Dispatch from Washington: May 2023


The United States is fast approaching “X-date,” the point at which America would reach its statutory debt limit. National Security Advisor Jake Sullivan delivered a major economic policy speech, calling for a “new Washington consensus,” integrating economic policies with the nation’s global security agenda. Sullivan also met with Wang Yi, China’s State Councilor and Minister of Foreign Affairs in Vienna to try and ease tensions. The U.S. Federal Reserve raised interest rates for the tenth time. Former President Donald Trump’s legal woes are mounting as he is deemed liable for sexual assault. Legal concerns aside, Trump won’t cede the stage as he participated in a widely viewed town hall hosted by CNN. Over 4,000 people representing nearly 100 foreign markets gathered outside Washington for the SelectUSA Summit. The COVID-19 public health emergency is officially over. There may be a crisis along the U.S.-Mexico border as “Title 42” expires, and officials brace for a wave of migrants from Central America.

Debt Limit Drama as “X-date” Approaches

The Unites States is weeks away from “X date,” the point at which the U.S. Treasury will run out of the cash needed to pay the government’s bills on time. Congress is constitutionally required to authorize the issuance of debt. The debt limit restricts the total amount of money that the federal government can legally borrow to cover government operations. Once reached, Treasury can use “extraordinary measures,” accounting maneuvers that allow the government to continue standard operations, for a limited period. The current $31 trillion debt limit was reached on January 19, and since then the Treasury has been using these “extraordinary measures” to pay the government’s bills. In a May 1 letter to House Speaker Kevin McCarthy, Treasury Secretary Janet Yellen warned that the U.S. could hit its debt ceiling as soon as June 1, the so called “X date.” This is much earlier than Wall Street and Washington had estimated. On May 15, Yellen sent a follow-up letter to all Congressional leadership stating that she estimated that Treasury will “likely 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 noted that the stand-off has already had material affects and that, “Treasury’s borrowing costs increase substantially for securities maturing in early June.” Negotiations are heating up between the White House and Congressional leaders, with President Biden cutting short his Asia trip to return following the G-7 in Japan to lead negotiations. At the staff-level, talks have been occurring with greater frequency and urgency. The clock is ticking on crafting a measure to avoid an unprecedented and potentially catastrophic default.

In April, House Republicans passed a measure pairing nearly $4.8 trillion in deficit reduction with a debt limit increase into next year—the legislation will not advance in the Democrat-controlled Senate. Minority Leader McConnell said that there must be a bipartisan deal on spending, arguing that prior debt-limit deals have been tied to spending agreements, and this time should be no different. Worthy of note, is that Republicans voted to raise the debt ceiling three times when Donald Trump was president, with no preconditions. President Joe Biden and Senate Democrats have been insisting on a clean debt limit increase. White House Press Secretary Karine Jean-Pierre accused House Republicans of manufacturing a crisis and said that the debt limit had been increased 78 times since 1960. McCarthy has rejected the possibility of a short-term debt-limit extension and said Congress will need a deal in principle to lift the debt limit by the week of May 15 given the time constraints.

Default could significantly harm the American economy as well as national security. On the domestic front, federal workers could be furloughed, and mortgage rates may soar. More than 60 million people receive monthly Social Security payments and a similar number depend on Medicare for their health insurance. In the event of a default, the administration might have to pick between paying Social Security benefits and making interest payments on the debt, Medicare also wouldn’t be able to pay providers and states wouldn’t get their federal Medicaid funding. While in Japan for the Group of Seven finance ministers’ meetings, Secretary Yellen warned that a default would, “Risk undermining U.S. global economic leadership and raise questions about our ability to defend our national security interests.” Yellen predicted an “economic and financial catastrophe,” saying that household incomes would drop, and millions of Americans could lose their jobs. Director of National Intelligence Avril Haines said that our main adversaries, China and Russia, would take advantage of a default by saying the United States is in decline and that “we’re not capable of functioning as a democracy.” Testifying before the Senate Appropriations Subcommittee on Defense on May 11, Defense Secretary Lloyd Austin and General Mark Milley, Chairman of the Joint Chiefs of Staff, warned that breaching the debt limit would significantly damage U.S. standing in the world and call into question the country’s global leadership.

American Economic Leadership

In late April, National Security Advisor Jake Sullivan laid out the Biden administration’s international economic agenda. Speaking at the Brookings Institution, the National Security Advisor outlined the rationale for the administration’s new industrial policies. Sullivan called for a reconceptualization of international economic policy, arguing that the premise that economic integration would make nations more responsible and open had been proven wrong and there is now a need to recognize the reality that China, a large non-market economy, had been integrated into the international economic order in a way that posed considerable challenges. Sullivan detailed a strategic shift away from economic interdependence with China but stressed that the strategy was focused on “de-risking and diversifying…not decoupling.” This is the same language used by European Union President Ursula von der Leyen in remarks at the World Economic Forum in Davos earlier this year, signaling closer alignment between Washington and Brussels in their approach to Beijing. Sullivan articulated a “small yard, high fence” approach to restrictions on trade and investment in militarily-relevant areas and that restrictions, “Will remain narrowly focused on technology that could tilt the military balance.” This echoes Treasury Secretary Janet Yellen’s comments earlier in April where she provided her vision for policy with China. Sullivan also argued that capitalism needs to look fundamentally different in order to address today’s challenges, the consequences of economic inequality, and how they feed threats to democracy. Sullivan is just the latest senior administration official to trash the neoliberal consensus of the free trade era—United States Trade Representative Katherine Tai provided a similar rebuke at Davos this year. Sullivan noted that the new economic model will take time to materialize, saying the old economic model was not “built overnight,” and it will take years to see which institutions will rise and fall with the new economic order.

National Security Advisor and Top Chinese Diplomat Meet in Vienna to Ease Tensions

Jake Sullivan met with China’s State Councilor and Minister of Foreign Affairs Wang Yi in Vienna May 10 and 11. According to a White House readout, Sullivan and Yi, “Had candid, substantive, and constructive discussions on key issues in the U.S.-China bilateral relationship, global and regional security issues, Russia’s war against Ukraine, and cross-Strait issues, among other topics.” The two met for eight hours over the course of two days. This is among the highest-level interactions between US and Chinese officials since the spy balloon incident earlier this year – that episode caused Secretary of State Antony Blinken to postpone a trip to Beijing. However, relations were quite strained before the balloon incident. The meeting was an effort, by both sides, to reestablish a normal channel of communications, but, given the trust deficit, it will be difficult to manage the tension that exists in the relationship.

Fed Raises Rates Again to Tame Stubbornly High Inflation

On May 3, at the end of its two-day policy meeting, the U.S. Federal Reserve announced another rate increase, the 10th rate hike in just over a year, bringing the benchmark interest rate to a level between 5 and 5.25 percent. The successive rate hikes are an effort to slow the economy in hopes of getting inflation under control.  Central Bank policymakers spent the two-day meeting debating whether the economy had cooled enough to pause raising rates. Following the policy meeting, in remarks to the Economic Club of New York, New York Federal Reserve President John Williams said that inflation “remains too high” due to a strong job market. The latest Consumer Price Index (CPI), a key inflation metric, showed that consumer prices rose by 0.4% in April, and that annualized inflation was 4.9%, slightly lower than the 5% in the March data but still more than double the Federal Reserve’s target of 2%. Many financial market participants believe that the Fed will not raise rates at its next policy meeting in mid-June. Nevertheless, comments from Williams, who also serves as vice chair of the central bank’s rate-setting Federal Open Market Committee, indicate that policymakers still view price pressures as too high and that the Fed remains committed to bringing inflation back to its 2% target.

Trump Found Liable of Sexual Assault, Still Faces Other Legal Challenges

Former President Donald Trump has a number of legal matters confronting him. He is the first former president to face criminal charges and the first president to be deemed liable for sexual assault. The latter stems from a civil action brought forward by E. Jean Carroll—on May 10, a jury found that Trump sexually abused her in a luxury department store dressing room in the spring of 1996 and awarded her $5 million for battery and defamation. The New York attorney general also is leading a civil investigation looking at whether Trump’s companies committed various acts of fraud over several decades. Trump does not face jail time for the Carroll case and has initiated an appeal.  The civil investigation by the New York attorney general will not result in criminal charges. However, Trump does face serious consequences, including potential incarceration, related to several criminal investigations. Trump was arrested and charged with over 30 felony counts on charges involving hush-money payments to adult film actress, Stormy Daniels. The timing for his trial is yet to be determined but it is expected to occur during the height of the Republican nomination contest. The Department of Justice is also looking into the removal of classified government documents from the White House, which were found at Trump’s Florida estate, Mar-a-Lago, after he left office. The Justice Department believes Trump may have violated the Espionage Act, among other statutes, and they are looking at obstruction of justice as another potential crime. Trump’s role in the January 6 insurrection is also being investigated by the Justice Department and they may bring charges—hundreds have already been found guilty and sentenced for their actions at the Capitol. Finally, there is an ongoing criminal investigation in Georgia, into whether Trump acted illegally to try and overturn his loss in the state in 2020. A grand jury heard evidence for over eight months before filing a final report, which may have recommended charges, that remains sealed.

Trump’s CNN Town Hall, A Sign of Things to Come

On May 10, former President Trump participated in a CNN presidential town hall in New Hampshire, a key early voting state in the 2024 Republican primary. Notably, the town hall was held the day after a Manhattan jury found that Trump sexually abused columnist E. Jean Carroll in 1996. Trump was pugnacious, as expected, and repeated much of what he has said previously. As to January 6th, he blamed others for the riot at the Capitol, lied about the timeline of that day, and continued to criticize former Vice President Mike Pence for not trying to overturn the election results. He also repeated his lies and unsubstantiated claims of widespread fraud in the 2020 election. Trump also inserted himself into the high stakes and delicate debt ceiling negotiations, saying that congressional Republicans should let the U.S. government default unless Democrats agree to “massive” budget cuts and downplayed the potential fallout from a default. He refused to call Russian President Vladimir Putin a war criminal, and repeatedly declined to say whether he wants Ukraine or Russia to win the war. CNN’s Kaitlan Collins moderated the 70-minute town hall and was widely criticized for her performance as Trump used bluster and lies to overwhelm her and steal command of the stage. 

SelectUSA Investment Summit Held Outside Washington

From May 1-4, the SelectUSA Summit brought together global executives, foreign investors, business leaders and U.S. government representatives to discuss the investment climate in the United States, and the critical role that economic development plays in the U.S. economy. Hosted by U.S. Secretary of Commerce Gina Raimondo, notable speakers presenting at the conference included senior White House officials, Cabinet members, U.S. governors, and policymakers who highlighted the Biden administration’s accomplishments, and transformative pieces of legislation that invest in American competitiveness such as the bipartisan CHIPS and Science Act, the Inflation Reduction Act, the Bipartisan Infrastructure Law. Aided by the passage of these three measures, Secretary Raimondo argued that now is the time for foreign companies to increase their investment in the United States. Addressing the gathering on the closing day, Secretary of State Antony Blinken said the administration’s vision of investment is not a zero-sum proposition, rather the approach, “Is predicated on building a strong, resilient, and advanced industrial base with our partners around the world.” Blinken further noted that bodies such as the U.S.-EU Trade and Technology Council, are important for coordinating complementary industrial strategies. More than 4,200 people attended this year’s summit, representing 82 foreign markets and 53 U.S. states and territories. According to U.S. International Trade Administration,  since its inception, SelectUSA has facilitated more than $146 billion in investment, creating and/or retaining over 166,000 U.S. jobs.

The COVID-19 Public Health Emergency is “Over”

The federal COVID-19 public health emergency (PHE) declaration ended on May 11—this follows the World Health Organization determining that COVID-19 is no longer a global public health emergency. While there continues to be over 70,000 new COVID-19 cases reported each week, the termination of the PHE is a recognition by the federal government that we are at a different point in the pandemic. Hospitals and state health departments will no longer be required to report comprehensive data. This carries risks, and there are vulnerabilities associated with a fractured public health surveillance system; experts warn of the potential for the coronavirus to come roaring back. The end of the emergency will also end Title 42, a policy measure that permitted the U.S. to deny asylum and migration claims for public health reasons (see next section). In more than 20 mostly Republican-controlled states, work requirements for federal food assistance programs that were paused during the pandemic, will return. One of the first COVID relief laws gave states extra federal funding for Medicaid, and as a result, the program grew to an estimated 95 million beneficiaries, which is more than 1 in 4 Americans.  States can now start disenrolling people, and recent analysis from the health research group KFF suggested that as many as 24 million people could lose Medicaid. The federal government will also no longer cover the costs for vaccines or treatments with the health insurance system forced to take over. 

Title 42 Expires, Border Security Takes Center Stage

An emergency pandemic-era policy to regulate border crossings expired on May 11 as the declaration of a public health emergency for COVID-19 ended. The so-called “Title 42” measure was created to address public health and social welfare, and granted the government the ability to take emergency action in numerous ways, including to “stop the introduction of communicable diseases.” While this policy has been in place for decades, it gained greater utility in March 2020 under the premise of increased COVID-19 precautions. Under Title 42, officials could quickly turn away certain migrants at the border—since it was imposed, the measure has turned migrants back to Mexico more than 2.5 million times. With its expiration, officials fear it will spur a surge of migrants and exacerbate an already challenging humanitarian crisis at the southern border. Speaking in Brownsville, Texas, a city along the U.S.-Mexico border, Department of Homeland Security Secretary Alejandro Mayorkas said the situation was going to be extremely challenging. This issue has inflamed already deep political divisions and sparked new calls for Congress to tackle immigration reform legislation. 

To deal with the surge, President Biden is sending 1,500 active-duty troops to the southern border.  They will join 2,500 military personnel already on the ground and fill “critical capability gaps.” President Biden spoke on May 9 with Mexican President Andrés Manuel López Obrador about a number of issues, including migration. On May 10, the Biden administration announced additional measures it will implement to respond to the expected fallout when Title 42 lifts. One will include sending 24,000 law enforcement personnel and 1,100 new border patrol processing coordinators to the U.S.-Mexico border. The administration will also open regional processing centers throughout Central America to allow individuals to determine whether they are eligible for a legal pathway of entry into the United States while in their home country. 

On Capitol Hill, House Republicans passed a measure on May 11 that would restart construction of a border wall, increase funding for border agents and upgraded border technology, and reinstate the “remain in Mexico” policy. The most controversial provisions of the bill would place new restrictions on asylum seekers. The Biden administration has threatened to veto the legislation stating it does, Little to actually increase border security while doing a great deal to trample on the Nation’s core values and international obligations.” The legislation is also dead on arrival in the Democratic-controlled Senate,  where it would need at least 60 votes to advance under chamber rules.

“Who’s Who” – Personnel Updates from the Biden Administration

Center for Disease Control and Prevention – Dr. Rochelle Walensky, Director of the CDC, will step down on June 30.

Department of CommerceJames “Jamie” Wise is now a senior advisor in the Office of the Secretary. Christopher “Chris” Slevin is now chief of staff in the Office of the Secretary

Department of DefenseCara Abercrombie was nominated for Assistant Secretary for Acquisition.

Department of StateMargaret L. Taylor has been nominated as Legal Adviser. The following ambassadorial nominations have been announced: Edgard D. Kagan for to Malaysia, Nathalie Rayes for the Republic of Croatia, and Sean Patrick Maloney for the Organization for Economic Cooperation and Development (OECD).

Department of the Treasury Brent Neiman is Deputy Under Secretary in the Office of International Affairs.

Department of Veterans AffairsTanya J. Bradsher has been nominated as Deputy Secretary.

White HouseNeera Tanden will serve as Assistant to the President and Domestic Policy Advisor. Zayn Siddique was promoted to Principal Deputy of the Domestic Policy Council. Stefanie Feldman is now Staff Secretary. Amos J. Hochstein is now Deputy Assistant to the President and Senior Adviser for Energy and Investment on the National Security Council (NSC) staff. Adam R. Hodge is now Special Assistant to the President and Senior Director for Press and Spokesperson on the NSC staff.



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© 2022 Created by ABCPRODUCTION.digital