The debt ceiling crystal ball

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Debt ceiling negotiations at a standstill

Fox News' Chad Pergram has the latest on the economic fight on 'Special Report.'

"This is not going to go the way you think." Luke Skywalker in Star Wars Episode VIII, The Last Jedi

We don’t really know how the next two or three weeks are going to go on the debt ceiling.

In fact, it may take longer than two to three weeks.

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"It will happen before the markets get disrupted," predicted Sen. Lindsey Graham, R-S.C., on Fox News. "I’m not so sure about June 1st."

Of course, June 1st is the general deadline. Or early June. Or sometime in early June.

It’s hard to say. Even for the Treasury. We just know it’s around that date.

And seeing how Treasury may shift the due date – based on revenue flowing in the door – no one is truly sure.

The key is keeping the markets at bay.

The markets experienced a slight hiccup Friday when the talks hit "a pause," as described by lead GOP negotiator, Rep. Garret Graves, R-La.

Then House Speaker Kevin McCarthy, R-Calif., told FOX Business the talks would resume.

WASHINGTON, DC  May 16, 2023: US President Joe Biden and Vice President Kamala Harris meet with House Speaker Kevin McCarthy, Minority Leader Mitch McConnell, and Senate Majority Leader Chuck Schumer in the Oval Office of the White House on Tuesday, May 16, 2023. (Demetrius Freeman/The Washington Post)

They truly don’t have much track, regardless of when the deadline is.

But let us peer into the crystal ball and look at possible pathways which may consume the next few weeks.

The House is in session next week. The Senate is not. But a Senate recess is not expected to be the issue. The House likely goes first in this exercise – provided there’s an accord. And soon. Senate Majority Leader Chuck Schumer, D-N.Y., told senators Thursday that they were on call. He could summon them back to Washington on 24-hour notice.

McCarthy said he needs a framework by the end of the weekend. McCarthy also says the House then needs "three or four" days to process the bill. McCarthy insists that he will adhere to the House’s "72-hour rule." That means that if the House GOP sticks to the letter of the policy, the bill must sit for three whole days for members to digest it. Supposedly, the House would not make alterations to the bill. But Republicans made varying degrees of changes on their own debt ceiling bill and a border security bill just before the House debated and voted on their measures. However, the House could waive that provision and just put the bill on the floor if there is a time crunch – provided Members don’t cry foul.

So, if there’s a deal, don’t expect the House to tangle with this until the end of next week.

And while we cruise into the present weekend with towers of uncertainty, next weekend - yes, Memorial Day weekend - is a likely target for a weekend session. That includes Memorial Day itself. Several lawmakers with whom Fox News spoke groused about that possibility. Lawmakers like to be back in their home states and districts for Memorial Day parades.

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But, if the nation faces a fiscal crisis?

Time is of the essence.

Finding the right cocktail of votes in the House will be fascinating. The chasms between the sides yawn. This exercise requires just the right mixture of Democratic and Republican votes to pass the bill. Both sides must absorb quite a hit.

The House Freedom Caucus announced Thursday it would only support the House GOP-passed bill. In fact, the Freedom Caucus declared nothing should happen until the Senate passes that very bill. However, it’s impossible for that to happen. Moreover, the measure would never secure 60 votes to break a filibuster. In addition, Republicans carped for months that President Biden wouldn’t negotiate. It may be fair to criticize Mr. Biden for waiting so long to engage in negotiations. But it’s inconsistent to demand negotiations – yet require your opponent to accept your proposal.

So, things "paused" for a spell on Friday. The market rebounded slightly at the end of the trading session. In fact, the market was up for the week.

But the pause achieved something important.

UNITED STATES - MAY 16: Speaker of the House Kevin McCarthy, R-Calif., left, and Senate Minority Leader Mitch McConnell, R-Ky., address the media after a meeting with with President Joe Biden on the debt ceiling at the White House on Tuesday, May 16, 2023. Senate Majority Leader Charles Schumer, D-N.Y., and House Minority Leader Hakeem Jeffries, D-N.Y., also attended. (Tom Williams/CQ-Roll Call, Inc via Getty Images) (Tom Williams/CQ-Roll Call, Inc via Getty Images)

Both sides can’t appear as though they are giving up too much too quickly. McCarthy needs to show that he’s fighting for as much as he can in the House approved bill. For instance, Rep. Pramila Jayapal, D-Wash., said that she was "watchful" of what the White House was doing in the talks.

"We should not reward the hostage takers," said Jayapal.

So once the House finishes the bill, the measure goes to the Senate. Senate Minority Leader Mitch McConnell, R-Ky., believes that any package negotiated by the President and Speaker can "easily" pass the Senate. McConnell has only been a bystander to this process so far. Some still believe McConnell may swoop in if things go sideways.

"He’s the best poker player in Washington," observed one longtime Senate hand.

If the Senate can forge an agreement among all 100 senators, it can move very fast. But if a band of senators objects, it can stretch out the process for several days. Running the Senate traps and breaking a filibuster could take close to a week.

And, if the Senate changes the bill, the measure must return to the House.

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That presumes that the House can accept the changes and vote for the revised Senate version.

This is why the House and Senate are really cutting it close if Treasury Secretary Janet Yellen is accurate on when the U.S. may crash into the debt ceiling. It’s entirely possible that the Senate may not even finish the bill until much deeper in June. We’ll see how calm the markets remain.

"The big intangible is faith from the markets. It will be front and center," said FOX Business contributor Gary Kaltbaum. "The market will rule. Politicians will follow the market. And if it goes down, that will feed on itself. And potentially, there goes the economy."

Also, keep an eye on efforts by liberal senators, imploring President Biden to invoke the 14th Amendment to avoid a debt ceiling crisis. The White House dismisses this gambit. But it bears watching.

Section 4 of the 14th Amendment reads "The validity of the public debt of the United States, authorized by law…shall not be questioned."

There is a legal theory that the President could simply point to the 14th Amendment via proclamation or executive order and the debt ceiling question would dissolve.

WASHINGTON, DC - MAY 16: U.S. Rep. Garret Graves (R-LA) speaks to reporters as he laves a House Republican caucus meeting at the U.S. Capitol on May 16, 2023 in Washington, DC. President Biden and congressional lawmakers continue to work on a deal to raise the debt ceiling ahead of the June 1 deadline, when U.S. Treasury Secretary Janet Yellen warned Congress that the United States would default on their debts. (Photo by Kevin Dietsch/Getty Images)

No President has ever taken this path.

But not so fast.

The clause "authorized by law" is problematic.

One could argue that the debts incurred – above the current statutory debt ceiling – are valid because Congress authorized that debt via a "public law." Laws approving programs for veterans. The law establishing Social Security. You get it.

But one could also argue that Congress has approved no new "law" to account for the spending beyond the present debt ceiling.

That could create problems.

This would be subject to court challenges. Some legal and Constitutional scholars also believe the President would stand on shaky legal ground for this. Plus, the markets may not buy it. That’s an issue if the maneuver is so extraordinary that the markets lose confidence in the presidential declaration about the debt.

But, Democrats could also point to the 14th Amendment as giving the U.S. cover until Congress passes the bill.

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So these are scenarios of what could happen over the next few weeks.

However, remember the sage counsel of Jedi Master Luke Skywalker. No matter what happens, "this is not going to go the way you think."