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MORNING REPORT

PRESENTED BY P&W MILITARY ENGINES

Tuesday, May 23

by Alexis Simendinger & Kristina Karisch

© Associated Press / Alex Brandon | President Biden and Speaker Kevin McCarthy (R-Calif.) met for about 90 minutes to try to reach a debt deal on Monday and declared some progress. Talks are to continue.

No debt deal; talks continue

It took God seven days to make a world but it's taking President Biden and Republicans precariously close to five months to try to save one from default.

The debt drama, which is skidding toward an economic imperative by June 1, will continue at the staff level today as Speaker Kevin McCarthy (R-Calif.), who spoke of "productive" talks with Biden after more than an hour of conversation Monday, conceded after leaving the Oval Office that there is "no agreement yet" (The Hill).

"From this discussion, he knows where we are," McCarthy told reporters as he returned to the Capitol. The two leaders focused on where they remain at odds, looking for ways to bridge the still-considerable gaps.

Biden arrived back in Washington late Sunday from Japan and resumed negotiations that had taken place between the White House team and the Speaker's staff last week and again on Sunday.

"We only talked about where our differences were," McCarthy said, adding that the staff for the White House and his team will run through "ideas" he and the president discussed hoping to come to agreement. No additional meetings are scheduled at the White House, he added, suggesting he and Biden will likely talk "every day" until the situation is resolved.

"We reiterated once again that default is off the table and the only way to move forward is in good faith toward a bipartisan agreement," the president said in a statement following Monday's meeting.

The Hill: The Speaker has little room to maneuver.

The House Freedom Caucus met Monday and discussed whether to urge McCarthy to reject any offer from Biden unless it included every provision in the House-passed bill, beefed-up border security and cuts to the FBI — a new demand, The Washington Post reported.

McCarthy said lifting the debt limit for a short period was not on the table among Republicans because it would prolong the debate rather than resolve it. He also discounted the suggested use of the 14th Amendment as a fallback to duck the Congress.

Among major sticking points: Biden wants deficit and debt reduction to be achieved in part by raising revenues and taxes on corporations and the wealthy, not just tallied through spending cuts.

The Hill: These are the biggest sticking points in the debt ceiling fight.

The White House and House negotiators have agreed in principle to the lowest hanging fruit on the table, according to Fox News: pulling back unspent COVID-19 funds to achieve savings of between $50 billion and $70 billion, according to some estimates.

The House GOP passed a bill last month that would reduce discretionary spending by about $130 billion, returning Congress' annual budget to fiscal 2022 levels. Democrats have balked at reductions of that size.

Asked about federal permitting reform for energy construction projects, which has some bipartisan support, McCarthy said some version may be in an eventual deal after discussing it with Biden.

We're getting closer. Don't give up on us," the Speaker told reporters late Monday, describing June 1 as their operative, take-it-to-the-brink deadline.

Treasury Secretary Janet Yellen on Monday updated her dire projection that the government will be in technical default within days. "We estimate that it is highly likely that [the] Treasury will no longer be able to satisfy all of the government's obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1," she said in a letter to lawmakers.

The New York Times: Negotiators have agreed to cap discretionary spending, likely over two years.
The Hill: McCarthy's end game on the debt ceiling begins to come into focus.

The House is scheduled to depart Washington beginning on Thursday afternoon ahead of the Memorial Day weekend, based on the schedule lawmakers had as of Monday.

The Associated Press: If the U.S. defaults on its debt, here's what it would mean in the world economy.
The Hill: Health insurance for 600,000 Americans is at stake as part of debt ceiling deliberations.
The Wall Street Journal: Inflation hit Americans' finances in ways they felt its effects last fall, the Federal Reserve affirmed in a survey.
The Hill: Inflation will remain high this year and so will the Fed's key interest rate, according to the National Association for Business Economics' survey released Monday.
The Hill and Politico: Sen. Tom Carper (D-Del.), 76, announced he will retire at the end of his term after serving in the Senate since 2001. Rep. Lisa Blunt Rochester (D-Del.) is seen as the odds-on favorite to succeed Carper.

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Leading the Day

➤ POLITICS

Sen. Tim Scott (R-S.C.), in a high-energy speech Monday, announced his bid for the 2024 GOP presidential nomination, jumping into a primary battle that has so far centered around former President Trump and Florida Gov. Ron DeSantis. Scott announced his decision at his alma mater, Charleston Southern University, in a speech drawing on his biography of growing up poor in North Charleston, S.C., and eventually ascending to the Senate. He is the sixth major Republican candidate to enter the field.

"We live in the land where it is possible for a kid raised in poverty by a single mother in a small apartment to one day serve in the People's House and maybe even the White House," Scott said during his announcement. "This is the greatest country on God's green Earth."

While Scott has a reputation as a well-liked senator among Republicans and many Democrats, he's likely to face an uphill battle for the 2024 GOP nomination, especially with DeSantis's all-but-guaranteed entrance into the race in the coming days (The Hill).

Trump on Monday welcomed Scott to the race, using his bid as an opportunity to chide a rival who's considered a more realistic contender (The Hill).

"Good luck to Senator Tim Scott in entering the Republican Presidential Primary Race," Trump posted on Truth Social. "It is rapidly loading up with lots of people, and Tim is a big step up from Ron DeSanctimonious, who is totally unelectable."

The Hill: Who is Scott, the latest 2024 Republican presidential candidate?
Roll Call: Five things to know about Scott's record in Congress.
NBC News: NBC's Tom Llamas sat down with Scott in an interview that aired Monday evening to discuss his candidacy, in which the senator called the U.S. role in Ukraine "essential" and contrasted himself with former both Trump and DeSantis.
Politico: "Blood in the water for DeSantis": Trump world embraces Scott's candidacy.

Meanwhile, as DeSantis prepares his own election bid, a small but influential contingent of Republicans is grappling with a strategic dilemma, stuck choosing between a candidate in Trump many of them consider a clear and present danger to the republic and an alternative in DeSantis they worry would solidify — possibly even intensify — the GOP's turn to anti-democratic demagoguery (The Miami Herald).

Fox News: More than 100 former Trump administration officials, eager to back a 2024 presidential nominee who could serve two terms, back DeSantis: "A proven winner."
The Hill: NAACP takes on DeSantis ahead of the governor's likely 2024 presidential bid.
Business Insider: California Gov. Gavin Newsom (D) is demanding records from textbook companies to see which are caving to Florida's "extremist" demands.
The Hill: 🛩 Student Jack Sweeney, 19, who created the Twitter account @elonjet to track Elon Musk's jet, is now using publicly available flight data (with a 24-hour delay per Twitter rules) to track DeSantis's private jet using the account @desantisjet. DeSantis signed a law this month that shields the governor and other state leaders from public disclosure of their travel records, which also leaves in the shadows those with whom they meet.

The Hill last week followed Nikki Haley through the Hawkeye State where she headlined 22 campaign events in a bow to old-school Iowa barnstorming. In an exclusive interview with The Hill's Niall Stanage, Haley made the case for her presidential bid and efforts to meet first-in-the-nation caucus voters in small settings. She reacted to DeSantis's expected entrance into the race this week and pushed back at naysayers who suggest she has no serious shot at winning the Republican nomination. Polling shows the former South Carolina governor who served as Trump's U.S. ambassador to the United Nations has been trailing behind the former president and DeSantis in the single digits.

A prominent anti-abortion group is flexing its political muscles in the 2024 Republican presidential primary, putting pressure on candidates to commit to a federal abortion ban. As The Hill's Julia Manchester reports, last month, Susan B. Anthony Pro-Life America showed its influence by openly criticizing Trump and calling on him to embrace a federal ban after he criticized GOP messaging on the issue following the party's disappointing midterms. Recently, Trump met with the group in an effort to smooth out their differences.

But SBA Pro-Life America's outsized influence has added further pressure to not just Trump but other GOP candidates as well as they attempt to navigate the thorny issue, which has proven a liability with Republicans since the overturning of Roe v. Wade.

2024 watch: Sen. JD Vance (R-Ohio) on Monday endorsed fellow Ohioan, Republican businessman Bernie Moreno, one of two declared GOP candidates who is eager to challenge Sen. Sherrod Brown (D-Ohio) next year (Cincinnati Enquirer). … Longshot Democratic presidential candidate Marianne Williamson lost two top campaign officials — her campaign manager and deputy campaign manager — over the weekend (Politico). … Virginia Gov. Glenn Youngkin is reconsidering a bid for the 2024 GOP presidential nomination at the urging of top donors (Axios).

The Hill's Judy Kurtz reports that actor Jon Hamm narrated a campaign ad for Marine veteran Lucas Kunce, the Democratic challenger seeking to unseat Missouri GOP Sen. Josh Hawley. "You can't fake courage," Hamm says in the ad.

EVENT INVITE:

The Economic Snapshot: CEO Summit, May 31, 2-3:00 p.m. ET

The post-pandemic economy has defied expectations repeatedly. The U.S. labor market and consumer spending are chugging along, while inflation is cooling, yet risks of a recession and a debt ceiling showdown loom. "The Economic Snapshot" will check the pulse of the U.S. economy. The Hill will gather chief executives to dissect just how companies are faring during this uncertain economic landscape, featuring speakers such as Scott Kirby, CEO of United Airlines; Michelle Korsmo, President & CEO of National Restaurant Association; Matthew Shay, President & CEO, National Retail Federation; and Evan Smith, Co-Founder & CEO of Altana AI.

Click Here to Register

In Focus / Sharp Takes

➤ INTERNATIONAL

Russia's claimed capture of the city of Bakhmut delivered a symbolic victory for Moscow and raises the pressure for Ukraine's coming counteroffensive to succeed, writes The Hill's Brad Dress. Kyiv, meanwhile, is contesting the claim of a complete Russian takeover of Bakhmut and has stressed that its troops remain in strategic positions on the outskirts of the city and are poised to retake it. Russian officials also claimed Ukrainian military saboteurs launched an attack across the border Monday, wounding eight people in a small town. Kyiv denied any link with the group and blamed the fighting on a revolt by disgruntled Russians against Moscow; neither version of events could be independently verified (The Associated Press).

Meanwhile, Russia's Ambassador to the United States Anatoly Antonov said the transfer of F-16 fighter jets to Ukraine would raise the question of NATO's involvement in the conflict. Ukrainian President Volodymyr Zelensky has for months been calling on the country's Western allies to supply advanced fighter jets, but concerns mounted that the move would be met with an escalation by Russian President Vladimir Putin. But amid a flurry of diplomacy by Zelensky ahead of the just-concluded Group of Seven summit in Hiroshima, Japan, British Prime Minister Rishi Sunak and Dutch Prime Minister Mark Rutte announced last week they had agreed to build an "international coalition" to provide fighter jet support for Kyiv (Al Jazeera).

👉 The New York Times (photography and video by Tyler Hicks): The city of Bakhmut, Ukraine, is gone: An aerial look with drone footage of the war's destruction.
CNN: Russia has claimed control of Bakhmut, but Ukraine says it's still fighting. Here's what we know.
Reuters: Ukraine courts Africa and "Global South" as peace plans proliferate.

The candidate who came in third in last week's presidential election in Turkey announced Monday that he will be endorsing President Recep Tayyip Erdoğan in Sunday's runoff vote, granting Erdoğan an additional boost against his remaining challenger. Although most polls in the run-up to the initial vote showed Erdoğan trailing opposition leader Kemal Kılıçdaroğlu, he won 49.5 percent of the vote, overcoming voter anger at high inflation and frustration with the government's response to catastrophic earthquakes in February (The Associated Press and The New York Times).

The Washington Post: Sudanese hope new cease-fire holds as ethnic violence in Darfur intensifies.
The New York Times: The EU asks Greece to investigate a video showing migrants abandoned at sea.
The Associated Press: In the Amazon, Brazilian ecologists try a new approach against deforestation and poverty.

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Opinion

The Colorado River is still in peril, by Mark Gongloff, columnist, Bloomberg Opinion.
What a debt default would mean for national security, by Richard Fontaine, opinion contributor, The Hill.

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 meet at noon for a pro forma session.

The Senate will convene at noon for a pro forma session.

The president will have lunch with Vice President Harris at 12:15 p.m. Biden will receive the President's Daily Brief at 1 p.m. and Harris will join him.

Federal Reserve Chairman Jerome Powell will meet on Capitol Hill at 12:30 p.m. with members of the House New Democrat Coalition, chaired by Rep. Ann Kuster of New Hampshire, to discuss the debt ceiling and the economy (CNN).

The White House daily press briefing is scheduled at 2:30 p.m.

Elsewhere

➤ TECH

A provision that for decades protected the tech industry from lawsuits over third party content on its platforms is getting a new test in the form of generative artificial intelligence (AI) tools, writes The Hill's Rebecca Klar. As generative AI tools like ChatGPT and rival products are on the rise, experts and stakeholders are split on whether Section 230 of the Communication Decency Act's liability shield for internet companies over third party content should apply to the new tools and in what way.

The debate comes as lawmakers race to regulate the emerging AI technology and as a recent Supreme Court decision kept the controversial Section 230 provision untouched, The Hill's Klar and Zach Schonfeld report. While the tech industry is celebrating Google's and Twitter's victories, the future of Section 230 remains in doubt, as lawmakers on both sides of the aisle vow reform.

CNN: Supreme Court shields Twitter from liability for terror-related content and leaves Section 230 untouched.
The Washington Post: What SCOTUS' ruling for Google, pass on Section 230 debate, means.
Bloomberg Law: Justices' Section 230 punt can influence social media harm cases.

Meanwhile, Facebook parent company Meta said it will appeal a record $1.3 billion privacy fine and order to stop transferring users' personal information by the European Union, the latest salvo in a decadelong case sparked by U.S. cyber snooping fears (The Associated Press and NPR). While the U.S. and EU last year "in principle" agreed to a new framework for cross-border data transfers, the new pact has not yet come into effect.

The Washington Post: The EU slap at Meta could have repercussions for business.

Meta is hoping that the data privacy agreement is established before the European regulator's deadlines come in place in October. If the new framework "comes into effect before the implementation deadlines expire, our services can continue as they do today without any disruption or impact on users," Nick Clegg, Meta's president of global affairs, and Jennifer Newstead, chief legal officer at the company, said in a blog post Monday (CNBC).

➤ STATE WATCH

TikTok, owned by Chinese company ByteDance, on Monday sued Montana for its ban announced last week on downloads of the app in the state (NBC News). TikTok cited the First Amendment as it fights the first such state ban in the country. "The reason [the ban] was passed by Montana is that there's ample evidence out there that China is using TikTok to spy on Americans. We don't like being spied on here in Montana," state Attorney General Austin Knudsen told NewsNation's "Cuomo" on Monday. He said TikTok app users cannot opt out of the use of their personal data. "TikTok will collect your facial recognition, it will collect your thumbprint, it will log your keystrokes. It will scan all the other apps on your phone, it will download all your videos and pictures and scan them for intel. You have no choice here," Knudsen added.

Nebraska Gov. Jim Pillen (R) on Monday signed into law a ban on abortion after 12 weeks of pregnancy with exceptions for rape, incest and to save the life of the mother. The law also restricts gender-affirming medical care for people younger than 19 (The Associated Press).

Michigan Gov. Gretchen Whitmer (D) on Monday signed a red flag law that raised questions about enforcement. Such laws are designed to keep guns away from those who might harm themselves or others. Michigan joined Minnesota as the second state in under a week to implement such a law after Democrats in both states won control of both chambers and the governor's office in November. New Mexico previously was the last state to pass a red flag law in 2020 (The Associated Press).

🚰 The Biden administration announced Monday it brokered an agreement among California, Arizona and Nevada to take less water from the drought-strained Colorado River, a deal that reduces, for now, the risk of the river running dry below the Hoover Dam, which would jeopardize the water supply for Phoenix, Los Angeles and some of America's most productive agricultural land (The New York Times).

Axios: Guam braces for a "direct hit" from intensifying, "powerful" Typhoon Mawar.

The Closer

And finally … 🚀 NASA is embracing commercial partners in space for an upcoming moon mission. An industry team led by Jeff Bezos's Blue Origin space venture on Friday won a $3.4 billion government contract to provide a second type of landing system for crewed as well as uncrewed lunar landings. SpaceX's Starship system is to be used for the first two crewed lunar landings during the Artemis 3 and 4 missions, currently scheduled for as early as 2025 and 2028. Blue Origin's Blue Moon system would be used for Artemis 5, currently set for 2029 (Yahoo Finance).

"Our partnership will only add to this golden age of human spaceflight," NASA Administrator Bill Nelson said.

Separately, NASA continues to plan to de-orbit the International Space Station in January 2031 while embracing other commercial space partnerships in the future. Launched in 1998, the ISS has been continuously occupied since November 2000 under a U.S.-Russian-led partnership that also includes Canada, Japan and 11 European countries.