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April 19, 2023
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THE TOP
Happy Wednesday morning.
As you might’ve heard, we’re now 100 days into the 118th Congress — it’s all House Republicans have talked about this week — and the GOP leadership is facing its first real legislative test.
And what a test this debt-limit faceoff will be. After struggling mightily to get the job back in January, Speaker Kevin McCarthy now finds himself squaring off against President Joe Biden and Democratic leaders on Capitol Hill. A possible default on the U.S. government’s $31 trillion-plus debt looms just two months off, and there has been zero progress so far.
McCarthy has an untested leadership team and a balky conference that wants a showdown with Biden over government spending but isn’t sure exactly how to win. And senior House Republicans are scrambling to pass their own plan — which we’ve described in detail since first scooping it last week — if they can come up with 218 votes. They’re not there yet.
We wanted to spend this morning dissecting the challenges facing the main players in House GOP leadership.
Speaker Kevin McCarthy
For the first time in his career, McCarthy is charting the course for House Republicans in a high-stakes negotiation. The 58-year-old McCarthy — now the top Republican in the country — has been around these types of skirmishes for the better part of a dozen years, but he’s never called the shots.
McCarthy’s strategy is to try to pass something — anything — to show that he can move legislation through a fractious House. In McCarthy’s view, this will force Biden to negotiate and may shift the onus on Senate Democrats to pass their own bill.
Here are McCarthy’s challenges:
No. 1: McCarthy wants to pass a debt-limit bill with just one week of lead time. It won’t be easy, but that doesn’t mean it can’t happen. He’s letting conservatives fill this package up with whatever they want without going through committee markups. Just five Republican no votes will sink any bill, so there’s very little margin for error.
No. 2: What happens if McCarthy passes this bill? Senate Majority Leader Chuck Schumer and the White House are publicly insisting on a clean debt limit increase, and they think they can break McCarthy over this. Biden spoke to Schumer and House Minority Leader Hakeem Jeffries on Tuesday and reiterated that none of them will negotiate on the debt limit.
Team McCarthy says they have no intention of ever passing a clean debt-limit increase. But that means that even after struggling to pass this bill, House GOP leaders could easily find they didn’t budge the Senate or White House one inch.
No. 3: The risk for McCarthy is that he’s advocating for all of these conservative policies, yet many of them will end up on the cutting room floor. This helps McCarthy with his right wing inside the conference, but potentially it’s a big effort with little real payoff.
No. 4: The calendar is a huge challenge for the speaker and the rest of Washington. It’s April 19. The latest estimates from Goldman Sachs and other analysts is that the U.S. government could reach the default deadline by mid-June. And a discharge petition may be all but useless at this point. There simply isn’t enough time. In fact, the only debt-limit related bill in committee right now repeals the debt limit entirely.
McCarthy holds a pretty bad hand here. The debt limit battlefield isn’t a good one for Republicans. Plus, he’s dealing with a conference that’s unusually interested in picking ideological fights they can’t win. McCarthy is doing what he must internally, but that doesn’t resolve his larger problems.
Majority Leader Steve Scalise
It’s a bit unusual to say this, but Scalise is on the sidelines here. That’s not a criticism of the Louisiana Republican. But this is McCarthy’s show — and that’s the way the speaker likes it.
McCarthy has deputized Rep. Garret Graves (R-La.) to help craft a debt package that Republicans could rally behind — not Scalise nor his ally, Budget Committee Chair Jodey Arrington (R-Texas). In fact, Arrington told us Tuesday that he’s merely playing a “supporting role” in debt-limit talks.
As he has been for the last decade, Scalise is along for the ride. He’ll probably shoulder some blame if this all blows up by dint of his position in the leadership. But Scalise knows how to create space from McCarthy.
Majority Whip Tom Emmer
After McCarthy, Emmer and his deputy, Rep. Guy Reschenthaler (R-Pa.), are in the hot seat now. When we caught up one-on-one with McCarthy Tuesday, we asked if Republicans can pass their bill next week. McCarthy — a former whip himself — made sure to tell us that he thinks so, but added he’s “not the whip.” In other words, Emmer better get into gear.
Emmer expressed confidence about winning a floor vote, saying only one Republican has told him he’s a no so far.
“I believe we’re gonna pass it,” Emmer said Tuesday. “I’m confident we’ll get something done.”
Appropriations Committee Chair Kay Granger
This debt-limit fight is just part of the broader government funding story. When McCarthy calls for instituting tight spending cuts, appropriators — led by Granger, a Texas Republican — have to craft spending bills to fit those limits.
And appropriators are getting nervous.
Rep. Tom Cole (R-Okla.), a cardinal who oversees transportation and housing spending, warned in a private meeting this week that returning to FY 2022 levels on non-defense spending makes it extraordinarily difficult to draft and pass the annual funding bills. Cole said that the Appropriations Committee will go along with the speaker’s plan, but it’s essentially unworkable.
“I’m very confident that we can pass any bill we write out of committee,” Cole later told us. “I think we’ll have some real challenges on the floor, but that’s somebody else’s problem.”
The White House
Biden will head to Accokeek, Md., today, where he will “highlight the impacts of Speaker McCarthy and extreme MAGA House Republicans’ threatened 22% spending cuts … And, he’ll explain how House Republicans are trying to take away food assistance and health care from millions of Americans and repeal the Inflation Reduction Act, sending manufacturing overseas.”
In other words, the debt limit battle has officially been joined.
Also: We scooped in the PM edition Tuesday night that Matt Sparks, McCarthy’s deputy chief of staff for communications, is leaving to start his own communications firm. Sparks will be involved with McCarthy’s political operation.
Tomorrow: Join us at 9 a.m. ET for our conversation with House Problem Solvers Caucus Co-Chairs Brian Fitzpatrick (R-Pa.) and Josh Gottheimer (D-N.J.) on the challenges facing small business owners. This conversation is the first in a three-part series, Small Business, America’s Future. RSVP here.
– Jake Sherman and John Bresnahan
THE HOUSE MAJORITY
House GOP dives into immigration minefield
As the debt-limit fight rages on, the House Judiciary Committee today will take up another issue dividing Republicans — immigration.
The panel is set to mark up a sprawling immigration and border security bill. Getting this package through the committee won’t be an issue. But GOP leaders will then have to expend a lot of political capital to muscle this legislation through the House. And it’s still DOA in the Senate.
The GOP plan: Judiciary Committee Chair Jim Jordan (R-Ohio), unsurprisingly, said he was confident about passing the bill in committee. But Jordan acknowledged that Democratic delay tactics could draw out the markup.
“It’s up to the Democrats in some ways,” Jordan said when asked how long the markup Wednesday will take.
House Republicans have struggled for months to coalesce around an immigration and border security proposal. As we reported last month, Judiciary Republicans postponed a planned immigration markup as sharp disagreements between moderates and conservatives threatened to tank the package.
Democrats’ playbook: Judiciary Democrats plan to hammer the thorniest immigration issues to highlight internal GOP divisions. Democrats will offer a litany of amendments in three key areas: changes to asylum rules, expansion of E-Verify programs and what they claim is a possible return to migrant family separation policies.
“Democrats support comprehensive immigration reform and are happy to negotiate and talk, but we’re not going to support extreme measures,” said House Democratic Caucus Vice Chair Ted Lieu, who sits on the Judiciary Committee, said.
The path to 218: As we noted above, House Republican leaders have a long road — and many, many obstacles — to get this package through the chamber.
Rep. Tony Gonzales (R-Texas) has openly sparred with fellow Texas GOP Rep. Chip Roy over the contours of the package for months. This week, Gonzales continued his public vendetta against the GOP bill, again promising to vote no on the leadership’s debt-limit proposal if the current immigration package comes to the floor.
Gonzales has said the proposed changes to asylum policies will take away one of the few remaining paths for legal immigration into the United States. And he’s not alone. This is also a huge sticking point for Florida Republicans who represent districts with significant Cuban and Venezuelan populations.
“If something comes to the floor that looks like the 137 pages that were there yesterday, I’m thinking I’m the least of worries for folks,” Gonzales said. “There’s a lot of folks that I think have a lot of issues with that.”
Along with asylum changes, watch moderate Republicans who represent agriculture-heavy districts, including Reps. Dan Newhouse (Wash.) and Don Bacon (Neb.). Businesses in their districts might be affected by the implementation of immigration verification systems for farm workers.
Also happening today: The Judiciary Committee is taking up its firearms resolution to nullify the Bureau of Alcohol, Tobacco, Firearms and Explosives’ brace rule. As we first reported last month, that markup was postponed in the wake of the mass shooting in Nashville.
— Max Cohen and Mica Soellner
INVESTIGATION NATION
Afghanistan oversight takes center stage
The disastrous U.S. withdrawal from Afghanistan in 2021 will be a huge focus on Capitol Hill today. Here’s what you need to know:
House Oversight and Accountability Committee hearing: Oversight Committee Chair James Comer (R-Ky.) has called on four key inspectors general to testify this morning on the Afghanistan withdrawal.
News: Here’s what Comer will say in his opening statement: “Today, the Taliban flag flies over Kabul … This is Joe Biden’s legacy.”
Read more from Comer here, who predictably bashes the Biden administration for the “catastrophe” that was the pullout from Afghanistan.
Rep. Jamie Raskin (D-Md.), the top Oversight Democrat, will argue for a more fulsome analysis of the U.S. effort in Afghanistan. Raskin will say that Afghanistan oversight “requires looking comprehensively at the dynamics of this massive, decades-long military and nation-building effort — not just the last few months.” This has been the standard Democratic response to GOP attacks on the Biden White House.
And the special inspector general for Afghanistan reconstruction (SIGAR) will accuse the Biden administration of stonewalling requests for information, according to the opening statement we obtained.
“The Department of State, USAID, the UN and other agencies are refusing to give us basic information that we or any other oversight body would need to ensure safe stewardship of tax dollars,” John Sopko will say today.
The Blinken subpoena: Today is the deadline for Secretary of State Antony Blinken to hand over a Kabul Embassy dissent cable to House Foreign Affairs Committee Chair Michael McCaul (R-Texas). As we’ve reported, McCaul issued a subpoena for this document — which details concerns from U.S. officials on the withdrawal — and has since shifted back the deadline to accommodate the State Department.
McCaul told us Tuesday that he hasn’t heard back from State.
“If [Blinken] doesn’t comply with the subpoena, then it takes it into litigation,” McCaul said. “Honestly, I think they’re trying to stonewall this until the end of this Congress.”
Reviewing the after-action report: Key lawmakers atop relevant committees are beginning to review the classified after-action reports recently provided to Congress by the Defense and State departments.
Sen. Jim Risch (R-Idaho), the top Republican on the Senate Foreign Relations Committee, told us he looked at the report and concluded “it’s nonsense.” Risch didn’t elaborate. McCaul said he’s scheduled to start reviewing the report today in the House SCIF.
On the Democratic side, Senate Armed Services Committee Chair Jack Reed (D-R.I.) said he’s read excerpts of the report. But Reed added he’s waiting for the SIGAR findings to get a fuller sense of the 20-year U.S. involvement in Afghanistan. Sen. Bob Menendez (D-N.J.), who chairs the Foreign Relations panel, said he hadn’t reviewed the report yet but intends to do so soon.
— Max Cohen, Andrew Desiderio and Heather Caygle
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CRYPTO CORNER
Republicans draft a revised stablecoin bill ahead of hearing
A crypto-focused panel on the House Financial Services Committee will meet today to talk about stablecoins — a bedrock product for the crypto sector that Congress is keen to legislate on. And this is something to watch.
We almost had bipartisan action last Congress on stablecoins, a type of digital asset that seeks to maintain a fixed value so it can be used in other crypto transactions.
Negotiations between the House Financial Services Committee’s top Democrat, Rep. Maxine Waters (Calif.), and now-Chair Patrick McHenry (R-N.C.) almost led to a markup before talks fell apart last fall.
Fast forward to a few months later, and that bipartisan bill was released last weekend, when committee staff uploaded it as a discussion draft ahead of the hearing scheduled for today.
It’s a 73-page bill that you can read here. But don’t sweat the specifics too much.
Some news: Republicans have been working on a “clean, revised draft” of the stablecoin bill that we’ll hear more about this morning, according to Rep. French Hill (R-Ark.). Hill is the chair of the House Financial Services subcommittee on digital assets.
In an interview Tuesday, Hill told us the new stablecoin package will be rooted in the framework Waters and McHenry hammered out last year. But Hill acknowledged that this new draft isn’t exactly “bipartisan” yet.
“I wouldn’t call it a fully bipartisan product, because I don’t think it’s been fully vetted,” Hill said. But ultimately, Republicans “want this to be a bipartisan product,” he added.
Democratic staff on the Financial Services Committee tell us that there have been no negotiations between the two parties on stablecoin legislation since last fall. They also said Waters no longer supports the 73-page discussion draft on today’s agenda, in part due the collapse of crypto exchange FTX in November.
If Republicans are serious about passing crypto legislation under divided government, the bill will need to be bipartisan. Hill said the new bill “has been worked on in collaboration with the [Biden] administration, the regulatory agencies, and certainly, the Democrats are aware.”
The key difference, the Arkansas Republican said, is that the new bill features input from different interests in and around the crypto sector, which “will lead us to a more informed draft in the coming days.”
We don’t want to make too much hay out of Republicans working on their own here. Democrats, including Waters, her staff, and Biden officials at the Treasury Department, want a deal to address stablecoins before the sector is large enough to pose serious financial stability risks. Despite their disagreements, everyone we’ve spoken to lately has been hesitant to publicly blast the other side over this issue.
One more news nugget: Hill said that Republicans are also working on a “market structure” crypto bill. That sounds dry, but what we’re really talking about are significant questions for financial regulators — who’s responsible for different aspects of the sector.
Financial markets regulators have disagreed about who will supervise different parts of crypto, which has to do with whether said products are legally “securities” or “commodities.” It’s up to either Congress or the courts to make the call.
Stablecoin legislation is “a good starting point, but it’s not the endpoint,” Hill said. More:
– Brendan Pedersen
THE CAMPAIGN
John Boehner, the former House speaker who knows a thing or two about the debt limit, is in D.C. this week and will hold a fundraiser for House Energy and Commerce Chair Cathy McMorris Rodgers (R-Wash.) today. Former Reps. Bill Shuster (R-Pa.) and Jack Kingston (R-Ga.) are also on the invite — they both work with Boehner at Squire Patton Boggs.
Also: Sen. Ben Cardin (D-Md.) told us that we shouldn’t read too much into his meager fundraising in the first quarter — just $15,000 — even as speculation mounts about whether he’ll run for re-election in 2024.
“I explained I would not do fundraising until I decided I was going to run or not run,” said the 79-year-old Cardin. “Money is not going to be an issue for me.”
Cardin said he is “actively” deliberating but has no firm timetable for a decision. There are several potential successors waiting for Cardin to decide, and it could make for a fascinating Democratic primary if he ends up retiring. Cardin was first elected to the Senate in 2006 and previously served in the House for 20 years.
In other Senate news: Sen. Tammy Baldwin’s (D-Wis.) campaign is already fundraising off the news that Rep. Tom Tiffany (R-Wis.) is considering running for Senate. Check out the fundraising appeal, which paints Tiffany as “far-right” and “extremely anti-choice.”
— Jake Sherman, Andrew Desiderio and Max Cohen
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