011 events in a 2013 report.

The New York Times explainer: How close is the U.S. to hitting the debt ceiling? How bad would that be?
The Hill: White House calls on the Speaker to publicize details of deals he made with conservatives.

Leading the Day

➤ CONGRESS & POLITICS

The Biden documents controversy on Tuesday simmered with a new suggestion by McCarthy that Attorney General Merrick Garland may not bring "fresh eyes and non-bias" to the special counsel review of the president's recently found classified documents and the separate criminal investigation by a special counsel of former President Trump's defiant retention of secret presidential records at Mar-a-Lago.

"Is it right that Garland should even be in charge of this?" the Speaker asked reporters in the Capitol. "That's why the House will look into these investigations, as well."

The Wall Street Journal: The Justice Department considered but rejected an FBI role in the search for any additional Biden documents.

Meanwhile, the White House is struggling to get its messaging fine-tuned about the Biden document discoveries, report The Hill's Brett Samuels and Alex Gangitano.

The Hill: White House charges GOP with hypocrisy on Trump, Biden.
The Hill: Secretary of State Antony Blinken told NBC News on Tuesday that he was "surprised" that government documents were taken to Biden's private office after he left the Obama administration.
CNN: House Republicans lay groundwork for impeachment of Department of Homeland Security Secretary Alejandro Mayorkas.

McCarthy is playing offense by putting early pressure on Senate Democrats running for reelection in red states to back proposals being passed by the House, such as a ban on exporting oil from the Strategic Petroleum Reserve to China, reports The Hill's Alexander Bolton. Senate Majority Leader Charles Schumer (D-N.Y.) has to decide how much latitude to give members of his caucus with the Senate majority at stake next year.

Truth & consequences? McCarthy and House GOP leaders placed embattled Rep. George Santos (R-N.Y.) on the Small Business and Science committees (The Hill).

2024 Watch: Florida Gov. Ron DeSantis (R) is a beneficiary of the ongoing controversy over classified documents in Washington, which has ensnared the sitting president and the GOP's sole announced presidential candidate, writes The Hill's Niall Stanage in his latest Memo.

Politico Magazine, Jonathan Martin: DeSantis takes on the likeability issue (sort of).
Vox: DeSantis's war on "wokeness" is a war against the First Amendment.
Yahoo News: Trump on the possibility of DeSantis running against him in 2024: "We'll handle that the way I handle things."

Wes Moore, seen as a fast-rising star in his party, will be sworn in today as Maryland's Democratic governor, becoming the state's first and the nation's third Black governor. Moore succeeds term-limited Republican Gov. Larry Hogan (The Hill).

The Washington Post: For Black voters, great expectations of America's lone Black governor.
The Washington Post: Defeated New Mexico GOP candidate for the state legislature Solomon Peña, 39, was arrested and charged with paying people to fire in December on the houses of four Democratic officeholders. At the heart of the alleged plot, according to Albuquerque authorities, were election-fraud conspiracies.
MSNBC: During a Washington speech on Tuesday about the state of the working class, Sen. Bernie Sanders (I-Vt.) called declining U.S. life expectancy an "issue of enormous consequence" at a time when this country spends twice as much per capita on health care as other industrialized nations.

In Focus / Sharp Takes

➤ ECONOMICS IN THE ALPS

The annual World Economic Forum meeting is officially underway in Davos, Switzerland, bringing lawmakers and business leaders to the swanky alpine town. Normally a draw for influential figures, many of the world's most powerful heads of state skipped it this year. The only Group of Seven leader present is Chancellor Olaf Scholz of Germany. The highest-ranking Biden administration official dispatched to Davos is Labor Secretary Marty Walsh, although lawmakers including Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (I-Ariz.) are participating (CNBC).

Amazon's Andy Jassy, JPMorgan Chase's Jamie Dimon, Microsoft's Satya Nadella and Pfizer's Albert Bourla are among the CEOs who fly in, joining corporate leaders who may be booked for breakfast-through dinner meetings whether they are panelists or not. Hotels in Davos serve as settings for private meetings between business titans and existing and prospective clients.

It's called the World Economic Forum and has a grand mission statement, but is the confab in the Alps becoming a flashy corporate conference? The New York Times's DealBook investigates.

European Commission President Ursula von der Leyen faced a tricky balancing act in Davos on Tuesday as she spoke to hundreds of CEOs, politicians and global leaders — assuring European leaders their beleaguered companies will get cash while insisting the European Union (EU) is not turning protectionist. Von der Leyen set out a sweeping plan to keep Europe's industry competitive in a race to attract green tech and climate-related investment (Politico EU).

"The next decades will see the greatest industrial transformation of our times — maybe of any time," she declared. "And those who develop and manufacture the technology that will be the foundation of tomorrow's economy will have the greatest competitive edge."

CNBC: EU announces new green proposals to rival Biden's Inflation Reduction Act.
Time magazine: Why "polycrisis" was the buzzword of day one in Davos.
The Wall Street Journal: At Davos, the mood is somber as many CEOs question the economic outlook.

U.S. climate change envoy John Kerry said at the forum that the world will eventually move to a low-carbon economy, but it may be too late to avoid the worst effects of climate change. Kerry addressed the net-zero carbon emission efforts being made by many companies but acknowledged he learned the most important tool for fighting the climate crisis "as secretary [of State], and I've learned it since, reinforced in spades, is: money, money, money, money, money, money, money. And I'm sorry to say that" (CNBC).

"I'm convinced we will get to a low-carbon, no-carbon economy — we're going to get there because we have to," he said. "I am not convinced we're going to get there in time to do what the scientists said, which is avoid the worst consequences of the crisis."

Falling corporate tax rates in the U.S. are part of a global trend that has governments charging big business less in tax while looking to make spending cuts across a wide range of social programs, writes The Hill's Tobias Burns. Reports from nonprofit Oxfam, the U.S. Government Accountability Office and other organizations are showing that as governments weigh austerity measures in the wake of the pandemic, corporations with surging profits are being asked to foot less of the bill.

➤ INTERNATIONAL

A helicopter crash near a kindergarten outside Kyiv this morning killed at least 18 people, including Ukraine's interior minister and three children, according to authorities. The cause for the crash was not immediately clear. Government officials who were killed include Denys Monastyrsky, his deputy, Yevhen Yenin, and state secretary Yurii Lubkovych (NBC News). Reuters and The New York Times published crash site photos.

Ukrainian President Volodymyr Zelensky is scheduled today to speak to the Davos gathering via video. He wants weapons. Vitali Klitschko, Kyiv's mayor, is in Switzerland (The New York Times).

Separately, a Russian missile strike over the weekend at an apartment complex in the southeastern Ukrainian city of Dnipro exposed a gaping hole in Ukraine's air defenses as some fear more brutal Russian attacks are on the horizon, writes The Hill's Brad Dress. The Dnipro strike killed 44 people, including five children, in one of the most devastating attacks on Ukraine's civilian population in the war.

Ukrainian officials said they did not possess a defense system capable of downing Russia's Kh-22 missiles used in the attack, underscoring a pressing need for Kyiv to bolster its defenses for the winter months. Russia may have been targeting energy grids and critical infrastructure rather than the Dnipro apartment complex, but Moscow's strategy to pound critical infrastructure in Ukraine is coming under increasing worry it will inflict more mass civilian casualties, especially after the appointment of a new commanding general last week.

The Pentagon's top general, Mark Milley, met in Poland on Tuesday for the first time in person with his Ukrainian counterpart in what appeared to be a symbolic show of support as the U.S. intensifies its military assistance to Ukraine (The Washington Post). Milley's visit is part of a weeklong trip to Europe that also includes a stop today in Brussels for a NATO military chiefs of defense meeting. While in Germany, Milley will join Defense Secretary Lloyd Austin for an in-person meeting of the Ukraine Defense Contact Group at Ramstein Air Base. After that, Milley will travel to Norway to participate in meetings with chiefs of defense from various partner nations (The Hill).

Politico EU: Bulgaria to the rescue: How the EU's poorest country secretly saved Ukraine.
The New York Times: Overcoming initial concerns by Israel about its relationship with Russia, the Pentagon is sending some U.S. arms stored in Israel to Ukraine.

Scholz on Tuesday said he's in talks with allies about possibly supplying heavy tanks to Ukraine. He said a decision would be in lockstep with other allied nations.

"I am always thinking about the situation," Scholz told Bloomberg News in Berlin. "We always act together with our allies and friends — we never go alone."

Germany has faced increasing pressure to supply Ukraine with tanks and the government's reluctance led to the resignation of the country's defense secretary. Berlin has so far resisted providing the modern tanks or allowing partners to do so, saying Western tanks should be supplied to Ukraine only if there is agreement among Kyiv's main allies, particularly the United States (Reuters and Bloomberg News).

The New York Times: Untested German defense minister has allies watching closely.

Scholz spoke with Bloomberg News about a range of topics, from a potential trade war with the U.S. — which the chancellor said won't happen — to a potential recession and lessons his country learned from Germany's dependence on Russia for natural gas. The full interview is available HERE.

Reuters: Russia to make "major changes" to armed forces from 2023 to 2026.
The Wall Street Journal: China's shrinking population is a deeper problem than its slow economic growth.
NPR: Climate activist Greta Thunberg was detained by German police while protesting a coal mine expansion.

Virtual Event Invite

The Future of Cities: Mayor's Forum, Thursday, Jan. 19 at 1 p.m. ET/10 a.m. PT

America's cities are diverse, dynamic and constantly evolving. As mayors gather in Washington for the U.S. Conference of Mayors Winter Meeting, join The Hill for our annual discussion with leaders from cities large and small. Mayors Muriel Bowser (D.C.), Andre Dickens (Atlanta), James Hovland (Edina, Minn.), Wade Kapszukiewicz (Toledo, Ohio), Elizabeth Kautz (Burnsville, Minn.) and Jim Ross (Arlington, Texas) join The Hill's Bob Cusack. RSVP today to save your spot.

Opinion

My new co-worker Rep. George Santos (R-N.Y.) is a distraction and a danger to democracy, by Rep. Ritchie Torres (D-N.Y.), contributor, NBC News. https://nbcnews.to/3IZqwH7
Water is a terrible thing for California to waste, by The Wall Street Journal editorial board. https://on.wsj.com/3IZJSM3

Where and When

👉 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 meet briefly at noon on Friday and return for legislative business on Jan. 24.

The Senate meets Friday at 1 p.m. for a pro forma session.

The president will receive the President's Daily Brief at 9 a.m.

Vice President Harris is in Washington with no public schedule today.

The Treasury secretary is in Zurich, Switzerland, to meet with Vice Premier Liu He of China. From Switzerland, Yellen will travel with a three-nation itinerary to Africa.

Secretary of State Antony Blinken at 8:45 a.m. will speak to the U.S. Conference of Mayors in Washington. He will participate in a roundtable at 9 a.m. with a group of mayors who are attending their annual gathering. Blinken will meet at 1:30 p.m. with Turkish Foreign Minister Mevlut Cavusoglu at the Department of State.

The White House daily press briefing is scheduled at 3 p.m.

Elsewhere

➤ TECH

A new wave of lawsuits argue that Tesla's self-driving software is dangerously overhyped. Its blind spots may be able to teach us about Elon Musk, the company's erratic CEO, The New York Times reports. To Musk, because collision generated data, it was valuable, and with enough data, the company could speed up the development of the world's first truly self-driving car.

"My guess as to when we would think it is safe for somebody to essentially fall asleep and wake up at their destination: probably toward the end of next year," Musk declared in 2019, though his prediction never materialized. "I would say I am certain of that. That is not a question mark."

The New York Times: Musk goes to trial over his 2018 plan to take Tesla private.
Business Insider: Musk says he declined Davos, but organizers say he wasn't invited.

As New York magazine reports in a deep dive into Musk's new, "hardcore" Twitter, the site's staff spent years trying to protect the platform against impulsive ranting billionaires — then one made himself the CEO. Meanwhile, social media users have expressed anxiety about algorithmic suppression, or "shadowbanning," for years. Now they're getting some unexpected clarity as Musk tries to look into the practice. But as The Atlantic reports, even he likely can't do much to fix the problem.

Vox: The clock is ticking on a TikTok ban. Millions spent on lobbyists, a billion dollars spent on safeguards. Will it be enough to stay in the United States?
The Wall Street Journal: The Federal Trade Commission's plan to ban noncompete clauses shifts companies' focus.
Bloomberg News: Microsoft to cut engineering jobs this week as layoffs go deeper.

➤ STATE WATCH

Prior to the atmospheric river events inundating California, the state was in the midst of a three-year drought and has a long history of dealing with extreme dry weather and subsequent water shortages, writes The Hill's Gianna Melillo. To adapt to these weather extremes, many local and state efforts to collect excess rainwater have been implemented throughout the years. These include upgrading highway medians to capture stormwater, expanding reservoir capacity, improving reservoir efficiency, upgrading cities to include permeable pavement and other low-impact development features, and installing solar panels on canals to help prevent rainwater evaporation.

The Washington Post: An Arizona city cuts off a neighborhood's water supply amid drought.
The Guardian: Warning of unprecedented heatwaves as El Niño set to return in 2023.
The Washington Post: How dark money groups led Ohio to redefine gas as "green energy."

The D.C. Council on Tuesday rejected Mayor Muriel Bowser's veto and is moving forward with legislation to update the city's criminal code, which hasn't been updated for more than a century. In a 12-1 vote, the council moved to override Bowser's veto of the Revised Criminal Code Act, which determines what punishments to assign to crimes, including sentence lengths, and classifies what types of crimes are misdemeanors (WTOP).

➤ HEALTH & PANDEMIC

Since the start of the pandemic, COVID-19 has killed more than 1 million people in the United States and life expectancy has been cut by nearly 2.5 years since 2020. But a very early look at 2022 data from Johns Hopkins University suggests there were significantly fewer COVID-19 deaths last year — at 267,000 — compared to the first two years of the pandemic. More than 350,000 COVID-19 deaths were reported in 2020 and that number rose to 475,000 deaths in 2021.

The final count will differ from this early data as states continue to review death certificates and refine their reporting, and it will be months before the US Centers for Disease Control and Prevention (CDC) releases preliminary mortality data to compare to other causes of death (CNN).

Forbes: Pregnant women with COVID-19 are eight times more likely to die than their uninfected counterparts.
The Washington Post: China is finally divulging COVID-19 data. The World Health Organization says there's more to the story.

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

Étienne-Émile Baulieu, the 96-year-old scientist who came up with an idea for an "unpregnancy pill" decades ago has led an eventful life, from his teenage days in the French Resistance to his friendships with famous artists, The New York Times reports. Baulieu wrote in a 1990 book that he hoped that by the 21st century, "paradoxically, the 'abortion pill' might even help eliminate abortion as an issue."

The New York Times: A sickle cell cure brings a mix of anxiety and hope.

Total U.S. coronavirus deaths reported as of this morning, according to Johns Hopkins University (trackers all vary slightly): 1,100,609. Current U.S. COVID-19 deaths are 3,907 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

And finally … 🏛️ More than two centuries after Lord Elgin, a British aristocrat, returned from Greece in the early 1800s with some of the greatest treasures of antiquity, the collection may return to its roots. It includes statues of Greek gods and carved frieze panels that show battling centaurs that once decorated the Parthenon in Athens.

With an informal offer and a counteroffer on the table, the talks have reached a stage that "had not been seen before," according to a person on the Greek side of the negotiations (The New York Times).

The so-called Elgin Marbles are housed at the British Museum. The debate about the marbles deepened in recent years as new thinking about actions by former empires have resulted in the return by Western museums of other nations' ancient treasures, including Benin bronzes, Italian antiquities — and other fragments from the Parthenon, which were relinquished in December by the Vatican to Greece.