Democrats may have to bend on negotiations with GOP on debt ceiling

Published

3 years ago

January 22, 2023

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Strategists and policy experts in both parties believe Democrats will have to come to the bargaining table soon to negotiate a debt ceiling deal that would avoid an economic catastrophe.

President Biden and Senate Majority Leader Charles Schumer (D-N.Y.) are so far refusing to negotiate with Speaker Kevin McCarthy (R-Calif.) on raising the nation’s debt ceiling, but voices across the political spectrum argue the precedent for such talks has been set.

Former President Obama negotiated with the House Republican majority in 2011 to extend the nation’s borrowing authority, while former President Trump agreed to big discretionary spending increases in 2019 to raise the debt ceiling.

Obama agreed to negotiate big spending cuts with Republicans before the 2012 presidential election because he knew he was ultimately responsible for the health of the U.S. economy, which would have taken a major hit if the federal government had defaulted on its debt obligations in 2011.

Trump agreed to a $320 billion increase in domestic and military spending as part of a two-year budget deal because he wanted to take the threat of default off the table before his reelection bid.

Experts say Biden is now in a similar position as he readies his own reelection bid and won’t be able to resist negotiations.

“A failure to deal with the debt limit would be catastrophic for the economy. Any serious person who has studied this knows the economic consequences would be deep, long-lasting and disastrous,” warned former Senate Budget Committee Chairman Kent Conrad (D-N.D.).

Conrad said he understands why Democrats refused to negotiate with Republicans on raising the debt limit during Obama’s second four years in office, but he expects Biden to sit down with Republicans this year on the issue.

“You can see that there is the possibility at least of a negotiation,” he said.

Conrad said a negotiation between Biden and Republicans in Congress would be an “opportunity to deal with some of the long-term challenges facing the country.”

“The hard reality is both Social Security and Medicare are headed for insolvency,” he said. “There’s an opportunity to deal with some of these long-term challenges that are critically important to the country.“

Other Democrats also think a bipartisan negotiation will take place, though they predict that Republicans won’t win the same steep spending cuts they got from Obama a decade ago.

“Ultimately Schumer, McConnell and Biden will figure something out,” said Jim Kessler, a former Schumer aide who now serves as executive vice president for policy at Third Way, a centrist Democratic think tank.

“In the end, I think the likelihood is the agreement will come out of the Senate and the House will be forced to take it. McConnell’s view is, ‘We’re not going to default,’” he said.

McConnell predicted at an event at the University of Louisville on Thursday that Republicans would negotiate a deal with Biden.

“In the end, I think the important thing to remember is that America must never default on its debt. It never has, and it never will,” he said. “We’ll end up in some kind of negotiation with the administration over what the circumstances or conditions under which the debt ceiling be raised.”

Biden so far is not getting tremendous pressure from his party to enter negotiations, with the exception of Sen. Joe Manchin (D-W.Va.), who represents a state that tends to be deep-red in presidential elections.

“We have to work together. It’s bipartisan, it’s always been bipartisan as far as the debt ceiling,” Manchin told Fox Business in an interview in Davos, Switzerland. “I think what we have to do is realize that we have a problem. We have a debt problem.”

Manchin, who is up for reelection in 2024, floated the idea of considering reforms to prolong the solvency of federal programs such as Medicare and Social Security in exchange for Republican support for raising the debt ceiling.

“We would put bipartisan, bicameral committees together to look at each one of the trusts and come up with solutions of how you fix it,” he said.

A Senate Republican aide said refusing to negotiation with Republicans “isn’t sustainable especially with folks like Manchin floating ideas out there.”

Besides Manchin, who hasn’t said whether he plans to run for reelection next year, vulnerable Senate Democrats include Sens. Jon Tester in Montana, Sherrod Brown in Ohio and Jacky Rosen in Nevada, as well as Independent Sen. Kyrsten Sinema (Ariz.) will be watching the debt ceiling maneuverings closely.

Schumer and then-Speaker Nancy Pelosi (D-Calif.) refused to negotiate spending cuts in exchange for raising the debt limit in the fall of 2021 and instead put pressure on McConnell to work out a deal to bring along at least 10 Senate GOP votes.

McConnell agreed to a procedural workaround that allowed debt-limit legislation to circumvent a filibuster in the Senate, allowing him to make the argument that Democrats alone raised the debt limit. But McConnell still came under withering criticism from former President Trump and some conservatives because GOP votes were needed to allow the debt limit bill to bypass a filibuster.

Republicans say Democrats can’t expect McConnell to help pave the way for a clean debt limit increase this year.

“Mr. Schumer and others are talking about, ‘We can do what we did in ’21 and that’s just hold out and Republicans will cave,’ I don’t think that’s realistic when you have a divided Congress,” said Bill Hoagland, senior vice president at the Bipartisan Policy Center and a former Senate Republican leadership aide.

“My sense here is, and Biden’s been here before — he went through it in 2011 — at the end of the day it’s not ‘My way or the highway.’ He has to give something to Congress and Congress has to give to something to him,” Hoagland predicted.

“I think some form of limitation on discretionary spending is likely,” he added. “It shows the president is willing to work with Congress.”

Hoagland said reforms that would reduce or put new restrictions on Medicare and Social Security benefits are less likely than negotiated cuts to discretionary spending because Republicans don’t want to be accused of forcing cuts to popular entitlement programs before the next election.

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Already, Democratic leaders are revving up their message that the new House GOP majority wants to put those programs on the chopping block.

“From rising home costs, interest rates, cuts to Social Security, Medicare and more, it’s clear who will actually pay the price for gratuitous partisan politics: American families,” Schumer said in a statement.

Newly elected House Democratic Leader Hakeem Jeffries (N.Y.) tweeted Friday: “Social Security is not negotiable.”

Business

Surprise rise in inflation as summer travel pushes up air fares

Published

3 hours ago

August 20, 2025

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Surprise rise in inflation as summer travel pushes up air fares

Prices in the UK rose even faster than expected last month, reaching the highest level in 18 months, according to official figures.

Inflation hit 3.8% in July, data from the Office for National Statistics (ONS) showed.

Not since January 2024 have prices risen as fast.

It’s up from 3.6% in June and is anticipated to reach 4% by the end of the year.

Economists polled by Reuters had only been expecting a 3.6% rise.

More unwelcome news is contained elsewhere in the ONS’s data.

Train tickets

Another metric of inflation used by government to set rail fare rises, the retail price index, came in at 4.8%.

It means train tickets could go up 5.8% next year, depending on how the government calculate the increase.

This year, the rise was one percentage point above the retail price index measure of inflation.

These regulated fares account for about half of rail journeys.

Why?

Inflation rose so much due to higher transport costs, mostly from air fares due to the school holidays, as well as from fuel and food.

Petrol and diesel were more expensive in July this year compared to last, which made journeys pricier.

Coffee, orange juice, meat and chocolate were among the items with the highest price rises, the ONS said. It contributed to food inflation of 4.9%.

What does it mean for interest rates?

Another measure of inflation that’s closely watched by rate setters at the Bank of England rose above expectations.

Core inflation – which measures price rises without volatile food and energy costs – rose to 3.8%. It had been forecast to remain at 3.7%.

It’s not good news for interest rates and for anyone looking to refix their mortgage, as the Bank’s target for inflation is 2%.

Whether or not there’ll be another cut this year is hotly debated, but at present, traders expect no more this year, according to data from the London Stock Exchange Group (LSEG).

Economists at Capital Economics anticipate a cut in November, while the National Institute of Economic and Social Research (NIESR) expect one more by the end of the year.

Analysts at Pantheon Macroeconomics forecast no change in the base interest rate.

Political response

Responding to the news, Chancellor Rachel Reeves said:

“We have taken the decisions needed to stabilise the public finances, and we’re a long way from the double-digit inflation we saw under the previous government, but there’s more to do to ease the cost of living.”

Shadow chancellor and Conservative Mel Stride said, “Labour’s choices to tax jobs and ramp up borrowing are pushing up costs and stoking inflation. And the Chancellor is gearing up to do it all over again in the autumn.”

Business

AI ‘immune system’ Phoebe lands backing from Google arm

Published

5 hours ago

August 20, 2025

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AI 'immune system' Phoebe lands backing from Google arm

An AI start-up which claims to act as an ‘immune system’ for software has landed $17m (£12.6m) in initial funding from backers including the ventures arm of Alphabet-owned Google.

Sky News has learnt that Phoebe, which uses AI agents to continuously monitor and respond to live system data in order to identify and fix software glitches, will announce this week one of the largest seed funding rounds for a UK-based company this year.

The funding is led by GV – formerly Google Ventures – and Cherry Ventures, and will be announced to coincide with the public launch of Phoebe’s platform.

It is expected to be announced publicly on Thursday.

Phoebe was founded by Matt Henderson and James Summerfield, the former chief executive and chief information officer of Stripe Europe, last year.

The duo sold their first start-up, Rangespan, to Google a decade earlier.

Their latest venture is motivated by data suggesting that the world’s roughly 40 million software developers spend up to 30% of their time reacting to bugs and errors.

Financial losses to companies from software outages are said to have reached $400bn globally last year, according to the company.

Phoebe’s swarms of AI agents sift through siloed data to identify errors in real time, which it says reduces the time it takes to resolve them by up to 90%.

“High-severity incidents can make or break big customer relationships, and numerous smaller problems drain engineering productivity,” Mr Henderson said.

“Software monitoring tools exist, but they aren’t very intelligent and require people to spend a lot of time working out what is wrong and what to do about it.”

The backing from blue-chip investors such as GV and Cherry Ventures underlines the level of interest in AI-powered software remediation businesses.

Roni Hiranand, an executive at GV, said: “AI has transformed how code is written, but software reliability has not kept pace.

“Phoebe is building a missing layer of contextual intelligence that can help both human and AI engineers avoid software failures.

“We love the boldness of the team’s vision for a software immune system that pre-emptively fixes problems.”

Phoebe has signed up customers including Trainline, the rail booking app.

Jay Davies, head of engineering for reliability and operations at Trainline, said Phoebe had “already had a real impact on how we investigate and remediate incidents”.

“Work that used to take us hours to piece together can now take minutes and that matters when you’re running critical services at our scale.”

Entertainment

Paul Weller suing former accountants after they stopped working with him over Gaza statements

Published

5 hours ago

August 20, 2025

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Paul Weller suing former accountants after they stopped working with him over Gaza statements

Paul Weller is suing his former accountants after they stopped working with him after he alleged Israel was committing genocide in Gaza, according to a legal letter.

The former frontman of The Jam, 67, has filed a discrimination claim against Harris and Trotter after the firm ended their professional relationship.

Lawyers for Weller say the singer-songwriter was told in March that the accountants and tax advisers would no longer work with him or his companies.

According to the letter, which was seen by the PA news agency, a WhatsApp message from a partner at the firm said: “It’s well known what your political views are in relation to Israel, the Palestinians and Gaza, but we as a firm are offended at the assertions that Israel is committing any type of genocide.

“Everyone is entitled to their own views, but you are alleging such anti-Israel views that we as a firm with Jewish roots and many Jewish partners are not prepared to work with someone who holds these views.”

Israel has vehemently denied claims of genocide.

But lawyers for Weller claim by ending their services, the firm unlawfully discriminated against the singer’s protected philosophical beliefs, including that Israel is committing genocide in Gaza and Palestine should be recognised as a nation state.

Weller said: “I’ve always spoken out against injustice, whether it’s apartheid, ethnic cleansing, or genocide. What’s happening to the Palestinian people in Gaza is a humanitarian catastrophe.

“I believe they have the right to self-determination, dignity, and protection under international law, and I believe Israel is committing genocide against them. That must be called out.

“Silencing those who speak this truth is not just censorship – it’s complicity.

“I’m taking legal action not just for myself, but to help ensure that others are not similarly punished for expressing their beliefs about the rights of the Palestinian people.”

The legal letter says Weller will donate any damages he receives to humanitarian relief efforts in Gaza.

Cormac McDonough, a lawyer at Hodge Jones and Allen, which is representing Weller, said his case “reflects a wider pattern of attempts to silence artists and public figures who speak out in support of Palestinian rights”.

Mr McDonough added: “Within the music industry especially, we are seeing increasing efforts to marginalise those who express solidarity with the people of Gaza.”

Sky News has contacted Harris and Trotter for comment.