I spoke to Lou Jacobson for his Politifact post on the debt limit fight and how it might be resolved.

• The White House could act unilaterally. The executive branch could mint a platinum coin with a face value of $1 trillion, deposit it in the Federal Reserve, and pay off its financial obligations as normal.

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During a previous debt limit fight, Obama called the idea “wacky,” and in 2021, Yellen called it a “gimmick.” It’s also unclear whether this would be upheld in the courts.

Ironically, some Republicans might like to see Biden take this path, said Liam Donovan, a principal at the law firm Bracewell.

“It would absolve Republicans of any responsibility, while opening the door to political attacks on Biden’s extra-constitutional overreach,” Donovan said.

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• A fig leaf solution. The likeliest endgame, experts say, is that the two parties will negotiate a deal that raises the debt limit, but with conditions that Democrats can live with, such as “a good-faith, bipartisan reform to the process that can help Republicans save face without Biden looking like he paid a ransom,” Donovan said. “A small concession is the optimal path because it provides an offramp for the bulk of the Senate conference that doesn’t want a clean hike but also doesn’t have the stomach for going over the brink.”

This would leave lots of tough negotiating for consideration of spending bills later this year, but most observers say that’s a preferable outcome.

Read the full piece here.

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.

Read the full piece here.

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.

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Read the full piece here.

I spoke to Semafor about the hard-won agreement between leadership and House conservatives that enabled Kevin McCarthy to narrowly garner the votes to become Speaker.

POWERFUL COMMITTEE ASSIGNMENTS

The most important tool in leadership’s arsenal is deciding which bills come to the floor and under what circumstances.

But in order to secure the speakership, McCarthy is said to have promised the House Freedom Caucus three seats on the all-important House Rules Committee, which makes those decisions, as well as what amendments can be offered and how long debates go on.

If true, that should be enough for them to veto plans by leadership unless Democrats step in.

“That’s the real juice here,” Liam Donovan, a Republican lobbyist and former National Republican Senatorial Committee staffer, told Semafor.

Read the full piece here.