THE LONG GAME: 2-month debt ceiling deal; Cuts to reconciliation bill
A doomsday scenario—the U.S. defaulting on its debt—was narrowly avoided when the Senate voted Thursday along party lines to raise the country’s borrowing cap by $480 billion. Republicans provided ten votes to end debate, enabling a motion to move forward on the agreement that raises the debt ceiling through early December. Even that was too much for some on the right wing to stomach. Former president Donald Trump issued a statement blasting Senate Minority Leader Mitch McConnell (R-KY) for allowing the two-month deal to happen. Perhaps that is what led McConnell on Friday to send a letter to President Biden vowing that Republicans would offer no further assistance to raise the debt ceiling and would rather see the government default rather than work with Democrats. McConnell blamed Senate Majority Leader Chuck Schumer (D-NY) for “poison(ing) the well” with a floor speech in which he said that the government had almost experienced a “first-ever, Republican-manufactured default on the national debt.” All this finger-pointing adds up to one thing: expect another high-wire political act in early December.
If Democrats are going to pass their social spending bill through reconciliation, it looks increasingly likely that its original $3.5 trillion price tag will shrink. Senate Budget Committee Chairman Bernie Sanders (I-VT) conceded that the overall spending would be reduced, but set a floor for the package when he said that $2 trillion would not be enough. President Biden held meetings with Democrats last Friday and according to some sources, a range of $1.9 trillion to $2.2 trillion was discussed. Where are the cuts likely to come from? According to the New York Times, centrist Democrat Kyrsten Sinema (D-AZ) wants to see $100 billion cut from proposals to combat climate change. The talk of cuts to the bill is not sitting well with some on the left, including Rep. Pramila Jayapal (D-WA), the chair of the Congressional Progressive Caucus. In an interview with the Associated Press, she shared telling Biden that his suggestion for compromise was “too low, and I said that I would really like to be closer to three (trillion).”
Washington Watch is published weekly when Congress is in session. Published monthly during extended recess or adjournment.
Spotlight on Puerto Rico
Puerto Rico coronavirus statistics for October 11
According to the Puerto Rico Health Department, 319,938 people are believed to have been infected with COVID-19, an increase of 940 since October 4. The increase between September 27 and October 4 was 1,016. The rate of deaths continues to decrease: the death toll is currently 3,192, with 27 of those registered since October 4. Comparatively, 32 people died from the virus between September 27 and October 4. As of today, the cumulative number of confirmed cases since the virus arrived on the Island is 150,508 and the number of probable cases is 32,168. Currently, there are an estimated 2,848,293 people in Puerto Rico who are eligible for the vaccine; 88% of that amount has been partially vaccinated, while 79.7% has been fully vaccinated.
Debt restructuring plan moves through the legislature
The Puerto Rico Senate last week voted overwhelmingly in favor of P.C. 1003, the bill enabling the Plan of Adjustment, which would erase part of the Island’s debt and allow it to once again issue bonds. The version passed made substantial amendments to previously existing versions of the measure. The changes made by the Puerto Rico Senate to the bill revolve around the exchange of existing debt for new one. In the newest version of the bill, such exchanges cannot occur if changes are made to existing arrangements for public employees pensions.
While the Puerto Rico House of Representatives had previously voted on a different version of the Debt Restructuring Plan, they will need to vote on the version as amended by the Senate. Governor Pedro Pierluisi has publicly indicated that he is likely to sign the existing legislation into law. Meanwhile, critics argue that the plan—like its previous versions—ultimately does little for Puerto Rico, and that the issuance of new bonds does nothing but place Puerto Rico on the hook for another debt crisis down the line in exchange for spending money today.
PREPA declares state of emergency
As Puerto Rico continues to experience an increasing number of blackouts, the Puerto Rico Electric Power Authority (PREPA) has declared a state of emergency due to the “critical state” of its power generation. This state of emergency would allow PREPA to expedite a series of purchases and contracts related to repairs via the loosening of regulations. The purchases and contracts are expected to have a cost of $180 million.
Last week, the U.S. House Committee on Natural Resources held a hearing on LUMA’s performance. At the hearing, the Committee heard testimony from several witnesses, including environmental attorney Ruth Santiago, who testified that the LUMA contract establishes “a long, expensive and exclusive scheme that creates a private monopoly over energy transmission, distribution, generation dispatch, customer service, planning and all other electric system functions with the exception of operation of the generation plants”—all on Puerto Rican taxpayers’ dime. Santiago also cited various rate hikes enacted since LUMA’s takeover—and another one was requested last month.
Concerns about the impact of the fiscal plans on the University of Puerto Rico
Under PC 1003 , the University of Puerto Rico would be allocated a fixed budget of $500 million for the next five years. According to university officials, the bill makes no guarantees that the money will be ultimately assigned, and last week they traveled to the Capitol to advocate for the university because they believe the university actually requires an amount closer to $650 million. According to Puerto Rico Senator José Vargas Vidot, the UPR system would need to close down three of its campuses—Utuado, Humacao, and Ponce—in order to remain viable, even with the $500 million. It is unclear if this is the case.
University alumni have taken to social media to explain the importance of the University. Using the hashtag #YoSinLaUPR, former students speak about the role the university plays in improving peoples’ lives, without the crippling student debt associated with higher education in the U.S.
View From The White House
In an attempt to curb an uptick in inflation, the Commerce Department launched an “early alert hotline” last week for resolving shortages in the semiconductor supply chain.
President Biden on Friday restored full protections to three national monuments that had been slashed by former President Trump, including Bears Ears and Grand Staircase-Escalante in Utah, and reimposed fishing restrictions in the Northeast Canyons and Seamounts Marine National Monument off the coast of New England.
According to Bloomberg News, the White House is considering issuing an executive order directing agencies to study the implications of cryptocurrencies, and is weighing the idea of appointing a White House “crypto czar” to coordinate administration policy on the issue.
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