Washington Update - January 23, 2022

Billy Moore    Dc2

Congress returns to session this week, preparing for a fight over raising the debt ceiling that was reached last week. By taking “extraordinary measures,” mainly not making deposits to federal retirement accounts, the U.S. Treasury can avoid a default until late spring or early summer.

As with previous Democratic Presidents, Republicans in Congress plan to use any debt ceiling increase as leverage for reduced spending. Democrats insist they will not negotiate a deal, arguing a default risks a global economic catastrophe and Congress should increase the ceiling without strings attached. Speaker Kevin McCarthy and President Joe Biden plan to meet soon and the debt limit will be a topic of discussion.

The debate is an important early test of Speaker McCarthy’s leadership skills. A debt limit increase is likely to be approved before a default, the bill’s contours shaped by bipartisan centrist Senators and may feature process reforms instead of steep spending cuts. Should it pass the House with the bipartisan support of centrist Representatives, it could prompt a group of very conservative Republicans – mainly those who opposed McCarthy’s election as Speaker for 14 votes – to revolt and move to remove him from the leadership. 

This week, in addition to debating a dozen non-controversial bills, the House will take up legislation restricting sales from the Strategic Petroleum Reserve. Some of the House leadership’s priority measures, including a border enforcement bill, have run into intraparty dissent, indicating changes will be made before floor action is scheduled. Senators expect to continue confirming presidential nominations.

President Biden’s possession of classified documents while out of office has become the top priority for investigation by House Republicans. Because it is part of a criminal investigation, Republican demands for documents are unlikely to be fulfilled.

Amid cooling inflation and steady employment gains, inverted bond yields continue to predict a 2023 recession.