I want to turn briefly to the debt ceiling talks. However the mainstream media plays it or the White House for that matter, the fact is, House Speaker Kevin McCarthy has knocked President Biden off his clean debt ceiling perch and has already achieved a major victory in the battle of the budget.
Why do I say that? Because Biden not only had a meeting in the White House with congressional leaders, but he also finally met with Kevin McCarthy after 97 days since their first meeting.
That by itself was a Biden surrender, and the second point is that, despite Biden's blarney that he'll never negotiate budget reforms as part of the debt ceiling discussion, he has now agreed to send White House staff to meet with congressional staff — hang on a minute, get ready for it — about budget savings as part of a debt ceiling increase, and they're all going to meet again with the president on Friday for a follow-up.
So, Biden is now doing exactly what Kevin McCarthy asked him to do last February. In fact, sources confirm that congressional staff met with the White House folks today in Kevin McCarthy's office in the Capitol. So, they're getting down to work. There isn't going to be a debt default. There never was going to be a debt default.
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Biden just kept trumpeting that and the idea that somehow he could ignore the new House Republican majority or its talented leader Kevin McCarthy. Biden failed, and that's the significance of yesterday's White House meeting.
I don't care how the White House spins it. This was a big win for McCarthy. Now, the negotiations are going to go on for a while. They will be very, very difficult, undoubtedly contentious, and will go right up to the final D-Day date, but the exact D-Day date, when the government supposedly runs out of cash, is really a known unknown.
Janet Yellen says June 1. I suppose she could be right, but the Treasury could keep looting from various government retirement funds almost forever. So, the D-Day date is a moving target. That's going to add to the drama. So far, the Treasury bond market is completely ignoring this, showing no fear of a Treasury default.
I don't know if he realized it, but yesterday, in his rare presser, Joe Biden actually capitulated to one of McCarthy's demands, which is to claw back unused COVID money. That is about $50 or $100 billion. So, that's a complete surrender to reducing the budget and cutting spending.
White House people have been whispering to their favorite media outlets that the Republicans must not touch any unpaid bills. Well, a COVID claw back is not an unpaid bill, and, by the way, canceling the student loan cancelation is not an unpaid bill either. That could be worth, I don’t know, $4–$500 billion.
Another point is the Republican demand to include H.R. 1, the Lower Energy Costs Act, which would reopen the oil and gas spigots with thorough permitting reform, a very popular measure in both houses with strong Democratic support.
So, we'll see how all this plays out in the weeks ahead. There will be plenty of battles over fiscal year baselines and the 1% growth limit for future spending. Joe Biden is already out on the campaign trail trying to scare everybody about health care and veterans’ aid.
We used to call that the "Washington Monuments Syndrome" that any spending cuts will destroy all the wonderful things on Planet Earth, but really, the Republicans are not cutting the budget. They're putting a speed limit on the discretionary portion of the budget and for good reason because of Biden's $6 trillion spending explosion in the last two years, somebody's got to slow it down, and that's what the Republicans are arguing.
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Meanwhile, the GOP appropriators haven't made any decisions yet, so all of Biden's blarney should be ignored. He just got whooped by McCarthy. His approval rating is down to 36%. His economy in the first quarter was a recession-prone 1.1%. Polls show Democrats don't even want him to run for re-election.
So, Biden's giving in, dropping his promise for a clean debt ceiling bill. Hats off to Kevin McCarthy — at least we got some progress. Save America. Pass McCarthy's bill.
This article is adapted from Larry Kudlow’s opening commentary on the May 10, 2023, edition of "Kudlow."
