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February 3, 2023
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THE TOP
Happy Friday morning.
We’re going to be writing about the debt limit pretty consistently over the next few months. We wanted to use this morning’s top to take a quick look at what we’ve learned thus far about each of the key players in the process.
President Joe Biden: Biden and senior White House officials began the 118th Congress vowing that the debt limit needed to be lifted without much fanfare. That quickly went by the wayside.
Now, after meeting with Speaker Kevin McCarthy, the White House says the president “welcomes a separate discussion with congressional leaders about how to reduce the deficit and control the national debt while continuing to grow the economy.”
The White House wants to rhetorically separate any discussion about the debt limit from the federal spending debate, but that’s a distinction without a difference. It’s clear that the two issues are linked. Biden is going to have to negotiate with Republicans – and already is.
At the moment, Biden is showering McCarthy with praise. During a fundraiser in New York, the president called McCarthy a “decent man.” In a speech at the National Prayer Breakfast on Thursday, Biden said both sides need to “start treating each other with respect. That’s what Kevin and I are going to do.”
The next few weeks are critical for Biden. As the 80-year-old president ponders another run, a new White House chief of staff is taking over. His top economic adviser is leaving.
Biden will give the State of the Union address Tuesday – where this issue will be an important focus – while his FY2024 budget is set to be released on March 9. OMB Director Shalanda Young cautioned that these discussions “are a marathon,” and noted that Biden’s budget will “continue that trajectory on deficit reduction” without saying how.
Speaker Kevin McCarthy: McCarthy has a very difficult task ahead of him. Yes, he got Biden to the negotiating table and that’s a notable first step. But now McCarthy has to figure out how to get where he wants to go, the critical part of any political showdown.
McCarthy and Biden are vying right now for who will appear more “reasonable.” McCarthy said he “has respect for the president” and wants to work with him. McCarthy is trying to avoid making himself the issue in any talks.
Yet McCarthy is starting to show his hand as well. As we’ve been reporting, McCarthy’s goal is a two-year budget agreement that reduces spending. That seems relatively straightforward, but it’s not. McCarthy likes to say there’s plenty of waste in the federal government, and he’s right about that. However, one person’s waste is another’s prized program. Finding real spending cuts isn’t easy.
Furthermore, will a simple budget cap agreement be enough for House GOP conservatives?
One thing we saw this week is that, for the moment, McCarthy is eager to talk to reporters. McCarthy spent more than an hour Wednesday and Thursday answering questions from the Capitol Hill press corps about what he’s trying to do with Biden – while taking a pass on divulging details.
Senate Majority Leader Chuck Schumer: Hill Democrats are in an awkward spot. They’re maintaining their stance opposing any negotiations over the debt limit, even though Biden and McCarthy have effectively moved beyond that.
It’s clear the debt limit won’t be raised without deficit-reduction measures. But Schumer and other top Democrats are continuing to make the case for a clean debt-limit hike, arguing McCarthy wouldn’t be able to pass spending cuts through the House given the competing GOP factions there.
At a press conference Thursday, Schumer reiterated that Biden and Hill Democrats believe the debt ceiling should be raised cleanly without any preconditions.
Still, Biden’s decision to even sit down with McCarthy signals that negotiations are underway. That means Democrats have a chance to propose their own deficit-reduction methods, including tax hikes. Schumer, however, said this must be done as part “of the budget and appropriations process.”
Translation: Let’s raise the debt limit first, and then deal with government debt and the deficit. That approach is obviously a non-starter for Republicans. Democrats, however, believe highlighting the GOP’s perceived intransigence over an issue as serious as a debt default is a winning message for them. Hence Schumer’s oft-repeated line, “Show us your plan.”
Senate Minority Leader Mitch McConnell: McConnell is essentially on the sidelines — for now — an unusual spot for him given his history negotiating budget deals, including with Biden.
Publicly, McConnell is supporting McCarthy and pointing out, correctly, that negotiations surrounding the debt limit are common. He’s also harkened back to his role in the 2011 debt-limit standoff, during which he negotiated the Budget Control Act with then-Vice President Biden.
McConnell isn’t eager to jump into the talks at this point, arguing it’s up to McCarthy and Biden to find a resolution. Some Senate conservatives have told us they want McConnell to be on standby in the event that he’s needed, citing his work on the 2011 deal. For now, though, McConnell isn’t trying to get ahead of McCarthy.
House Minority Leader Hakeem Jeffries: With Republicans in control of the House, Jeffries has the least involvement in these talks, at least right now. Jeffries’ main job is to defer to Biden, and to some extent Schumer, as the negotiations unfold. If a deal is reached at some point, it will be up to Jeffries to corral his caucus into voting for the proposal.
— Jake Sherman, Andrew Desiderio, John Bresnahan and Heather Caygle
ETHICS BEAT
Office of Congressional Ethics back in business
The Office of Congressional Ethics, the independent ethics watchdog, is back in business.
We told you a couple weeks ago that there was some controversy over OCE after Republicans inserted several provisions in the House rules package that impacted OCE board members and staff. House Minority Leader Hakeem Jeffries had a 30-day window to name new board members.
Well, Jeffries did so on Thursday. Jeffries tapped former Rep. Mike Barnes (D-Md.), former Rep. Bill Luther (D-Minn.) and Lorraine Miller, the former House Clerk, for the board, as the Democratic appointees. Miller is new to the board.
Speaker Kevin McCarthy has re-appointed Paul Vinovich, a longtime congressional staffer, former Rep. Lynn Westmoreland (R-Ga.) and Karen Haas, also a former Clerk of the House, to the Republican spots. Vinovich will serve as chair.
Now that all six board members are in place, the board can appoint staff members and get the OCE up and running for this Congress.
– John Bresnahan
INVESTIGATION NATION
The politics of PPP fraud
The Paycheck Protection Program – one of the key efforts by Congress and former President Donald Trump to respond to the economic crisis caused by the Covid-19 pandemic – was hailed as a “wild success.”
Designed to help small businesses, the federal government handed out a staggering amount of PPP money in a ridiculously short period of time.
During just two weeks in April 2020, the Small Business Administration approved roughly almost 1.7 millions loans worth $343 billion. Overall, SBA spent $800 billion on PPP. Proponents claim it saved 90 million jobs and the U.S. economy.
Now comes the backlash. There have been estimates that up to 10% of PPP loans were fraudulently obtained. Add to this the $400 billion spent under the related Economic Injury Disaster Loan, and the fraud total could reach as high as $100 billion, according to House Republicans. The government doesn’t even really know how much was stolen. More than 500 investigations are ongoing right now.
House Republicans have vowed to get to the bottom of all this, blaming Democrats and the Biden administration for the lack of accountability, which makes for some interesting politics.
PPP was created as part of the $2 trillion CARES Act. A divided Congress – GOP Senate and Democratic House – approved the measure, and it was signed into law by Trump. Trump administration officials ran it at the most important point.
In a bid to get the money out fast – and because Congress allowed it – some safeguards were relaxed. Loans weren’t checked against the Treasury Department’s “Do Not Pay” list, which is designed to prevent fraud, for instance. “These loans were approved with few, if any, controls to check if the applicant was legitimate and qualified for aid,” said Michael Horowitz, chair of the Pandemic Response Accountability Committee and the Justice Department IG.
Pretty much all of the lawmakers who voted for PPP are still in Congress. House Oversight and Accountability Committee Chair James Comer (R-Ky.), who’s leading the investigation into waste and fraud allegations, noted that he supported the measure.
But Comer said House Republicans “have seen reports” that $500 billion to $770 billion was misspent during the pandemic, a mind-blowing total.
So how does Congress investigate an emergency program with lax controls that it approved? Can Congress or the Biden administration “claw some of that money back,” as Comer has suggested?
“The program helped a lot of people,” Comer said of PPP in an interview on Thursday. “The majority of people, it helped.”
However, Comer added:
Oversight Democrats led by Rep. Jamie Raskin (Md.) said the coronavirus select committee last Congress “exposed how the Trump administration’s mismanagement of small business relief programs and refusal to implement basic anti-fraud controls led to nearly $84 billion in potentially fraudulent loans.”
Raskin added that some Republicans are now “cherry-picking facts and deploying distorted figures…vaporizing the reality that they were a lifeline and salvation for millions of businesses and families, including in their own states.”
Sen. Marco Rubio (R-Fla.), who chaired the Senate Small Business Committee at the time PPP was created, has hailed it as a “historic success” and even touted it in campaign ads last year. Rubio has made the case that the program literally saved thousands of American businesses from total collapse, and that fraud — while obviously a problem — occurs with every government program.
We asked Rubio about the House GOP’s posture toward PPP. Rubio again defended the program and said he didn’t view the House Republicans’ hearing as an attack on PPP itself, but on those who committed fraud.
Here’s Rubio:
Rubio’s counterpart in standing up the program, Sen. Ben Cardin (D-Md.), similarly defended PPP. Cardin said the percentages of loans and money doled out that were fraudulent were small.
“We need to drill down and understand the scope of this and then recognize there’s a difference between a mistake and fraud,” Cardin said. “I wanted them to be aggressive on oversight. But the final numbers are not shocking.”
— John Bresnahan and Andrew Desiderio
THE CAUCUSES
Goldman, an impeachment figure turned member, launches the Bagel Caucus
We’re going to take this opportunity to say Punchbowl News loves bagels. What can we say? They’re great.
We know, as a general proposition, that New York bagels are better than D.C. bagels. In fact, it isn’t even close. But we don’t live in New York; we live in Washington. So we eat Bullfrog, Call Your Mother and Bethesda Bagels.
Rep. Dan Goldman (D-N.Y.), the top aide on former President Donald Trump’s first impeachment, is launching a bagel caucus. This is crucial work.
Why is he launching this important undertaking? Here’s an email from his chief of staff Haley Scott to House Democratic chiefs of staff:
Now, we have questions. Where will said bagels be imported from? Will the lox be from New York? We’ve requested an invitation. We will be working this bagel angle for you. Trust us – we will be reporting back as soon as humanly possible.
– Jake Sherman
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PUNCHBOWL NEWS EVENTS
What Sec. Buttigieg told us
Missed our Thursday conversation with Transportation Sec. Pete Buttigieg? Watch the full event below.
THE CAMPAIGN
New: For the first time, the New Dem Action Fund — the campaign arm of the center-left New Democrat Coalition — has a national finance team. Rep. Marc Veasey (D-Texas) will lead the finance operation, along with vice chair Rep. Mikie Sherrill (D-N.J.).
The campaign group, helmed by Rep. Ami Bera (D-Calif.), is gearing up for a big cycle. Democrats need to flip just a handful of seats to reclaim the House majority. New Dems, whose caucus counts the vast majority of Frontliners as members, will be critical to this effort.
Check out the New Dem Action Fund’s full leadership team here.
— Max Cohen
THE MONEY GAME
Attention hunters: Rep. Bruce Westerman (R-Ark.), the new chair of the House Natural Resources Committee, has a jam-packed fundraising schedule aimed at you.
There’s the annual Arkansas duck hunt on Jan. 27. Then the annual Maryland turkey hunt is May 8. Plus, the annual Westerman hog roast and birthday party is on Nov. 15.
For those who may be more at home on the Vegas strip, Westerman is hosting his fourth annual Las Vegas retreat with Rep. Dave Joyce (R-Ohio) as a special guest. That event is from Dec. 7-10.
— Max Cohen
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