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The ‘X-Date’ Cometh
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The ‘X-Date’ Cometh

Plus: A Q&A with Rep. Mike Gallagher on China policy.

Speaker of the House Kevin McCarthy speaks to reporters about debt ceiling negotiations at the U.S. Capitol Thursday. (Photo by SAUL LOEB/AFP via Getty Images)

Congress looks ready to blow past the date Treasury Secretary Janet Yellen has said the government could default on its obligations, but some lawmakers are betting they have more wiggle room.

“I don’t believe the first of the month is the real deadline,” said Florida Republican Matt Gaetz.

It’s a big bet to take on something that could upend the global economy. But passing a deal to raise the nation’s borrowing limit before June 1 looks nearly impossible at the moment. Even if Republican leaders reach an agreement with President Joe Biden as soon as today, they have said House staff will need between 24 and 48 hours to draft the legislative text. After that, the chamber’s rules require three days for members to review it before it comes to the floor for a vote.

Congressional leaders still hope to pass legislation sometime next week. House members have largely left town for Memorial Day recess, but they are on notice to return to vote if needed. 

Beyond scheduling logistics, leaders face stiff political headwinds. Democrats are frustrated with the process and many members may balk at the deal if it includes any kind of expansion in work requirements for social safety net programs, as Republicans have demanded. Conservatives, meanwhile, are growing anxious about whether the agreement imposes stringent enough spending cuts.

Gaetz predicted Thursday night the deal—if one emerges—will alienate both progressives and conservatives but still ultimately pass the House.

The Senate will present its own challenges, though. Getting unanimous consent to speed up debate within the chamber is usually difficult, but at least one Republican senator—which is all it takes to hold the bill up—is already publicly pledging to slow things down if the bill isn’t to his liking.

“I will use every procedural tool at my disposal to impede a debt-ceiling deal that doesn’t contain substantial spending and budgetary reforms,” Utah Sen. Mike Lee wrote Thursday. “I fear things are moving in that direction. If they do, that proposal will not face smooth sailing in the Senate.”

The New York Times’ Jim Tankersly and Catie Edmonson reported Thursday night that the deal could raise the debt limit past the 2024 election and impose caps on discretionary spending for two years. The caps would mostly impact nondefense discretionary spending, which would amount to a cut on paper—but when accounting for some budgetary maneuvers the negotiating team is considering, could ultimately stay roughly even with this year’s levels. Military spending would grow in the upcoming fiscal year.

Lawmakers emphasize the talks are still in flux. But if those details hold, it’s a far cry from the demands Republicans made in their own debt ceiling bill. That measure would have hiked the debt limit only through March of next year, presenting another opportunity for Republicans to extract concessions from Democrats in this session of Congress. It also would have slashed discretionary spending by more than $130 billion and imposed caps on spending growth for a decade.

Outside conservative activists are pressuring Republicans to accept nothing less than the House GOP bill. Russ Vought, former director of the Trump administration’s Office of Management and Budget, argued the deal as reported by the New York Times “isn’t much different than a clean debt limit increase,” which Biden has pushed to pass for months.

“You have to work to be this incompetent,” he said of Republican leaders.

On Thursday, House Speaker Kevin McCarthy appeared ready for some blowback from his conference.

“I don’t think everybody is going to be happy at the end of the day,” he told reporters. “That’s not how this system works.”

China Competition Select Committee Issues First Recommendations

The House select committee on competition with the Chinese Communist Party approved its first two reports and legislative recommendations this week. Members hope to deter Chinese aggression against self-governed, democratic Taiwan and respond to the Chinese government’s ongoing genocide of mostly Muslim ethnic groups in Xinjiang. Rep. Mike Gallagher, who chairs the panel, spoke with The Dispatch about the recommendations in an interview this week.

He also addressed other recent developments in China policy, including Senate Democrats’ work on another version of a China competition bill and the Biden administration’s approach to China policy since a Chinese spy balloon traversed the continental United States in February.

The interview is below, edited for length and clarity.

The Dispatch: Your panel recommended decreasing America’s de minimis threshold for international shipments, particularly for packages from foreign adversaries. This threshold lets shipments valued below $800 enter the country without duties and without much scrutiny from Customs and Border Protection (CBP). Major Chinese fashion retailers, like Shein, rely heavily on this trade benefit to send orders directly to consumers—but lawmakers worry it could be allowing products made with forced labor into the United States.

Some members of Congress may be reluctant to go against corporate lobbying to maintain the threshold. Do you think there’s really enough support to change it this year?

Gallagher: Well, I’m cautiously optimistic. At a field hearing that Ways and Means had a few weeks ago, Chairman Jason Smith seemed to indicate that we need to take action to close the loophole. So I think there’s bipartisan support for doing something on it. Obviously, the devil’s in the details. And while we recommend an amendment to the Tariff Act of 1930 to reduce the de minimis threshold, we did not in the report specify the precise level in part to preserve some flexibility for negotiations.

We’ve also heard compelling testimony from U.S. Commission on International Religious Freedom Chairman Nury Turkel at our genocide hearing as well as from former U.S. Trade Representative Robert Lighthizer last week which suggests that companies are exploiting the de minimis loophole, and that it’s not just a way to inject slave labor-produced products into the U.S., but Lighthizer pointed out it’s a channel for fentanyl and counterfeits. And CBP indicates that over 90 percent of all counterfeits are seized in the de minimis channel. We intend to work with Chairman Smith and members of that committee to arrive at a piece of legislation that can pass this Congress.

You’d have to make the threshold much lower to actually impact apparel shipments that human rights groups are worried may contain banned Xinjiang cotton. If you cut the current $800 threshold in half, you’re still probably leaving most of those shipments beneath the threshold. Congressman Earl Blumenauer has advocated a different approach that would end de minimis altogether for shipments from China. What do you think of that?

Gallagher: We are actively scrutinizing the Blumenauer bill. I’ve had personal conversations with Blumenauer on the issue. I’m not yet ready to endorse a particular framework, but we’re headed in that direction. I think conceptually I agree with you. It’s like, okay, we’re going to cut it to $400. Does that actually solve the problem? I’m not sure. $200? No. I like what I’ve read of the Blumenauer bill, but we’re running this through a process to hopefully arrive at a consensus position that the chair and ranking member of the committee of jurisdiction could get behind.

Groups that lobbied against changes to de minimis last year argued behind the scenes that it wasn’t a good time because it could slow down beleaguered supply chains and increase inflation. Do you think that would be a potent argument against the change in this Congress?

Gallagher: No. The argument boils down to: “This is not a good time to confront genocide, for economic reasons and to have cheap textiles.” I find that very unpersuasive. I’m sensitive to the idea that any form of even highly selective decoupling is going to entail costs. And certainly there’ll be a cost associated with this, but I think your average American wants confidence that when they buy a T-shirt or some article of clothing, it’s not made with slave labor. So I think now is the time, given everything we’re hearing about the atrocities committed in these camps, just the increasing aggression we’re seeing economically in general from China. Perhaps there’s never a perfect time to do the right thing, but this is the right thing.

Senate Democrats recently announced they’re working on another China competition bill to follow up on last year’s semiconductor chips package, including additional provisions boosting American industries. Some Senate Republicans are skeptical of another big industrial policy push. They’re looking to cut federal spending and are worried about this new package turning into a giveaway to companies.

Gallagher: I share those concerns. We’re now actively conducting a massive experiment with industrial policy, really for the first time in a long time. I think it’d be wise to ascertain whether it works or not before we embark on another round of industrial policy. I’m very skeptical that the CHIPS Act will work as intended in part because of all the conditions being placed on Department of Commerce grants. You’ve even had some liberal commentators like Ezra Klein raise this concern and how demanding a daycare plan and an equity plan and an anti-white supremacy plan for chips grants is going to massively increase the cost. Rather than spending $40 billion on onshoring chips, maybe the right thing would’ve been to spend $40 billion building a Navy and an “anti-Navy” to prevent the invasion of Taiwan in the first place.

What I hope the House can do is consider our own approach, and then we pass something that I think could be targeted, powerful, and bipartisan, and then maybe we can have a conversation with the Senate after that. But I don’t think we should start from the departure point of whatever framework Chuck Schumer is cooking up. I’ve heard a lot of misgivings, not just from Senate Republicans, but even some Senate Democrats.

Another one of your recommendations was for Congress to pass legislation requiring the administration to consider more sanctions on perpetrators of the genocide in Xinjiang and companies involved in human rights abuses. Did you see the Reuters report two weeks ago about how the Biden administration has delayed sanctions responding to the genocide in Xinjiang for months, as officials have tried to keep open the possibility of sending Secretary of State Antony Blinken to China for meetings?

Gallagher: I did see the report and find it very troubling, this broader effort just to suppress the spy balloon incident in general so as not to jeopardize Blinken’s trip to Beijing—until, you know, the intrepid reporting of the Billings Gazette made that impossible. I don’t understand this desperate desire for a photo-op in Beijing. I think particularly after the balloon incident, any meeting should happen on U.S. soil. There’s a broader kind of neo-engagement or zombie detente push coming out of the administration right now with the Janet Yellen speech, the Jake Sullivan speech, that I’m struggling to understand. We have two decades of evidence to suggest that economic engagement’s not actually going to reduce CCP aggression. So what’s changed now?

I’ve had some informal conversations with the administration about that. And we have invited the administration to testify in a hearing that would have representatives from the executive branch to talk about not just their overall approach to China, but where allies and partners are in this approach. This is not going to be a bomb-throwing hearing. We want it to be serious and sober. The administration should welcome that discussion, and I think there’d be an opportunity for us to ask some serious questions: How does one de-risk without decoupling? What are the meanings of all these fancy phrases we have right now? What’s the overall goal of your China strategy? We need to have a huge public debate about that. And I think the select committee could be the forum for that serious conversation.

Did they say yes to that invitation? 

Gallagher: The White House supports it, but we just have not been able to lock down the actual witnesses. Some of them are not enthusiastic about testifying before Congress. But that’s part of the job.

Of Note

Haley Wilt is a former associate editor for The Dispatch.