The other Washington debt ceiling no one is talking about

Politico

12-03-2025

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QUICK FIX
As Congress moves toward the 33rd temporary reauthorization of the National Flood Insurance Program due Friday, lawmakers are engaging in discussions on how to save a system that millions of Americans rely on. Some former senior NFIP officials say one issue should be at the top of the list — figuring out how to run the program without it being perpetually in debt.
The NFIP owes $22.5 billion to the Treasury, primarily due to its inability to fully cover claims from previous natural disasters like Hurricanes Katrina and Helene. Congress forgave $16 billion of debt in 2018, but the program's burden continues to increase, with about $7.9 billion of wiggle room until the $30.43 billion debt ceiling is reached.
It's not good public policy to have a mandatory federal government program reliant on debt to succeed, said David Maurstad, a long-time FEMA employee and former Republican lieutenant-governor of Nebraska, who ran the NFIP until July. 'If Congress wants the program, they need to pay for it,' Maurstad said.
If the debt ceiling is hit, which both Maurstad and Robert Desaulniers, a former NFIP insurance specialist, said was possible, the program would be unable to approve new policies but still contractually obligated to pay out current policies.
Similarly, if Congress fails to approve a short-term government funding bill and the government shuts down Friday, the NFIP won't be able to write any new policies until everything is back up and running. The program's short-term reauthorization is included in the House version of the so-called continuing resolution that would keep the government running. A 'very small handful' of staff who already have their salaries budgeted will continue to be paid and will try to keep the program running, but the majority won't work or be paid until funding is passed, Desaulniers and Maurstad said.
Longer term, if Congress doesn't cancel any of the program's debt, lawmakers would have to increase the current limit, or 'the program would face significant challenges' in paying policyholder claims, Maurstad said.
Dollars for other program responsibilities would be repurposed to pay claims, forcing the NFIP 'onto even shakier ground,' which wouldn't last long before the program would face default, Maurstad said.
The debt issue is on the lawmakers' radar but the long-term fate of the NFIP remains undecided.
Sen. Mike Rounds (R-S.D.), a former insurance and real estate agent who chairs Senate Banking's housing and insurance subcommittee, said he wanted to get the NFIP 'actuarially looked at' to determine the program's cost and possible reductions, before making any decisions on debt forgiveness.
In the House, Financial Services housing and insurance subcommittee Chair Mike Flood (R-Neb.), said last week he would not consider providing additional NFIP funding.
Rounds said his goal was to get the overhaul done 'this year.' Flood said it's 'not a first part of the year priority.'
The reality is, premium dollars from policyholders pay the Treasury $619 million annually in interest on the debt, instead of being used for program improvements, which Maurstad said is 'morally reprehensible.'
IT'S WEDNESDAY — Feel free to send any insurance or other financial services policy tips and thoughts — or feedback on my Morning Money debut — to Katherine at [e-mail]. And as always, send econ policy thoughts, Wall Street tips, personnel moves and general thoughts to Sam at [e-mail].
Driving the Day
The Labor Department will release the Consumer Price Index for February at 8:30 a.m. … Senate Banking holds a hearing on housing affordability at 10 a.m. …
CPI — The consensus estimate among economists is that consumer prices in 'core' sectors of the economy — which exclude volatile food and energy prices – climbed at an annual rate of 3.2 percent last month. Many analysts anticipate a slowdown in price growth in housing – where inflation has been stickier – which would be viewed positively by Federal Reserve policymakers, Sam reports.
Still, the uncertainty created by President Donald Trump's trade policy announcements has started to drag on forecasts for future U.S. economic growth – while also stoking concern about higher inflation. 'Unfortunately for markets, it feels that this could be a lose-lose situation,' Julien Lafargue, chief market strategist at Barclays Private Bank, said in a research note. 'A higher-than-expected [CPI] reading could fuel the stagflation narrative while a weaker-than-expected print could cement recession fears. What the market really needs at this point is better visibility on growth rather than on inflation.'
CFPB firing meetings defied court order — During day two of the CFPB hearing Tuesday, a bureau employee testified that meetings to lay off 1,200 of 1,700 staff occurred as late as last Thursday, despite a court order Feb. 14 barring the agency from widespread firings after the CFPB employees' union sued Acting Director Russ Vought, per Katy O'Donnell.
Ireland at the White House — With Irish Prime Minister Micheál Martin headed to the White House for a meeting with Trump for an (early) St. Patrick's Day celebration, Ireland's business leaders are hopeful that the Taoiseach can navigate increasingly fraught trade policy shifts with one of the country's primary trading partners.
Administration officials like Secretary of State Marco Rubio and Commerce Secretary Howard Lutnick have identified the trade deficit with Ireland as a problem. Irish officials have been on a charm offensive this week in advance of the Trump sitdown. Government ministers have been dispatched for appearances across the U.S. and Martin on Monday used an event at South by Southwest to spotlight financial and economic ties between the two countries.
Enterprise Ireland Chair Michael Carey, the Irish government's trade and innovation agency and venture capital arm, on Tuesday told Sam that he's working with Irish businesses operating in the U.S. to game out possible scenarios. He also wants to know what type of support his organization may be able to provide in the event of future disruptions — though he declined to speculate on what steps Trump could take.
The last major economic disruption – the United Kingdom's exit from the European Union — 'was managed really well by Irish companies,' he said. 'I have no doubt these Irish companies are going to have the capability of responding to whatever happens, but until it happens, it's pointless.'
On The Hill
Biden-era crypto bill set to be repealed — An IRS rule requiring certain cryptocurrency to report information to the bureau is one step away from extinction after the House voted on Tuesday to repeal it, per Bernie Becker.
The Senate passed its own bipartisan vote rolling back the measure last week so the House's vote sends the measure to Trump's desk, with 76 House Democrats supporting rolling back the IRS rule.
Warren's objections to the stablecoin bill — Sen. Elizabeth Warren's Senate Banking Committee staff is circulating a policy memo to her Democratic colleagues outlining concerns about a GOP-led stablecoin bill set to be marked up Thursday, as part of an effort to rally other committee lawmakers against the legislation, per Jasper Goodman. The memo, obtained by POLITICO, says an updated version of legislation led by Sen. Bill Hagerty (R-Tenn.) to create a regulatory framework for stablecoins fails to 'protect consumers, national security, U.S. financial stability and competition in the economy.'
Lummis races to establish a bitcoin reserve — Sen. Cynthia Lummis (R-Wyo.), one of Congress's leading cryptocurrency advocates, reintroduced legislation Tuesday to establish a 'strategic bitcoin reserve,' renewing a push to have the government stockpile digital assets just days after Trump created a crypto fund via executive order, Jasper reports.
House Financial Services divided over Al Green — House Financial Services Chair French Hill (R-Ark.) signaled opposition Monday to kicking Democratic Rep. Al Green (D-Texas) off his committee, setting up a potential rift with conservative hardliners who are seeking to punish the Texas lawmaker, Jasper reports. Green was already censured by the House last week for disrupting Trump's joint address to Congress.
Rep. Andy Ogles (R-Tenn.), a Freedom Caucus member who also sits on House Financial Services, filed a resolution that would strip Green and other Democrats of their committee assignments after they sang 'We Shall Overcome' in the House chamber at the censure vote.
Hill said in an interview Monday that he doesn't 'believe, at this stage, that that's constructive,' but he added that he will wait and listen to the views of the conference.
Tariffs
Trump's tariff whiplash — Trump on Tuesday announced plans to double expected tariffs on steel and aluminum imports from Canada to 50 percent in retaliation for Ontario's stiff duties on electricity. Then hours later, after speaking with U.S. Commerce Secretary Howard Lutnick, Ontario Premier Doug Ford announced that he would suspend the 25 percent tariffs on electricity exports Ontario had levied on three U.S. states just a day before, per Ari Hawkins.
Trump allies blame Lutnick for tariff turmoil — As Trump struggles to message a scattered economic agenda his Commerce secretary, Howard Lutnick, is taking the blame. White House and administration officials, as well as Trump's outside allies, are growing increasingly frustrated with Lutnick, privately complaining about the close proximity he has to the president and the counsel he is giving him on economic issues, Megan Messerly, Dasha Burns, Ari Hawkins and Daniel Desrochers report.
House Republicans slyly move to vote on Trump's tariffs — GOP leadership slipped language into a House rule on their stopgap funding bill that would prevent any member of Congress from bringing up a resolution terminating Trump's declaration of a national emergency over fentanyl and undocumented immigrants entering the U.S. The president has used that emergency declaration to justify his tariffs on Canada, Mexico and China, per Daniel Desrochers, Meredith Lee Hill and Doug Palmer.
Rep. Gregory Meeks (D-N.Y.) and Democratic colleagues filed privileged resolutions last week seeking to terminate the national emergency.
'This provision simply prevents the Democrats from limiting the president's authority,' said a senior House GOP leadership aide.
Conservatives privately say House GOP leaders wanted to block a vote on tariffs for the entire Congress. But some Republicans pushed back, saying they would only allow it for the rest of this calendar year.
At the regulators
Treasury cracks down at the border — The Treasury Department on Tuesday ordered money services businesses operating near the U.S. southern border to start reporting cash transactions exceeding $200, which it said was part of a crackdown on the flow of money to Mexican drug cartels, Michael Stratford reports.
The 'geographic targeting order' from Treasury's Financial Crimes Enforcement Network imposes new reporting requirements on check cashers, currency exchangers, money transmitters and other money services businesses that are located in 30 ZIP codes in California and Texas near the border.
House Republicans' tax policy huddle with Bessent — Republicans on the House Ways and Means Committee met Monday with Treasury Secretary Scott Bessent to review an array of tax options for the GOP's policy agenda, per Benjamin Guggenheim and Jordain Carney.
'We're looking at the menu,' said Rep. Aaron Bean (R-Fla.), a freshman on the committee. 'I don't think we've ordered anything.'
Ways and Means Chair Jason Smith (R-Mo.) said he wouldn't share anything about the details of the meeting, only that 'it went very well.'
At the White House
Ueland tapped for OMB — Trump nominated Eric Ueland, a veteran Senate and White House aide, to serve as deputy director for management at the White House budget office, where he will serve directly under OMB Director Russ Vought, Katherine Tully-McManus reports.
Jobs report
Issac Boltansky — whose policy analysis is often cited here at Morning Money — has joined the mortgage company PennyMac Financial Services as its new head of public policy. Boltansky was previously the director of policy research at BTIG.
Jaliya Nagahawatte joins the office of Rep. Young Kim (R-Calif.) Monday as a financial policy adviser from the office of Rep. John Rose (R-Tenn.).
The Managed Funds Association has promoted Jillien Flores to chief advocacy officer, a newly established position within the organization, where she'll be responsible for the industry group's advocacy strategy and execution.
Wells Fargo's Robin Ginsburg will retire April 1. She joined the bank in 2012 to lead the National Housing Group in the Government & Institutional Banking business.