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MORNING REPORT

Friday, January 20

by Alexis Simendinger & Kristina Karisch

US hits debt limit — now what?

The United States on Thursday hit the debt ceiling — or the total amount of money the federal government can legally borrow — as lawmakers scramble to negotiate to raise the limit and avoid economic consequences if the U.S. defaults on its debt.

Treasury Secretary Janet Yellen told congressional leaders in a letter that the department will use its available tools after reaching the statutory borrowing cap of $31.4 trillion on Thursday. Yellen projected the government's wiggle room will be exhausted by June 5, a date with "considerable uncertainty."

"I respectfully urge Congress to act promptly to protect the full faith and credit of the United States," she wrote.

She has said default could cause "irreparable harm to the U.S. economy," as federally backed debt is the backbone of domestic and global markets. Failure to make good on the government's bills could trigger panic on Wall Street, raise the government's costs and conceivably spiral into millions of job losses, economists and administration officials argue.

Congress, meanwhile, remains bitterly divided on how to handle the issue, with Republicans pressing to use the debt limit as leverage to cut a deal on spending rollbacks — especially when it comes to social programs — in talks with Democrats, many of whom have pressed for a bill that solely addresses the debt ceiling. There's no clear solution in sight, leaving lawmakers and economists expecting a protracted fight that could stretch right up until June, when the projected wiggle room runs out.

The credit rating agency Moody's predicted that even if Congress and the White House did not reach an agreement, the Treasury Department could prioritize debt service payments ahead of social spending (The Hill, Vox and The Washington Post).

With extraordinary measures now in effect, the debt ceiling is officially a ticking time bomb we can't diffuse soon enough," Rep. Brendan Boyle (Pa.), the top Democrat on the House Budget Committee, said in a statement on Thursday.

Boyle accused Republicans of "pushing for default and start governing in Americans' best interest."

Sen. Joe Manchin (D-W.Va.) said Wednesday in an interview in Davos, Switzerland, that he's seeking a mix of House and Senate members from both parties to try to work out an accord that could become legislation to both raise the debt ceiling and trim future spending. He said he has talked with Speaker Kevin McCarthy (R-Calif.) about making commitments to scrutinize Social Security and Medicare in exchange for GOP support to lift the borrowing limit (The Hill and Bloomberg News).

"Let's take the trust funds — Medicare, Social Security, Highway Trust. You can't let those go defunct," Manchin said, speaking from the World Economic Forum in Davos, Switzerland. "What we're saying is, we have a Trust Act. We would put bipartisan, bicameral committees together to look at each one of the trusts and come up with solutions of how you fix it."

McCarthy is pressing Democrats to begin negotiations at a time when he faces pressures within his party to deliver on significant fiscal reforms (The Hill). The White House has refused to negotiate with House Republicans, remaining eager to describe the Speaker and fellow conservatives as reckless and extreme (The Hill). White House press secretary Karine Jean-Pierre said on Wednesday that the issue should not be used as a "political football" (The Washington Post).

"In the past there has been bipartisan cooperation to address the debt ceiling," she said, "and that's how it should be."

Senate Minority Leader Mitch McConnell (R-Ky.), meanwhile, said Thursday he is confident that the U.S. will never default on its debt and is not concerned a financial crisis could be on the horizon. McConnell — who will play a crucial role in negotiations — told reporters that while the push to raise the debt ceiling is "always a rather contentious effort," he believes lawmakers will succeed at doing so before the Treasury exhausts its "extraordinary measures" in June (The Hill).

The Washington Post: The debt ceiling game of chicken begins. Here's what history tells us about what could come next — and what's motivating each side.
Bloomberg News: What the U.S. debt ceiling battle means for your money.

The GOP risks overplaying its hand as negotiations intensify over the debt ceiling, writes The Hill's Niall Stanage, as Republicans remain adamant that spending must be cut before they will approve a raise of the limit. Some, such as Rep. Chip Roy (Texas), insist they won't back down no matter the consequences, but that poses real political risks — especially if the U.S. were to default for the first time in its history.

One of the central tensions emerging inside the Republican Party as it lurches toward an uncertain 2024 presidential primary is wavering support for former President Trump among the nation's evangelical leaders, The New York Times reports. Their congregants have for decades been a key constituency for conservative candidates and backed Trump during his ascent to the White House. The former president on Monday accused Christian leaders of "disloyalty" while blaming them for the GOP's disappointing midterm performance.

"When I saw his statement, I thought, 'You're not going to gain any traction by throwing the most loyal base under the bus and shifting blame,'" Bob Vander Plaats, an influential evangelical activist in Iowa and the chief executive of the Family Leader organization, told the Times.

Trump on Thursday is scheduled to deliver the keynote address at Judicial Watch's annual roundtable in Miami (Judicial Watch).

The war between Tesla and Twitter chairman Elon Musk and Democrats is starting to heat up, writes The Hill's Alexander Bolton. Democrats are calling for investigations into Musk's financing of Twitter and what foreign interests may be trying to gain control over the public square.

Musk on Wednesday predicted that Democrats would try to "weaponize" the federal government against him if former President Trump comes back on Twitter, borrowing a buzzword from House GOP conservatives.

The Hill: President Biden told reporters on Thursday when asked about the classified documents probe, "I think you're going to find there's nothing there. I have no regrets, I'm following what the lawyers have told me they want me to do. That's exactly what we're doing. There's no there there." The White House strategy in dealing with the controversy has some potential pitfalls, according to The Washington Post.
The Hill: The Supreme Court on Wednesday in a statement said it had not uncovered the leaker last year of a draft opinion overturning Roe v. Wade.
Vox: Wages are still growing rapidly. The Federal Reserve wants them to slow down.

Leading the Day

➤ ADMINISTRATION

Biden on Thursday flew across the country and then back to Washington in order to personally survey California's devastation following weeks of rain. His itinerary included the beach town of Capitola, where large waves tore apart a historic wooden wharf and pummeled the community's structures, depositing heavy debris on beaches. Preliminary estimates from Santa Cruz, Santa Clara, San Francisco and Sacramento counties put damage estimates at a combined $250 million. At least 21 people died, and a 5-year-old boy is missing. The statewide costs will climb into the billions of dollars, Politico reported.

At a state park in nearby Aptos, Calif., accompanied by Gov. Gavin Newsom (D) and members of Congress, Biden assured Californians affected by last year's wildfires and this year's floods that "the federal government is not leaving its responsibility until it's all fixed, it's done."

He said Uncle Sam has deployed $9 billion to California for assistance tied to extreme weather events, and he pointed to climate change as the culprit. "If anybody doubts the climate is changing, they must have been asleep for the last couple of years," Biden said.

The president ticked through a list of federal assistance from the Federal Emergency Management Agency, Agriculture Department, Small Business Administration and the Army Corps of Engineers. He said California will need years to recover and rebuild after some of the destruction he surveyed "to the homes, the businesses and to farm and ranches."

Biden advocated making "significant changes," which he did not specify, to California infrastructure. "The key is not just building back, it's building back stronger," he added (KSBW, The Los Angeles Times).

Refugees: A State Department pilot program to benefit refugees envisions that 10,000 ordinary Americans in addition to organizations, can sponsor individual refugees in the United States as part of a new "Welcome Corps." The program is capped at 5,000 refugees and is likely to admit refugee families beginning in April.

"For over four decades, our system has relied primarily on resettlement agencies [for refugee resettlement]," said Secretary of State Antony Blinken in a video that explained the Welcome Corps, which is modeled on programs in other countries, including Canada (The Hill).

"Under this new initiative, people in communities, faith-based organizations, colleges and universities, veterans' associations, and other groups will be able to play that role – taking the lead in helping refugees do things like find a place to live, enroll kids in school [and] obtain basic goods like furniture and winter clothes," he said.

The U.S. expansion of the government's handling of refugees fits the Biden administration's larger policy of adding legal pathways for immigrants while disincentivizing border crossings, reports The Hill's Rafael Bernal.

Groups of a minimum of five people who are willing to sponsor a refugee family must raise at least $2,275 per refugee to participate. The private sponsors will be expected to provide the same broad support to new refugee families as the nonprofit agencies, which will continue to resettle the vast majority of refugees (The New York Times).

Semiconductors: The Netherlands and Japan, home to key suppliers of semiconductor manufacturing equipment, are close to joining a Biden administration-led effort to restrict exports of the technology to China and hobble its push into the chips industry, reports Bloomberg News. The Dutch and Japanese export controls may be agreed to and finalized as soon as the end of January.

Coast Guard: A suspected Russian spy ship near Hawaii has been monitored for weeks by the U.S. Coast Guard in consultation with the Defense Department (The Hill).

Housing: The administration on Thursday renewed a push to require cities to address patterns of residential segregation, revamping a regulation scrapped by the Trump administration (Politico). A new proposed rule from the Housing and Urban Development Department incorporates an Obama-era effort in 2015 to ensure that state and local governments comply with obligations to "affirmatively further fair housing" under the 1968 Fair Housing Act. Biden, in a statement released on the eve of his meeting today with mayors who are in Washington for their annual conference, said the proposed regulation "sends a clear message to communities across the country that just saying they won't discriminate isn't enough."

➤ CONGRESS

Truth & Consequences? Yes, there's more news about Rep. George Santos (R-N.Y.).

The Hill's Emily Brooks and Mychael Schnell report on the icy reception Santos is receiving from his GOP colleagues in the House and why it matters.

A mountain of accusations that Santos repeatedly lied about his background now includes information, with video, that he performed as a drag queen in Brazil, where his parents are from and he once lived. The lawmaker "categorically" denied the report published along with a grainy photograph. "The media continues to make outrageous claims about my life while I am working to deliver results," Santos said (ABC News).

In Florida, Republican Rep. Greg Steube remains hospitalized in Sarasota after falling 25 feet from a ladder while trimming trees at his home. He was moved out of ICU on Thursday (CNBC and Fox News) and his injuries "are still under assessment but not life threatening at this time," his staff tweeted. "He is making progress and in good spirits." Steube's absence reduces the narrow majority held by House Republicans until he is well enough to return to work (The Hill).

In Focus / Sharp Takes

➤ INTERNATIONAL

A push to provide battle tanks to Ukraine is stalled after U.S. officials this week expressed reluctance stemming from difficulties in maintenance and training for the advanced vehicle, writes The Hill's Ellen Mitchell. Ukraine has repeatedly asked for Western tanks to help in its fight with Russia, a topic that was front and center this week at the World Economic Forum in Davos, Switzerland. Germany, which was mulling sending its Leopard tanks to Kyiv, reportedly would allow the other countries to send the vehicle only if the U.S. commits its own Abrams battle tank to Ukraine. But Washington is not yet prepared to send over the Abrams, Undersecretary of Defense for Policy Colin Kahl revealed Wednesday.

Western defense officials — led by Secretary of Defense Lloyd Austin — are meeting today at Ramstein Air Base in Germany to coordinate additional military assistance for Ukraine, even as the critical question of whether European tank deliveries to Kyiv would be authorized remained unanswered (The New York Times).

"Russia is regrouping, recruiting and trying to re-equip. This is not a moment to slow down — it's a time to dig deeper," Austin said. "The Ukrainian people are watching us, the Kremlin is watching us, and history is watching us."

CNN: "They have us over a barrel": Inside the U.S. and German standoff over sending tanks to Ukraine.
The Washington Post: Why is Germany under pressure to send tanks to Ukraine?
NPR: A tradition of plunging in an icy river persists in Ukraine, despite the war.
The Washington Post: The CIA director last week traveled to Kyiv for a secret briefing with Ukrainian President Volodymyr Zelensky about intelligence and Russia's next steps.

Israeli Prime Minister Benjamin Netanyahu has yet to uphold a decision by the Supreme Court that a key government minister convicted of tax fraud should be dismissed, locking his right-wing government in a standoff with the country's judiciary. If Aryeh Deri does not resign in the coming days or Netanyahu does not fire him, the legal dispute will compound a clash between the branches of government that analysts consider one of the most profound in Israeli history (The New York Times).

The Hill: Netanyahu raises breakthrough with Saudi Arabia in meeting with U.S. officials.
CNN: Striking French workers lead 1 million people in protest over plans to raise the retirement age.
The Wall Street Journal: Google parent Alphabet to cut 12,000 jobs, shrinking by 6 percent, including shedding workers outside the U.S.
The New York Times: How COVID-19 played a role in New Zealand Prime Minister Jacinda Ardern's resignation.

Opinion

How far should U.S. intelligence go in supporting Russia's armed opposition? by Douglas London, opinion contributor, The Hill. https://bit.ly/3ZLIhPT
How Republicans can stop a debt limit disaster, by Jonathan Bernstein, columnist, Bloomberg Opinion. https://bloom.bg/3Hk0Wve
George Santos has got to go, by Peggy Noonan, columnist, The Wall Street Journal. https://on.wsj.com/3DozfPx

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 and return for legislative business on Jan. 24.

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

The president will receive the President's Daily Brief at 9 a.m. At 2 p.m., he will host a bipartisan group of mayors who are in Washington to attend the U.S. Conference of Mayors winter meeting. Biden will make remarks about bipartisan goals ahead. The president will depart the White House at 5:25 p.m. to travel to Rehoboth Beach, Del., where he will remain for the weekend.

Vice President Harris, who is in California, will visit Tujunga Spreading Grounds in Los Angeles County at 1 p.m. PT for a briefing and tour. In remarks, she will highlight federal and state efforts to increase drought and flood resilience.

Treasury Secretary Janet Yellen is in Senegal where she meets today with President Macky Sall, Minister of Finance and Budget Amadou Ba and Minister of Economy and International Planning Oulimata Sarr. Yellen will speak in Dakar to the Délégation générale à l'Entrepreneuriat Rapide des Femmes et des Jeunes, a business incubator for women entrepreneurs in Senegal. The secretary will also hold a roundtable discussion with women entrepreneurs. Yellen will have lunch with business leaders from the American Chamber of Commerce in Senegal.

Secretary of State Antony Blinken is in Chicago where he will get a tour this morning of the "Children of War" art exhibit with Sen. Dick Durbin (D-Ill.) at the Ukrainian Institute of Modern Art. The secretary and the senator will meet with Ukrainian leaders from Chicago. At noon, Blinken will visit Eli's Cheesecake Company in Chicago. He'll meet at 1:30 p.m. local with State Department employees based in the Windy City. Blinken will sit down with his former Obama administration colleague David Axelrod, the founding director of the University of Chicago Institute of Politics, for a moderated conversation at 3:15 p.m. local.

The annual March for Life, the first since the Supreme Court overturned Roe v. Wade last year, invites abortion opponents to Washington, D.C., today. (Traffic and parking restrictions are in place until 4 p.m.)

The White House daily press briefing is scheduled at 1 p.m.

Elsewhere

➤ STATE WATCH

The Biden administration's efforts to loosen access to medication abortion are running into opposition in dozens of states, threatening to put the drugs out of reach for patients who live in states with abortion bans or other restrictions on the drug mifepristone, writes The Hill's Nathaniel Weixel. When Roe v. Wade was overturned in June, the Justice Department said states can't ban access to abortion pills the Food and Drug Administration has legally approved. But it's not clear if federal law takes precedence over states with abortion bans, and so far, the government has not tried to put that theory to the test.

ProPublica: Websites selling abortion pills are sharing sensitive data with Google.
Rolling Stone: This Trump judge could effectively ban the abortion pill.
Reuters: Reversing abortion drug's approval would harm public interest, the Food and Drug Administration says.
St. Louis Post-Dispatch: In Missouri, a group of religious leaders on Thursday sued to block the state's abortion ban.
Axios: Mothers in states with abortion bans are nearly three times more likely to die, report shows.

As demand surges for electric vehicles in the U.S. in the coming years, states such as Nevada are poised to take advantage of a boom in lithium mining thanks to incentives in the Inflation Reduction Act, The Hill's Zack Budryk reports. Environmentalists, meanwhile, warn that a heavy-handed approach to extraction could bring many of the same problems associated with fossil fuel extraction.

The U.S. has one lithium production site known as Silver Peak in western Nevada, while Chile, China and Australia dominate the lithium sector. The U.S. holds an estimated 3.6 percent of world lithium reserves, according to the U.S. Geological Survey, but extracting it is a painstaking process that involves building infrastructure the U.S. has neglected. However, the Inflation Reduction Act included tax incentives for electric vehicles, and specifically requires their components be built domestically or by U.S. trading partners to qualify, setting the stage for new domestic development.

Financial Times: U.S. lithium supplies stuck in neutral.

In the spring of 2020, someone defaced two synagogues in Huntsville, Ala., on consecutive days. The antisemitic slurs prompted investigations from the local police and the FBI. Even Huntsville's mayor got involved. And then, at year's end, the Huntsville police reported zero hate crimes, The Hill's Daniel de Visé writes. That odd vignette illustrates the vast underreporting of hate crimes in America; the FBI reports fewer than 10,000 in a typical year. Another Justice agency, meanwhile, churns out survey data suggesting that violent attacks amount to 300,000 hate crimes annually. In other words, close to 97 percent of hate incidents do not show up in the federal tally.

➤ HEALTH & PANDEMIC

🍷 Canada's health officials have overhauled their guidelines for alcohol consumption, warning that no amount is healthy and recommending that people reduce drinking as much as possible. The experts said the new approach builds on growing evidence that even small amounts of alcohol can have serious health consequences (The New York Times).

"Research shows that no amount or kind of alcohol is good for your health," the report states. "It doesn't matter what kind of alcohol it is — wine, beer, cider or spirits. Drinking alcohol, even a small amount, is damaging to everyone, regardless of age, sex, gender, ethnicity, tolerance for alcohol or lifestyle. That's why if you drink, it's better to drink less."

Los Angeles Times: How computers learned to be COVID-19 forecasters.
The New York Times: Regulators announce changes to nursing home rating system.
The Hill: More than 71 percent of LGBTQ youth say restrictive state laws have negatively impacted their mental health, according to a report from The Trevor Project and Morning Consult.

💉 The updated COVID-19 booster shot has been available to most Americans for over four months, but the Centers for Disease Control and Prevention (CDC) say just 18 percent of adults have gotten it. The months-long booster campaign appears to have an education problem, according to a report published Thursday by the CDC that asked 1,200 vaccinated Americans their reasons for receiving or not receiving an updated booster shot. Of the 714 individuals who had not yet gotten the updated shot, more than 23 percent — or close to a quarter — reported that they did not know they were eligible for it (U.S. News).

On the other side of the coin are rapid tests to confirm if you do — or hopefully don't — have COVID-19. NPR has done a reality check on what those rapid tests, also called antigen tests, can do — and what they can't.

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

Total U.S. coronavirus deaths reported as of this morning, according to Johns Hopkins University (trackers all vary slightly): 1,103,681. Current U.S. COVID-19 deaths are 3,953 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 … 👏👏👏 Bravo to this week's Morning Report Quiz winners! Our drive for trivia was inspired on Thursday by cars in the news.

These puzzlers easily steered into our winner's circle, going 4/4: Ki Harvey, Richard Fanning, Randall S. Patrick, Harry Strulovici, Tim Mazanec, Tim Burrack, Ted Kontek, Candi Cee, Stan Wasser, Mary Anne McEnery, Don Swanson, Paul Harris, Dick Baznik, Blair Marasco, Cliff Grulke, Bill Grieshober, Bob McLellan, Luther Berg, Robert Bradley, Patrick Kavanagh, Steve James, Terry Pflaumer, Pam Manges and Brent Tracy.

They knew that the beloved automobile Biden told reporters was "locked" in his Wilmington, Del., garage near cartons of White House records from the Obama administration is his 1967 Corvette Stingray.

Police in Baltimore (and other cities) this week offered anti-theft tips to owners of Hyundai and Kia models manufactured in certain years because they're vulnerable to car thieves responding to a TikTok dare.

Prices of used cars, previously soaring, have plummeted because of higher interest rates, affordability strains for consumers and increased supplies of new vehicles, according to a Tuesday news report. The answer we were looking for was "all of the above."

A car show on Martin Luther King Jr. Day in Fort Pierce, Fla., was interrupted by a shooting that injured eight people (one critically). It began with an argument between two people.