The Dispatch Podcast - White Flags and Olive Branches

Episode Date: April 30, 2023

Kevin McCarthy secured a bill raising the debt limit this week, sealing a crucial win for House Republicans. Liam Donovan, veteran government relations specialist, joins Mike to breakdown the strategy behind House leadership: from negotiations with the "Five Families" to Steve Scalise being a “bit player” for McCarthy. Show Notes: -Watch: Mike Warren interviews Liam Donovan -Warren's Debt Ceiling article for The Dispatch -Liam Donovan's Substack Learn more about your ad choices. Visit megaphone.fm/adchoices

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Coming to you from Washington, D.C., where it has been quite a week on Capitol Hill, Republicans in the House of Representatives, led by Speaker Kevin McCarthy, did what many thought could not be done with such a narrow majority. They passed a bill to raise the debt limit, with only a handful of GOP defectors after weeks of negotiating and tweaking and offering up solutions to holdouts in the conference, a big win for McCarthy and the Republican leadership team. But if you think that means the Senate will just simply take up this bill, pass it, send it to the president to sign into law, and everyone can quickly move on to the budget. Appropriations, passing laws, and doing other regular normal, orderly things, well, then you haven't been paying attention to any of the debt limit ups. and downs for the past decade plus. No, this House GOP bill was a first and necessary step

in a long process that will hopefully end up with some kind of agreement that avoids the U.S. defaulting on its debt obligations. It was also a key political win for McCarthy, for whom every hinge point moment of this Congress seems to be sink or swim, do or die. Does this strengthen the newish speaker? Or is it simply a stay of execution? Joining me to talk about all of this is Liam Donovan, a Republican lobbyist, strategist, and one of my go-to resources for information about what's going on in Washington, what's going on on Capitol Hill in the GOP, how to make sense of it all. Liam, welcome to the Dispatch Podcast.

Thanks for having me. All right. Well, let's start with the brass tax of the passage of this bill, which is called the Limits Save Grow Act of 2023, LSG. Wasn't that like an R&B group from the 90s? I can't remember. On Wednesday evening, the vote passed 217 to 215. Liam, how did Kevin McCarthy get it done losing only four House Republican votes? So it's a long sock. And as you said, I think it went through several twists and turns and iterations. and I think there was doubt really dating back to January as to whether this majority,

whether this speaker could marshal his troops on anything that could possibly lift the debt or really anything else, quite frankly. And I think there have been a series of wins on some things that are substantive and can become lost, something that are just pure messaging, but they haven't actually lost a vote yet. But this is a tough one in that, you know, Republicans generally are allergic to votes to raise the debt limit. That's what gives Democrats such leverage much of the time, because while Republicans might be more comfortable with the thought of flirting with the edge and default, they still have to count on Democratic votes so they can keep their hands clean. So I think the Biden position

and the broader Democratic position of, we will absolutely not negotiate, no questions, you know, cleaner bust was predicated on the assumption that McCarthy couldn't get it done. I think in a weird way that helps. There's no pressure. There are low expectations. And to some degree, I think this conference has been able to come together in the wake of it was a pretty fractious January speakership election to come together and kind of become a team.

I don't want to overstate it because there's a lot of game left to be played here. and there will be, you know, further challenges. This isn't the hard part. But I do think that some of the, the airing of grievances, let's say, that happened in January, that turned into sort of a trustfall of the distribution of power throughout the conference in a way that has not happened in previous speakerships.

And quite frankly, if you look at what brought down Boehner and ultimately, you know, what made the job untenable for Ryan, he didn't even really want it anymore, was they had big enough majorities that they could sort of marginalize the Freedom Caucus guys, you know, the dozen guys that are never going to be for anything. If they're not going to be productive, then he can just stiff on them and use the majority you have. McCarthy doesn't have that luxury. And because of the stakes, as you mentioned, the margins are so small, you can't take any of these guys for granted. And to that end, he sort of assiduously courted these different groups.

they call them the five families. And so, you know, you can't talk about how they got this vote done without taking a step back to the fact they really did spend the last four months trying to take stock of the conference, what people needed, what people could pallet, what they couldn't pallet. The reason that they had any kind of a struggle at the end was the late inclusion of the repeal of the IRA, Inflation Reduction Act, Clean Energy Tax. credits. The Freedom Caucus at the very end when they started to, they were about to roll out this bill and the Freedom Caucus said, no, we have to repeal IRA route and branch. There's a variety of reasons why you can't repeal IRA root and branch. It's a political matter. Not least because then Republicans are trying to raise the price of insulin and they're trying to do tax cuts for corporations and all these things that would just be a mess, leaving aside the fact that it would

actually be a budget buster on paper. What they settled for was, okay, fine, we'll just repeal the IRS funds and the clean energy tax credits. That's not a great vote for your average member, but it's also not something that's really going to give them too much harpern, except in the IRA, one of the things that it did was extend the legacy credits for biofuels like corn ethanol, like biodiesel, things like that that have a pretty important constituency, if you follow, let's say, I don't know, the Iowa primary.

The parochial interests there are so strong that this is not an IRA issue. This is a long-term legacy existing credit that the IRA sort of carried forward and transforms in the out ears into a new credit. That was poison for these guys. And so the late haggling was mostly, okay, how do we square the circle of keeping the Iowa delegation and some of these other Midwestern Ag District people happy? Because we have to do that. There's no question without cracking this thing open in a way that everybody needs their fix. And what they ended up with was a pretty clever move where even though the Freedom Caucus guys got what they wanted, the strict work requirements, the repeal of IRA and stuff, there were a few people that still said, well, the work requirements. either aren't tough enough or they don't kick in soon enough.

And so they ended up being sort of a trade where they said in a brief sort of late night amendment when they, right before they went to the floor, they said, okay, we are going to pull back and spare a handful of these legacy bipartisan tax credits in the form of biofuels. And there's another one related to carbon capture and sequestration, which is like sort of a, there's a weird, strange bedfellows coalition of fossil fuel Republicans. and environmentalist Democrats that like this. So it spared those two things in particular and traded that because it was a conservative

like Freedom Caucus Asked, it traded that for the work requirements kicking in a year early, so 2024. The reason that's easy for leadership to do as long as you don't end up with everybody coming to you with their problem is this isn't going to become law. No one is under the illusion that it's going to become law.

So it ends up giving you a lot of room, to maneuver, um, that's all it took. And, and of course, you know, it came down to a very climactic vote by George Santos who'd said all along, I'm not going to vote for this thing. So that was interesting. And there was a little bit of suspense. Um, but I think the shift in the narrative has been, um, pretty quick. Um, but also there's this, there's this tension where it's really hard for some people to give McCarthy his due in the sense that, uh, you know, in, in early January, it was like, oh, McCarthy is so hapless, he's never going to get this. What's he doing?

And then as soon as he did win on this 15th ballot or whatever, it's like, well, of course he was going to win. He gave away the story. He's powerless. He's never going to get anything done. So there's sort of a Rodney Dangerfield element to Kevin gets no respect. This is the same thing. He's never going to get this passed. That's the basis for the Democratic strategy.

He passed. Well, you know, of course he passed it. He made his guys walk the plank. He traded away. everything he had. And by the way, if Democrats, you know, had all their people there, he would have lost. And, you know, there's sort of a, you have to backfill this idea that McCarthy's bad at his job. And you have to shape your, you know, your fact pattern around it. But he did a good job. And I think what he fundamentally did was put the pressure away from

House Republicans, which is an important development, and puts it at the doorstep of Biden and Senate Democrats, who, as you said, they're not going to pick this up and pass it. But they don't have anything they can pass. And that's why it's so important that Biden engages because without his blessing, it's really hard to see how anything passes the Senate, let alone becomes law. I want to go back to the sort of internal machinations and sort of the long-term internal fights that we still expect in this close majority in the House. But you mentioned President Biden.

And it does strike me that this was either an underestimation or a miscalculation or misunderstanding on the part of the president about McCarthy's ability to get to the negotiating table. This was a big win for McCarthy for many reasons, but one of those reasons being he would have proven Joe Biden right about the House majority being hapless and about Kevin McCarthy being hapless had he not passed. So passing it sort of takes that argument away from president. Biden. Can you explain a little bit? Why is this miscalculation, misunderstanding of the Republican

conference and how it works and how McCarthy uses his power there? Where does it come from? And will Democrats learn their lesson? I think the White House position, while I think they probably underestimated the contingency and probably hadn't fully thought through what comes next. It's not a terrible bet to put the pressure on this house with this majority with this untested leadership team. Now, they rose to the occasion in this instance, but as a gambling proposition, it's not a terrible one. I wrote a piece for my substack, mostly just get all the thoughts out of my head. I was sort of piecemeal tweeting him. That's LPDonovan.substack.com. That's right. Good. Definitely check it out. And as I look at,

this, one of the things I was looking at was kind of how tenable is this position, and this is obviously before the vote happened, but I was sort of trying to explain what they're thinking here. And it's not crazy why they set this up, because unless and until Kevin McCarthy and House Republicans prove that they can do this, number one, it's crazy to bail them out. Why would you engage before they can demonstrate, you know, they can get their act together, number one. Number two, Even if you think Kevin McCarthy himself personally is acting in good faith and truly wants a deal, if he can't show that he can marshal the votes, why would you make a deal with him and trust that he can deliver anyone, let alone a significant chunk of his conference?

And number three, I think unless and until you get Republicans on the record for any increase in the debt limit, whatever conditions attached to it, any increase in the debt limit, then I think there is in the back of Democrats' minds, not unreasonably, the idea that the goal here, or at least something they're very willing to live with, is letting this bomb go off on Biden's watch with the idea that there will be a political upside to that. Now, I think they've sort of, if you're, if you're Republicans, you'd like to say you've checked all these boxes. You're not bailing us out. We sort of showed you that we can have a unified position. Number two, we've showed you, you know, McCarthy can deliver the votes

when it comes to in the end. He's got the trust of his conference, which is like the thing that was in doubt. And number three, when you have 98% of the Republican Party voting for a debt limit increase, that's not something that's ever really happened before. And so I think that alone shouldn't be discounted. And even if you attach crazy cuts to it and crazy things from a policy sample that will never happen, that fundamental point that McCarthy likes to make, we're the only ones that have actually done our job and voted to increase the debt limit. What's your plan? And so a no negotiation position isn't really tenable. I think the White House understands that what I'm watching for

and what I sort of anticipated was everybody needs to be able to save face here, including Joe Biden, and simply saying, okay, you got me. I'll negotiate on the debt limit. That's not something he can say. That's not something his base would put up with. But I think he can set that aside and say, fine, we'll negotiate on the budget. Having those talks on the budget at this juncture and having productive talks around a budget cap deal, which has to happen even if we're not associating with the debt

limit, I think helps to elide that tension there and gets us to a place where you could come up with a deal that could be wrapped together. And so I think that's the key here is kind of an arm's length distance between the plausible deniability that the White House needs that when we're talking about the budget, we're not talking about the debt limit, and the Republican imperative that they not just give something over to just. Joe Biden for nothing. The stakes, though, of this vote this week, as we have pointed out, nobody expects this particular bill to become law. This is not the actual specific vehicle by which the debt limit is raised. Did that also take the pressure off of Republicans? Yes, they had to

be on record for this vote. You got to get some wins here. But are we going to be back at this point? uh in in short order where the stakes are higher not just for the country and the debt limit and will we uh you know uh you know will we default on our obligations but for republicans for whom that's not as big of a problem and voting to raise the debt limit is a huge political problem for them are is this just a kicking the can down the road and it's going to get harder as the stakes get higher to, for McCarthy to corral these, uh, these cats, uh, and, and get a win. It definitely gets harder in the sense that, as you said, playing with live ammunition is, is different than this sort of, you know, this is process, right? This is, this is being able to go

give the locker room speech that, hey, you know, if we fail here, we're proving them right. Um, give me the support that I need to go in and, you know, get it done. And that's the stage we're at. And so, but I do think, you know, anything that could become law, if you put it on the floor right now today, it's going to fail. Because that sounds weird and counterintuitive, but the fact is until this is closer, more urgent, more perilous, and until both sides have been able to demonstrate to their respective constituencies that they fought their hardest, there's no way to get to the compromise position. And I think there's an understanding and recognition of that, even among Republicans,

and I think that the supposition from January on has always been that there's this sort of Damocles hanging over Kevin McCarthy in one false step and he's gone. I mean, that's true enough as far as it goes. Well, as I said, I think he's spent the last four months really building trust and support and momentum within this conference, this win builds further momentum. And I think people appreciate what he's accomplished. And even if we know that half or more of these guys are never going to support anything that can become law, that doesn't mean that they're going to, when it does become law, because it has to become law, because the debt limit has to be raised and the government needs to be kept open, that doesn't mean they're going to come for him

because they respect that he kept them involved in the process. They believe that he did his best and played the game as best it can be played. I think everybody understands that this bill isn't going to become what's going to become a lot. But if you acknowledge that at this stage, you've undermined your leverage. So, you know, it will get trickier. The real question, and this is, as we said, the ball is in the president's court. I think his ability to hang in with this position where I'm simply not going to negotiate, period.

It can only be tenable right now in two instances. Either, and these are associated, but either he is so committed to the principle at stake here and believes that the crisis around this kind of redounds to his benefit because he can prove these guys are, you know, nihilist extremists who are willing to, you know, if he's willing to stare them down and absorb the pain that's going to come from that. Because, okay, leaving aside whether we technically default, the markets are going to have a reaction here that's going to have downstream effects.

Last time we got this close, there was a downgrade that adds to significant long-term borrowing costs in ways that continue to resonate. And again, that's before you technically actually default. If he's prepared to absorb that pain and outlast Republicans, then he doesn't have to, you know, blink or sort of veer off this game of chicken. Relatedly, if he's prepared to act unilaterally, that is to say, I think, you know, people talk about minting the coin. That's probably not what would ever happen. But there are constitutional arguments that the debt limit statute is in conflict with the 14th Amendment,

which says the full faith and credit of the United States shall not be threatened to the public debt clause. There's no reason that he couldn't have the, you know, his counsel's office write up a memo that simply says that and they've shown a propensity to, you know, to take their chances with the court. So if he's prepared to do those things, and that's how I'm probably looking at it,

if in the coming weeks there's not a pretty clear sit down with McCarthy that at least, you know, it's nominally a budget, discussion, but everybody sort of knows what's going on, then maybe there's sort of path to a more seamless resolution. But if he sticks to his guns, that's what it tells me that he's prepared to either outlast these guys and or in the end act unilaterally before we get to that default position. Otherwise, he's really got no choice. Not long ago, I saw someone go through a sudden loss, and it was a stark reminder of how quickly life can change and why protecting the people you love is so important. Knowing you can take steps to help protect your loved ones

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with life insurance from Ethos. Get your free quote at ethos.com slash dispatch. That's ETHOS.com slash dispatch. Application times may vary. Rates may vary. This episode is brought to you. by Squarespace. Squarespace is the platform that helps you create a polished professional home online. Whether you're building a site for your business, your writing, or a new project, Squarespace brings everything together in one place. With Squarespace's cutting-edge design tools, you can launch a website that looks sharp from day one. Use one of their award-winning templates or try the new Blueprint AI, which tailors a site for you based on your goals and style. It's quick, intuitive and requires zero coding experience. You can also tap into built-in analytics and see who's

engaging with your site and email campaigns to stay connected with subscribers or clients. And Squarespace goes beyond design. You can offer services, book appointments, and receive payments directly through your site. It's a single hub for managing your work and reaching your audience without having to piece together a bunch of different tools. All seamlessly integrated. Go to Squarespace.com slash dispatch for a free trial. And when you're ready to launch, use offer code dispatch to save 10% off your first purchase of a website or domain. We should clarify, by the way, for listeners, just sort of what the stakes are in these next few weeks and sort of what we're looking at. You mentioned the sword of Damocles hanging over.

There is a sword hanging over, which is we have hit the debt limit already in January. We're dealing with the Treasury Department taking these extraordinary measures to essentially to pay bills without actually having to issue more debt. The estimate is that what June is when those extraordinary measures might run out? So we might, by the time this podcast airs, we might actually have new data on that. So there was, obviously, Tax Day was last week and the initial reports were those envelopes to, we're coming pretty light to the IRS mailbox. And, um, uh, it does seem there's been an uptick, but like to your point, they're not able to issue the debt they need to have

sort of day to day functioning of government. And so they're literally hand to mouth in terms of what, what hits, what hits the, uh, the, the treasury that day versus what has to go out the door. Um, there's sort of a bimodal prediction going on where the biggest stress would come the second week in June, and if the receipts get us past June 15th, there's significant running room until, let's say, the end of July. Reports are from Goldman, chatter out of Treasury. It seems like there's been enough coming in from tax receipts that we can safely get through mid-June, which puts us probably into late July. Treasury was supposed to come up with an updated projection on the X-State this week. They have not. It could come any time.

I think we'll probably learn that there's a little bit, you know, the fuse is a little bit longer than people had maybe feared. I could argue that either way. I think it's really hard to see how this thing would be resolved by mid-June and therefore you would have probably had to maybe kick the can to kind of sink things up later in the year. I frankly think that's probably for the best and would be a good faith measure if nothing else. If you have more time on the clock, you know, maybe there's more time. to get things together, but it's not enough time that it sinks you up with the spending fight that's to come. It does back you up against August recess. So JetFumes have a magical ability to get people thinking about how to get along. But that's the time horizon here.

And ultimately, as I mentioned, if you're trying to bring leverage to bear with respect to the debt limit on spending, the spending deadline isn't until the end of September. And Congress often kicks that can into the end of the year as well. So, you know, to some degree, the spending part is downstream from the sort of budget discussion because you have to come up with a deal for like the overall numbers. And this is actually one of the things that Republicans or Democrats are looking their chops over is Republicans are now on the record for voting to return spending levels, turning back the clock to the dystopian days of 2022, which would entail $130 billion.

cut on net because the omnibus that Republicans were so mad about that's that was a pretty significant boost like 70 billion for defense 60 some billion for non-discretionary uh defense non-discretionary and they want to sort of roll that back but because you're not voting on on spending items you're just voting on like a big number Democrats are filling in the blanks with what horrors might lurk beneath that 130 billion dollar number and so uh I say that just to say there's there's two steps this one is the overall agreement on the amount that the government should spend and then there's a subsequent step of appropriations

and what are the particulars like what different programs get different amounts and that's going to be a whole other fight that will come even after we resolve the debt limit. It's hard to know how the politics of all of that works out as you mentioned, does, is there a political advantage for Biden to hold his ground and to stare them down? We just don't know. We don't know how those sort of accusations of what spending Republicans are trying to cut will play as well.

But I want to get a little back to the politics, Liam, within the Republican conference. And I'm curious if you could back up a little bit, your sort of assertion here that McCarthy earns a lot of goodwill, brownie points here. within the conference because I have a piece up at the dispatch on Friday morning that takes a look at these sort of natural tensions within such a narrow majority, but within leadership between McCarthy and his majority leader, Steve Scalise. They really have calmed down over the last few weeks, but they've not gone away entirely, have they? And McCarthy's always having to look over his shoulder because of the way the speaker fight went, because of this narrow majority because of the feeling that he could at any time have a number of members just

decide, uh, we're done with McCarthy. Um, does he have to do that less now and can explain a little more about why that is? I would say it is very different vibe out there than it was perhaps some weeks ago. And I think that's purely a reflection of the fact that some weeks ago, they did not have a sense that they'd be able to pass this. There was not really a plan and there was a lot of anxiety around how this might go because I think if you start from how this could have gone off the rails and work backwards had this vote failed or had you know the the five families sort of had a a blow up that had McCarthy in the crossfire you know that's that's what I think lurked in the back of people's minds when the sniping starts

to creep up into reporting and and you know kind of blind media items I think the margin is still so slight that you can't keep your foot off or you can't take your foot off the gas in the sense of building

trust, building morale because that's really what this is at all times. You have to keep constant communication and look, if you think about how McCarthy got where he is, it's an incredible ability, whatever you think of his policy chops or

intellectual chops or whatever the sort of hit on him is, he has always done a really, really good job of keeping up relations with all quarters of the party. And that, I think, is to a large degree to credit for how this went. That's what the success came from. You have to continue to do that. And the minute you start taking anybody for granted, I think that's where you get in trouble.

So if you're looking at what could be festering here, it's kind of like, okay, well, the handful of people that did get taken care of, you know, that could, that sort of, I think, I think the success papers over any of those little things. But if I'm like, look, it would have been better if they didn't include the IRA repeal provisions, but you had to put the IRA repeal provisions in to get the conservatives votes. But you had to take out this little piece to, to keep the ag district votes. if that still ends in a New York member getting a bad hit in his district because he voted to take away, you know, things that are good for his district and clean energy, like that would, that that's the sorts of things that can annoy them. But I think part of it is keeping your foot on the gas. And so I think you're already seeing the majority tee up votes on, you know, their border and immigration package. Like there's always a new next thing that you need to keep doing.

to keep everybody going in the same direction. If you rest on your laurels, I think you're in deep trouble. But I think, you know, the way he has gotten as far as he has is not taking anybody for granted. And I think that's the lesson is you have to make sure you've got. And look, I think everybody and myself included sort of gasped when you looked at the Rules Committee roster

and was going to have people like Thomas Massey and Chip Roy, who were consummate squeaky wheels in previous speakers. ships, but you have nothing, if not, sort of a canary in a coal mine by putting your people who would ordinarily be problems on the floor, putting them as your early warning vehicle and quite frankly validators. Like the idea, you know, in conference, which is, you know, we don't get, we get readouts from like Jake Sherman on like what's happening in the room, but, but conferences where the airing of grievances happen. And typically, you know, in years passed, it would be Freedom Caucus guys coming up to the mic and, you know, shaking their

fist and talking about how leadership isn't listening to him. Instead, this time, you had like Chip Roy up at the mic giving a passionate speech about how important it was to support this bill. So I think that inverts a lot of the challenges that Boehner had, that Ryan had. It's not to say that McCarthy doesn't have his own perils, but I think there's a fascinating, counterintuitive strength in sort of strength by weakness, by the humility of this leadership style of like, hey, like, hey, guys, I can't do this without you. I'm not going to try to stiff arm you. I'm not going to try to stick one by you. I need you. And we all need you. And this is all about the team. I think that is, it might not be sustainable in all

situations. And again, whatever can become law won't have most of Republicans. But what he's doing here is earning the credibility to get that deal done without risking his job. And also, you know, bringing along people with this idea that we're all in this together. You know, in a way, the weakness, the narrow majority kind of helps give the majority an underdog feel. And hey, like, they're going to count us out. So let's all kind of get together. And yeah, that that does change the dynamic. it's that locker room dynamic that I mentioned and the other piece of it I think is which is which is new and different you saw it play out when you know certain members were out there talking reporters shooting their mouth off um there's nowhere to hide you know in in when there's 20 some people that can take a walk uh that that can get dangerous because you get a critical mass of people who are just dug in but when you're gonna be like you will be blamed if you take this down that's on you you you you you you let the team down and everyone knows it and everyone knows it and there's no safety of hiding behind

Matt Gates or something like you that's you you know you did that so I think that's another kind of counterintuitive advantage that there's exposure in that decision there's high stakes everything is walking a tightrope but that tightrope means that these guys take it more seriously than they might have if they could be, you know, less critical to the success of the party. Liam, what should we be watching for next in particular with this debt limit negotiation? What are the things you'll be watching to indicate how Democrats are going to be responding and what's next down the pipe? Yeah, a couple of things.

I mean, so they're interrelated. You know, one is the president, what his posture is. And as I said, I think what I'm looking for is not a white flag on the debt limit, but an olive branch on the budget. Because if you looked back and, you know, I was saying this as far back as February, February 1st, McCarthy and Biden met. He came out of that meeting saying, hey, I'm not negotiating on the budget, but we, you know, we can have a separate talk on the budget once Republicans release their budget. Now, that was a gambit to get Republicans to release like a broad 10-year budget that balances and basically what they'd promised. And that was mostly to get them to put their cards on the table so that he could just hammer them. This is not that, but I think the White House is sort of acknowledging that this is that budget.

And I think that allows Biden to say, okay, fine, we can start those budget talks. and to me that's how this can possibly work out is this sort of strategic ambiguity between budget talks writ large and and the debt which is obviously in the mix but you don't have to you don't have to debate the budget the debt separately you can talk about it about the budget um but in those budget discussions and for McCarthy that's the win right oh I got him to negotiate and Biden can say no I'm not negotiate on the debt limit and everybody can kind of save face there um but that's just the White House. The Senate has the ball in its court. As I said, what people don't appreciate or haven't priced in fully, because there's an assumption, well, if McCarthy would just put a clean increase on the floor, it would pass, which frankly, at this point, I honestly don't think it would, but he's not going to do it because it would put his members in a tough vote situation. That's a difference from 2011. If you look back at this point in 2011, the House actually did put a clean increase on the floor and they voted it down. You know, it went

in a lopsided way. Even Democrats were like, oh, no, we got to do some, you know, sort of fiscal reforms. So that won't happen here because I don't think Democrats would lose a single vote on a clean increase. They're just fully committed to this. That said, it can't pass the Senate. There are not the votes for it. You know, Joe Manchin wouldn't vote for it. So even if Democrats could get 50 votes for it, no Republicans are going to support that. And no Republican on either side is going to support that until we're way, way, way closer to peril. than we are right now. So I think that's part of it is like all these postures

are easier to maintain as long as, you know, it's sort of out there in the, in the ambiguous future. But the Senate has to do something. And, you know, I think there's probably differing opinions on whether it's wise

to take this up to shoot it down. I don't think they will, but in theory they could do that. But what can they move? I don't think they can without the White House's blessing because to get, even if you find,

And, you know, like, so the gangs are likely to start talking. Like, I'm looking at what, what does Mitt Romney think about this? What does Tom Tillis think about this? What is Kirsten's cinema, things like that? There's a, you know, a group of people who are at the center of all these deals, whether it's, you know, the bipartisan infrastructure law, whether it's the chips bill, whether it's the gun safety measures that they've passed. It's all the same people that are just trying to sort of see what the market can bear

for bipartisan legislation in the Senate. But even if you can figure that out, like what can get 10 Republicans or more, you still need Biden's blessing to get the 50 Democrats. So it is going to depend what... I think Schumer's taking his marching orders to some degree from the White House,

so you can maybe read what Schumer does as a signal as to what Biden's intentions are. But, I mean, that's the key, is the balls in their court and where it goes from here, I think is largely up to Biden. his willingness to, you know, engage in a way that could have a win-win or at least not like a lose, you know, somebody taking an overwhelming sort of capitulating loss because

that's the way this gets messy is if one side holds out and wants the other to like just take a huge loss, right? Biden's not going to take huge loss. It's just not. So, you know, Republicans get that. I think they just want some sort of. sort of cover to say they didn't cave. But if Biden insists on getting them to swallow something clean, that's not going to happen until the markets are so reactive that that prompts action. And even that, I don't know, I don't know that that moves them. So I think that the most promising avenue would be if Biden engages in these talks and you can

sort of get to a point where we can see how we can avoid the worst. But like I said, I think my best case scenario is, even just as a good faith measure, you do a short-term debt limit increase. Because if you do that, and that allows Biden to say, hey, I didn't give in on the debt limit, then for the real debt limit increase, you could sort of fold that into whatever budget concessions you get. And make no mistake, even if Biden wins, wins, quote unquote, the debt limit fight, he still has to give budget concessions.

Like, those are going to happen regardless. So, again, I think it's kind of the choreography of. how both sides can look like they come away with this without giving away the store. And, you know, I think the next moves up to the White House. New Year, same sort of brinksmanship, politics, and a delicate dance. Liam Donovan, you can follow him at L.P. Donovan on Twitter. Thanks so much for joining Liam on the dispatch podcast helping us walk through. I hope you join us again another time.

Anytime, happy to be here. Thanks for having me. Thank you.