September 29, 2023

Thought of the Week:

Do you remember the television show Early Edition? Set in Chicago, the character played by Kyle Chandler would receive a copy of the newspaper the day before it was actually published. Chandler’s character would then use the information in the paper to prevent tragic events. My wife’s good friend was a writer on the series, and he even named a minor character, Detective Winslow, after us. Well, this is an early edition of The Washington Connection, written before tonight’s second Republican debate and a looming government shutdown. Two issues are sure to come up during the debate—the potential shutdown and our country’s growing debt burden. First, with regard to the shutdown, although we’ve been told by former staff to House Speaker McCarthy to expect a technical shutdown over the weekend followed shortly thereafter by passage of a continuing resolution (CR) funding the government through mid-November, things are changing minute by minute, and we don’t see Speaker McCarthy avoiding a shutdown that lasts beyond the weekend. Military aid to Ukraine and border security are the sticking points. Second, and related to the government spending fight, is the country’s growing debt burden. Years of excessive federal spending by both Republican and Democrat administrations have pushed the nation’s debt over $33 trillion. In fact, the U.S. is adding more than $800 million an hour to that figure and accumulating more than $2 billion a day in interest on that debt. The figures are so large that they have led some analysts to question whether we may have reached a turning point in attitudes toward addressing long-term fiscal policy. While lawmakers seem to drag out even the most basic pieces of legislation to the eleventh hour, an open question is whether any eventual funding deal struck between Democrats and Republicans will shift the trajectory of fiscal spending in a meaningful way. Despite the dire situation, I’m skeptical because the most pressing issue in resolving the problem is something no one wants to face. While there’s little debate that skyrocketing debt is a drag on the economy, few have the political courage to offer real solutions. Americans want the debt burden reduced, but it’s regarded as political suicide to offer up the painful, unpopular solutions it would take to actually do anything about it. What can be done to slow, or reverse, inflationary government debt? Some argue the “Trump Tax Cuts” are to blame. The problem with that argument is that government revenue reached an all-time high following the cuts, but policymakers did not link the tax cuts to requisite spending cuts. Others argue that we need to fix the federal budget process by passing two-year budgets through regular order. We’ve talked about regular order in this blog before, but the savings available through process reform would only be felt at the margins. The crux of the federal debt problem lies in understanding the lines between “discretionary spending,” expenditures controlled annually by Congress, and entitlement or mandatory spending. In truth, discretionary spending, which includes everything from the defense and state department budgets to federal government salaries to the budgets of most federal agencies, amounts to less than 25% of overall expenditures. The U.S. cannot solve its debt problem by simply tinkering with discretionary spending. The real driver of federal deficits and debt is mandatory, entitlement spending. Mandatory, entitlement expenditures are popular transfer payments, including Medicare, Medicaid, Social Security, student loans, ObamaCare, and countless other programs you may have never heard of. Politicians who dare touch this third rail of politics typically don’t last long. The bottom line, and there is no way around it, is that the only way to address our debt crisis is though entitlement program reform. Unfortunately, there is no political constituency for doing the painful, hard work necessary to solve the problem, or at least lead us on a more sound fiscal trajectory. I wouldn’t expect any of the candidates on tonight’s debate stage to mention the unpopular things necessary to get our fiscal future back on track by bringing up entitlement reform as a debt solution.

Thought Leadership from our Consultants, Think Tanks, and Trade Associations

Brookings Looks at the Possibility of Deposing the Speaker. This week, all eyes are on the shutdown drama taking place in the House. Despite making concessions to his GOP opponents, Speaker McCarthy’s (R-CA) antagonists on the far right of the Republican conference have threatened to depose him as speaker. Some argue the threat is why McCarthy has been trying to cater to his far-right flank, even though their budget proposals haven’t passed the GOP-led House and would be dead on arrival in the Democratic-led Senate. At the same time, a bipartisan group is pressuring McCarthy to lean on Democratic votes to pass a stopgap bill to avoid a government shutdown. But is the threat to vacate the speakership truly credible? Under House rules, any member can introduce a resolution to declare the Office of the Speaker vacant; in fact, any member can offer the resolution as a matter of “constitutional privilege,” and questions of privilege have precedence over all other motions. Defenders of the Speaker could try to dodge a vote with a motion to table the resolution. If that were to fail, the Speaker’s supporters, working with minority party members, would need to defeat the resolution outright. The House has never acted to remove its speaker. Although speakers have come under pressure to resign, the House has voted just once, in 1910, on a resolution to declare the speakership vacant; it failed. If Speaker McCarthy’s opponents succeed, chaos might consume the House, with multiple ballots needed to seat a speaker. However, the rules are different than they were in January. When a new Congress meets for the first time, it can do no business other than elect a speaker or adjourn. Only after the election of a speaker can the chamber adopt rules to govern its proceedings. Once in place, House rules remain for the entire Congress. So, if Speaker McCarthy were deposed mid-Congress, the House could continue its business even before electing a new speaker. How? In the wake of the 9/11 terrorist attacks, the House revamped its rules in anticipation of a scenario in which a speaker might be unable to perform their duties. In the case of a vacancy, the rule requires the speaker to deliver an ordered list of House members to act as “speaker pro tempore” until the election of a new speaker. Although the rule has never been tested, an acting speaker would appear to exercise all the authority of a real speaker. It’s unknown who is on McCarthy’s list. While an acting speaker might reduce chaos, and even limit pressure to elect a new one, it’s unclear whether any Republican other than McCarthy could secure the votes required to be elected speaker.

Eurasia Group FollowsUnion Joe” to Michigan. President Biden joined the United Auto Workers’ picket line in Michigan, an unprecedented move by a sitting president. The decision to join the picket line is an indication that the Biden administration will continue to side firmly with the union in its ongoing strike against the Big Three automakers. The president’s trip, which comes after considerable pressure from progressives for a president who has described himself as the most pro-union in history to join the striking workers, is also meant to nullify the effect of former president Trump’s own visit to Michigan. Mr. Trump is hoping to use the strike and the broader issues around electric vehicles it implicates as a wedge issue with which to peel off union members, which could be decisive in the crucial swing state. However, Trump’s strategy faces major headwinds: (1) union members remain a decisively pro-Democratic voting bloc; (2) Trump has yet to endorse any of the UAW’s wage demands; and (3) UAW President Fain has harshly criticized Trump throughout the strike.

Observatory Group’s Outlook for U.S.-China Relations before Year-End. The recent meeting between China’s top diplomat, Wang Yi, and U.S. National Security Advisor Sullivan in Malta has helped bolster bilateral communication channels. Last week, both countries announced the launch of Economic and Financial Working Groups to facilitate talks on related topics. In addition, both sides have re-established communication channels in other areas, such as climate change. The Wang-Sullivan meeting is a further indication of a temporary thaw in the fragile U.S.-China relationship. In the coming weeks, senior Chinese officials will make official visits to Washington, where both sides will attempt to work out the details of President Xi Jinping’s trip to attend the APEC meeting and hold a bilateral summit with President Biden in mid-November in San Francisco. Some uncertainty remains over whether a Biden-Xi summit will occur, and may depend on the high-level diplomatic engagements in the coming weeks. The likelihood is high for the Xi-Biden summit to take place as expected, which might become a stabilizing factor for the bilateral relationship, at least in the short-term. Expect to see some lowering of tensions and more engagement between the two countries toward the end of this year. However, it remains uncertain how long this trend will last, as the 2024 outlook largely depends on the outcomes of two elections—Taiwan’s in January and the U.S.’s in November. If the pro-independence candidate, and incumbent Vice President William Lai, wins the Taiwanese election on January 13, it is likely to trigger another round of geopolitical tensions between Beijing and Washington over Taiwan and complicate overall U.S.-China relations.

“Off the Record”

Democratic state attorneys general (AG) and several senators are urging the Supreme Court not to overturn its long-standing Chevron doctrine, which grants the EPA and other agencies discretion to reasonably interpret ambiguous statutory language. Recently, in West Virginia v. EPA, the Court limited administrative agency authority by adopting a so-called ‘major questions’ doctrine, which has led to a number of challenges to administrative regulatory authority. AG’s and senators argue it would be rash to further upend precedent when the effects and understanding of the newly created ‘major questions’ doctrine is still developing. The Democratic AGs also emphasize that Chevron offers a measure of stability and predictability to cooperative federalism programs, pointing to two main ways the framework does so. First, when federal agencies offer fair interpretations of the law to fill statutory gaps left by Congress, Chevron allows states to rely on those interpretations in developing their implementation plans. Second, once those plans are approved by a federal agency, Chevron offers states some reassurance that the implementation process is unlikely to be derailed by third-party legal challenges.

In Other Words

“We need to have repercussions at the border. What does that mean? You’ve got to deport people, and you’ve got to show images of people being deported. When was the last time we saw people going the other way instead of just seeing people flow in?…I think Trump went too much to the right…and I think President Biden, the administration, is not doing enough. We’ve got to find the right balance,” Rep. Cuellar (D-TX).

“I honestly don’t know what to say to my fellow Republicans other than you’re gonna eat a shit sandwich, and you probably deserve to eat it,” Rep. Roy (R-TX) on budget negotiations.

Did You Know

Issued in 1936, the first official Social Security Card (055-09-0001) record belonged to John D. Sweeney, Jr., age 23, of New Rochelle, New York.

Graph of the Week

Immigration is Disrupting U.S.-Mexico Commerce. Customs and Border Protection (CBP) has released its August data, and monthly encounters at the southern border have increased 27% to 232,972, the highest level since December 2022. The high number of encounters will increase the prominence of immigration as a policy issue and damage President Biden politically. Months of data indicating that White House policies are not working to decrease border encounters will make the issue more difficult for the president, even among Democrats. Immigration has also begun to impact commerce between the U.S. and Mexico; one Mexican railroad company had to halt freight operations to avoid inadvertently transporting migrants to the border; further disruptions of this nature are likely. Although Biden administration policies alone are unlikely to meaningfully decrease border encounters over the medium and long term, the president will continue to pay a political price for immigration, and Congress will continue to fail to legislate.

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