I spoke to Axios‘ Neil Irwin about the debt limit collision course and the circular risk of market optimism and underreaction.
What they’re saying: “In order for Congress to act expeditiously, there must be a sense of gravity around the consequences should they fail to act,” Liam Donovan, a principal at Bracewell LLP, tells Axios.
•”At this point, conventional market wisdom is actively undermining that sort of pressure by projecting unmitigated confidence that it will all work out,” he said.
The bottom line: The sanguine outlook on Wall Street makes it more likely that some ugly days may be in store later this year.
Liam Donovan, a principal at Bracewell PRG, is a regular presence on cable news, in print, and on twitter as an expert explainer of what’s going on in Congress and in the Republican Party. With a background both in GOP campaign politics and government relations, Liam’s expertise on the intersection of politics and policy gives him tremendous insight to distill what really matters in Washington from the rest of the Beltway din. In this conversation, we talk Liam’s path to politics, his time in GOP campaigns, his shift to government relations, and get his insights into the chaos of last week’s (eventual) ascent of Kevin McCarthy as House Speaker…what to expect from Congress over the next two years…and his early takes on Trump vs. DeSantis ’24 & the future of the Republican Party.
IN THIS EPISODE Liam’s upbringing as a Navy Brat who went to high school in DC…
Liam’s stint working in GOP politics and at the NRSC…
The iconic GOP Senator Liam served as an aide to at the Senate committee…
Liam’s shift to government relations and lobbying…
Liam’s initial take on the chaotic House GOP process to anoint Kevin McCarthy as Speaker…
Liam on why it was probably inevitable for McCarthy to cave to the hard-right members…
Liam unpacks how McCarthy peeled off the different factions to earn the Speaker’s gavel…
Why the GOP center-right members never wavered for McCarthy…
Liam on why there was never a real chance of a few Republicans working with Democrats to elect a coalition Speaker…
Liam’s thoughts on the risk McCarthy could be deposed mid-term…
The Trump impact on the Speaker’s race and the Trump-McCarthy relationship…
Liam analyzes the CLF / Freedom Caucus “truce”…
Liam’s insight on what to expect on the debt ceiling…
Liam’s early handicapping of Trump vs DeSantis 2024…
The origin story of Liam’s unusual twitter profile photo…
Liam shouts out one of his favorite twitter accounts…
I spoke the GRID‘s Matt Zeitlin about the chaotic start to the 118th Congress and what it says about the looming debt limit fight.
The speakership fight was a “stark confirmation of what we already knew — that the results of the election have empowered and emboldened hard-liners within the conference and weakened the hand of leadership,” Liam Donovan, a Republican lobbyist, told Grid. It’s not clear that “any speakership” — McCarthy or otherwise — could survive putting forward a debt ceiling increase that Democrats could live with. “The challenge over the next six to eight months will be finding some sort of mutually acceptable fig leaf that would avoid a downgrade or default scenario.”
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But since past debt ceiling standoffs have been resolved without a breach, it’s possible that either the White House or the House may be more comfortable holding to their position in the expectation that the other side would cave. Similarly, it’s possible that the financial markets may not start reacting to the possibility of a debt ceiling breach until much later in the process, providing little outside pressure to reach a deal. “I think the X factor here is whether the mess on display wakes up [Wall] Street. They have underreacted in the past assuming it would all work out, which in turn emboldens guys who insist it’s all Chicken Little stuff. They’ll probably have to feel some pain to do what’s necessary,” Donovan said.
