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MORNING REPORT

PRESENTED BY P&W MILITARY ENGINES

Friday, May 26

by Alexis Simendinger & Kristina Karisch

No deal; debt talks continue

Speaker Kevin McCarthy (R-Calif.) reported some progress Thursday as debt negotiations with President Biden's team dragged on and lawmakers who departed the Capitol for Memorial Day weekend said they were unsure what will happen by next week (The Hill).

Leaked threads of a potential compromise package rattled House conservatives, who are balking at any significant concessions. The reports also worried Democrats, who complained to CNN that Republicans have been outpacing them in messaging and bravado. In the default-or-else duel, the House minority frets that Biden, whose poll numbers have fallen this month, might simply cave to avert default.

The Hill: House Black Caucus Chairman Steven Horsford (D-Nev.) urged the president to get more aggressive about the debt ceiling with an address to the nation.

"There is no agreement, all right?" the Speaker said Thursday evening as reports zeroed in on a potential two-year budget accord with enforceable spending caps. "We know where our differences lie, and we'll continue to work to try to be able to solve the problem, but there is no agreement" (The Wall Street Journal).

The package sketched by negotiators would have sufficient borrowing authority to last two years, perhaps in the neighborhood of $3.5 trillion to $4 trillion, GOP lawmakers told reporters Thursday.

McCarthy's public admonishments to his conference Thursday that any accord means compromise did not sit well with some of his colleagues — a reminder that reaching a deal in principle is not the biggest hurdle. To allow the Treasury Department a new infusion of borrowing, legislative language has to clear two chambers at a rapid clip within days.

I'm going to have to go have some blunt conversations with my colleagues," Rep. Chip Roy (R-Texas) told a local radio interviewer Thursday. "I don't like the direction they're headed."

Conservatives are unclear whether their push to block the administration's student loan debt forgiveness program and to rescind the White House-supported increase in IRS funding will end up in a final accord. Both were key goals in the Republican-passed House debt limit bill. The White House and Republicans remain deadlocked on some crucial issues and negotiators expect to continue working into the weekend.

The Hill: GOP's right flank fumes over rumored compromises in debt ceiling deal.

The Hill: Sen. Mike Lee (R-Utah) tweeted a warning Thursday: "I will use every procedural tool at my disposal to impede a debt-ceiling deal that doesn't contain substantial spending and budgetary reforms. I fear things are moving in that direction. If they do, that proposal will not face smooth sailing in the Senate."

Politico: House conservatives blanch at leaked details of McCarthy-Biden debt talks.

The Washington Post and Bloomberg News reported that negotiators were nearing a compromise that might overhaul the energy construction permitting process, which in theory is backed by Republicans and several key Senate Democrats. The deal would ease the process of building the interstate transmission lines needed to carry clean electricity across the country, a top priority for Democrats. To sweeten the deal for Republicans, it would make modest changes to the National Environmental Policy Act, a 1970 law that requires the federal government to analyze the environmental impact of its proposed actions. GOP lawmakers blame the environmental law for delays in building new highways, pipelines and other infrastructure.

On defense spending, one Thursday Bloomberg News headline reported, "Biden scores a win on defense spending." Citing unnamed sources, the report said Republicans would accept the president's March budget proposal when it comes to a smaller increase for the Pentagon as part of a debt ceiling pact.

The Hill's Alexander Bolton reports that some Republican lawmakers have been skeptical about McCarthy's assurances that a debt ceiling proposal to cap discretionary spending would not constrain the Pentagon's budget at a time of growing national security threats from Russia and China.

The prolonged clash in Washington about future debt and the self-inflicted drama of the U.S. potentially running out of cash to pay its current bills close to June 1 is monitored closely by the three major ratings agencies.

Morningstar reported Thursday that it placed U.S. debt in review "with negative implications," noting it could decide on a downgrade even if the administration and House Republicans reach a deal. Fitch similarly said Wednesday it is watching U.S. debt because of "debt ceiling brinkmanship," and could decide on a downgrade (The Washington Post).

Morningstar added Thursday that it expected a deal to be reached. If a technical default occurs, the agency thinks it would be brief. As a reminder, when the U.S. narrowly averted a default in 2011, a ratings downgrade cost taxpayers more than $1 billion in higher interest costs.

Note to readers: 🇺🇸 Morning Report will be off Monday for Memorial Day and return to inboxes on Tuesday. Happy weekend!

The Associated Press: Deadline looming, Biden and McCarthy narrow in on a two-year budget deal.
Reuters: Biden and McCarthy appear near a two-year budget deal on debt ceiling.
Roll Call: Parties moving closer on debt ceiling deal as talks drag on.
The Hill: Unorthodox immigration bill catches both parties by surprise.

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Leading the Day

➤ POLITICS

Florida Gov. Ron DeSantis (R) and his team are scrambling to right the ship after a rocky campaign debut on Twitter that was marred by technical glitches, writes The Hill's Max Greenwood. The live announcement on Twitter with owner Elon Musk was intended to serve as a bold, albeit unusual, presidential rollout for DeSantis that showcased his ability to sidestep mainstream media and go directly to his supporters. Instead, it was riddled with panicked whispers about technical problems and frequent audio cutouts.

Now, as he sets off on his nascent campaign, DeSantis is tasked with overcoming criticism that he's not ready for prime time. "There's the argument that he's [former President Trump] with competence, but even Trump is making fun of this," Doug Heye, a Republican strategist, told The Hill. Still, most Republicans, including Heye, said that the technical snafus of DeSantis's announcement aren't fatal for the governor's campaign.

"This won't matter in two weeks," Erick Erickson, the conservative radio host, wrote in a Wednesday night email. "But it'll be a major political story for the next few days as DeSantis foes make 'failure to launch' jokes and Musk haters ridicule what Twitter has become."

The New York Times: DeSantis's campaign says it raised $8.2 million in the first 24 hours.
Politico: Here's what top DeSantis lieutenants said in their private huddle with donors.

Amid a flurry of glitches and online mockery, the Twitter event is resulting in widespread speculation about Musk's ambitions in shaping national political discourse and the future of conservative media in the years ahead. As The Hill's Dominick Mastrangelo writes, DeSantis granting Musk exclusive access to his campaign launch has been widely viewed as a sharp deviation from political norms, and a major snub of Fox News — the preeminent force in a conservative media ecosystem that has been boosting the Florida Governor for months. But a slew of technical difficulties during the roll out has cast doubt on Musk's effort to turn Twitter into a bonafide media company where conservatives can turn to grow their audience.

Vox: Why DeSantis and Tucker Carlson love Twitter — and Musk.
Axios: Musk moves in on Murdoch.
Business Insider: Twitter is starting to look a lot like Fox News.

South Carolina Sen. Tim Scott, a candidate for the GOP presidential nomination, said Wednesday that the state's recently passed six-week abortion ban is "good news." Scott said last month that as president, he would sign a bill federally banning abortion after 20 weeks of pregnancy, if one arrived on his desk. He said states should be able to determine the issue on their own, but a federal limit needs to be discussed (The Hill).

"I think the state is trying to protect the culture of life and that's good news," he said in an interview with a local television station. "I mean, the 'heartbeat' bill is a step in the direction of that."

NBC News: Scott on the issues.

🎤 Former Vice President Mike Pence will headline a town hall in Des Moines, Iowa, on June 7 at 9 p.m. ET with CNN moderator Dana Bash.

YOU'RE INVITED:

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

The post-pandemic economy has repeatedly defied expectations. Inflation is cooling, but risks of a recession and a debt ceiling showdown loom. The Hill will gather chief executives to dissect how companies are faring amid the economic uncertainty: United Airlines CEO Scott Kirby, National Restaurant Association president and CEO Michelle Korsmo, National Retail Federation president and CEO Matthew Shay and Altana AI co-founder and CEO Evan Smith.

RSVP Now

In Focus / Sharp Takes

➤ INTERNATIONAL

Wagner Group founder Yevgeny Prigozhin once again amplified his public rift with Russian leadership this week, saying the war in Ukraine had backfired and the Kremlin risked facing a revolution. The Hill's Brad Dress reports that in an interview with a prominent pro-Kremlin blogger, Prigozhin estimated heavy losses for his private military company and suggested Ukraine could retake territory across eastern Ukraine and possibly even the Crimean Peninsula in its upcoming counteroffensive. Prigozhin has repeatedly sounded off against the generals leading the war from Moscow in recent months but has paid no apparent political price for his frequent criticisms.

Spring has finally sprung in southern Ukraine. And with temperatures rising, expectations of a long-awaited counteroffensive against occupying Russian forces are in full bloom (The Washington Post). Ukraine shot down 10 missiles and over 20 drones launched by Russia in overnight attacks on Kyiv, the city of Dnipro and eastern regions, officials said on Friday (Reuters).

🎓 Ukrainian President Volodymyr Zelensky gave a surprise livestreamed commencement address to graduates of Johns Hopkins University in Baltimore on Thursday and received an honorary degree. He thanked Biden and Congress for U.S. war assistance (Politico).

The New York Times: Stretched Russian forces would have to fill the gap if Wagner fighters pull out of Bakhmut.
ABC News: What has been happening in Belgorod, a Russian region that borders Ukraine?
Reuters: Ukraine says it shot down 36 drones in overnight Russian attacks.

Two opposing visions for Turkey's future will be on the ballot Sunday when voters return to the polls for a runoff presidential election. Populist President Recep Tayyip Erdoğan, who has ruled Turkey for 20 years, is well positioned to win after falling just short of victory in the first round of voting, even as the country reels from sky-high inflation and the effects of a devastating earthquake in February. Meanwhile, Kemal Kılıçdaroğlu, the leader of Turkey's pro-secular main opposition party and a six-party alliance, has campaigned on a promise to undo Erdoğan's authoritarian tilt (The Associated Press).

CNBC: Turkey's runoff election is paralyzing key oil exports from northern Iraq.
The Washington Post: Despite Brexit pledges, migration into the U.K. has soared.
Politico EU: Germany is in recession: Berlin braces for budget cut battle.
The Associated Press: South Korean, U.S. troops hold large live-fire drills near the border with North Korea.

U.S. and China trade: Commerce Secretary Gina Raimondo and her Chinese counterpart Wang Wentao met Thursday. Another test will be whether the top defense officials from both countries hold talks on the sidelines of an annual security forum in Singapore early next month, as has happened in the past. China wants the U.S. to lift sanctions placed years ago on China's recently appointed defense minister as a precondition for the meeting. Biden said last weekend that the demand is under discussion, though the State Department and other officials later said it isn't so (The Wall Street Journal and Politico).

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Opinion

Tim Scott is the alternative Republicans would want for president, except they've never heard of him, by LZ Granderson, columnist, The Los Angeles Times.
Sandy Hook and a reckoning for gunmakers, by Timothy L. O'Brien, columnist, Bloomberg Opinion.

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 2 p.m. for a pro forma session.

The Senate will meet Friday at 9 a.m. for a pro forma session.

The president will receive the President's Daily Brief at 9:30 a.m. Biden and first lady Jill Biden will host the Louisiana State University Tigers women's basketball team at 2 p.m. in the East Room to celebrate the 2022-2023 NCAA championship season. The Bidens plan a separate, 5 p.m. event for the University of Connecticut Huskies men's basketball team to celebrate their 2022-2023 NCAA championship season. The Bidens will depart the White House at 6:30 p.m. and head to Camp David.

Vice President Harris will participate in the White House event for women's basketball champions at 2 p.m. Second gentleman Doug Emhoff also will attend.

Economic indicator: The Bureau of Economic Analysis at 8:30 a.m. will report on personal income and outlays for April.

Elsewhere

➤ COURTS

© The Associated Press / Dana Verkouteren via AP, File | Oath Keepers leader Stewart Rhodes was sentenced to 18 years in prison for seditious conspiracy tied to the attack on the Capitol on Jan. 6, 2021.

Stewart Rhodes, the founder of the Oath Keepers extremist group, was sentenced by District Judge Amit Mehta to 18 years in prison for orchestrating a weeks-long plot that culminated in his followers attacking the U.S. Capitol on Jan. 6, 2021, in a bid to keep Biden out of the White House after the 2020 election. Rhodes is the first person charged in the attack to be sentenced for seditious conspiracy and his sentence is the longest to date in the hundreds of Capitol riot cases prosecuted by the Justice Department (The Associated Press).

The Supreme Court on Thursday narrowed which waters are subject to federal protections under the Clean Water Act, limiting the Environmental Protection Agency's authority in terms of where it can implement safeguards. The court ruled that in order for a wetland to receive protection, it needs to have a "continuous surface connection" with a protected body of water, making the two areas "indistinguishable" from one another (The Hill) Though the ruling was unanimous, Associate Justice Brett Kavanaugh joined the court liberals in pushing back on how far the court's majority narrowed which wetlands are protected (The Hill).

The New York Times: The Supreme Court on Thursday unanimously ruled as unconstitutional a Minnesota law allowing local governments to seize all the equity in a home over much smaller property tax debts. Chief Justice John Roberts wrote, "A taxpayer who loses her $40,000 house to the State to fulfill a $15,000 tax debt has made a far greater contribution to the public fisc than she owed. The taxpayer must render unto Caesar what is Caesar's, but no more."

Questions about age loom over the judicial branch as colleagues of 95-year-old Federal Appeals Court Judge Pauline Newman attempt to push her into retirement because of concerns about her mental state, writes The Hill's Zach Schonfeld. A formal investigation was launched by three of her fellow judges, with new efforts to reduce Newman's role at the court and demands she submit to a cognitive test.

The judge, who has been on the Federal Circuit appellate court since the 1980s, this month sued her colleagues to block the investigation, insisting she is still fit to serve and that their probe is unconstitutional (Business Insider).

The Closer

And finally … 👏👏👏 Bravo to this week's Morning Report Quiz winners! The victorious puzzlers were on firm footing with their smart guesses about socks associated with the White House. 🧦

Here's who went 4/4: Lou Tisler, Randall Patrick, Ki Harvey, Luther Berg, Sharon Banitt, Bill Grieshober, Patrick Kavanagh, Mary Anne McEnery, Paul Harris, Richard Baznik, Lynn Gardner, Pam Manges, Robert Bradley and Tom Chabot.

They knew that Speaker McCarthy (from our list of options) got stomped in the national press last week for his choice of casual footwear, including socks, worn while deliberating over the debt ceiling in the Oval Office.

Former President Clinton brought Socks the cat to the White House.

Former President George H.W. Bush, during his retirement and while using a wheelchair, became associated with "crazy socks," a wildly colorful brand, confiding during an interview, "I'm a sock man."

Former first ladies Martha Washington, Edith Wilson and Eleanor Roosevelt encouraged knitting and sewing socks for soldiers while showing off their own patriotic needlework during the war efforts of their eras. "All of the above" was the answer we looked for.