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PRESENTED BY

BY JOHN BRESNAHAN, ANNA PALMER AND JAKE SHERMAN
WITH MAX COHEN AND CHRISTIAN HALL

THE TOP

Happy Thursday morning.

Justice Stephen Breyer’s impending retirement from the Supreme Court is a huge moment for President Joe Biden, personally and politically. The political implications are obvious. Although this selection doesn’t give Biden the chance to reshape the ideological makeup of the court, he gets to choose a young jurist to cement the liberal lean of this seat for years to come.

Biden presided over Breyer’s confirmation to the Supreme Court as chair of the Senate Judiciary Committee in 1994, and now he will name Breyer’s replacement. This has never happened before in U.S. history. Not even by Martin Van Buren, who was Judiciary Committee chair way back in the 1820s and then later became the 8th president. We checked. So for Biden and the presidency, this is special. 

And let’s clear up something here – Republicans can’t block a Supreme Court nomination in the Judiciary Committee or on the floor as long as all 50 Senate Democrats stick together and back Biden’s nominee. Democrats don’t need Republicans to hold a confirmation hearing in the Judiciary Committee, and they don’t need them to vote in committee in order to advance a nomination, as we saw Republicans do with Amy Coney Barrett in 2020. A nomination can’t be filibustered or prevented from coming to the Senate floor. Vice President Kamala Harris can break a tie on the nomination if that occurs. So this is all about Democrats and the White House executing over the next few months. Democrats’ planning may begin as early as today, as Judiciary Committee Democrats will try to meet by Zoom to talk strategy, per our friend Seung Min Kim of the Washington Post. We explained in yesterday’s Midday edition that this process can start while Breyer is still sitting on the bench. The White House also told us Biden plans to nominate someone who is already a judge.

The Coverage:

→ NYT: “Senate Democrats Plan to Move Quickly on Successor to Justice Breyer,” by Carl Hulse

→ WaPo: “Democrats rejoice, Republicans cast any new Supreme Court nominee as radical as election-year fight begins,” by Michael Scherer and Seung Min Kim … “Breyer’s retirement renews focus on the Black female jurists who could replace him," by Seung Min Kim and Ann E. Marimow

→ Politico: “Supreme Court confirmation fight to make history in 50-50 Senate,” by Marianne Levine and Burgess Everett.

→ LAT: "Supreme Court vacancy offers Biden, Democrats a chance to energize voters after setbacks,” by Eli Stokols, Jennifer Haberkorn and Melanie Mason

This SCOTUS retirement and confirmation process has officially morphed 2022 into an incredibly busy year on Capitol Hill. The political stakes were already high as the two sides battle for control of a closely divided Congress. Now the legislative agenda will be just as busy.

Here’s everything else that needs to be done:

→ Government funding runs out Feb. 18. That’s 22 days from now. Appropriators are hoping for a year-long funding deal as part of an omnibus spending package. But there are hurdles. (More on this below.)

→ Biden’s State of the Union address is set for March 1. The House Democratic retreat is March 9-11 in Philadelphia. The House Republican retreat is March 23-25 near Jacksonville, Fla.

→ The Biden administration wants to pass legislation to combat China’s rise in the high-tech space in February or March. House Democrats released their own 2,900-page bill Wednesday. Republicans are against it, of course, and there are questions whether the Democrats can pass it on its own. The Senate passed a completely different bill. Whenever the House gets around to passing its version, negotiators then have to find a compromise. Again, the Biden administration wants this done in the next eight or so weeks. We are skeptical.

→ Remember the Build Back Better Act? We do. It’s on life support right now, but Senate Democrats want to revive it ahead of the midterms. Sen. Joe Manchin (D-W.Va.) – the main stumbling block – wants to scrap the agreement and start from scratch. Whatever this morphs into will have to be a product of rank-and-file Democratic senators coming together. Party leaders and the White House can’t and won’t be able to dictate the terms of a deal after the December debacle. So we’ll see whether his Senate Democratic colleagues can get Manchin back to the table.

→ A growing number of Republican and Democratic senators have been working with Sen. Susan Collins (R-Maine) to rework the Electoral Count Act and overhaul other election-related laws. After Senate Democrats’ broad-based voting reform push fell flat, the White House seems eager and willing to get something done. And Republicans are playing ball, for the time being.

→ The Pentagon has put 8,500 U.S. troops on alert that they might be shipping out to Eastern Europe as the Russians continue to threaten to invade Ukraine. Both the House and Senate will get classified briefings as soon as next week, and lawmakers are getting eager to craft a sanctions package to punish Moscow. 

→ The House’s Jan. 6 committee is continuing its probe into the attack on the Capitol and is moving closer and closer to former President Donald Trump, including asking Ivanka Trump to testify. The committee had been planning public hearings this spring. 

It’s often said that Congress should be able to walk and chew gum. Sure, that’s a cute line. But from our experience, the institution can only take on so much pressure at once before it becomes overwhelmed. The question is: are we at that point? What here falls by the wayside? Is it the BBB? Do you think Congress can get this all done?

GOVERNMENT FUNDING

Appropriators make progress in omnibus talks, but no deal yet

House and Senate appropriators are making progress on an omnibus spending deal to cover the rest of the fiscal year – through Sept. 30 – but there’s no deal yet, we’re told by sources close to the talks. A topline number might be agreed upon as early as next week, giving Congress a chance to finish an omnibus by the Feb. 18 funding deadline.

Appropriators may need a short-term continuing resolution to finish work on an omnibus spending package by then, however. This short-term funding patch would be something along the lines of a week or 10 days. Anything longer than that is unlikely.

Of course, this is all predicated on an agreement coming together. Which, we repeat, hasn’t happened yet. The House and Senate will be back in town next week, and party leaders will need to sign off on any potential deal. There are lots of moving parts, including policy riders and the Hyde Amendment, which bars the use federal funds for abortions

And there’s another issue – the House isn’t scheduled to be in session during the week of the Feb. 18 deadline. At least not under the current schedule posted by House Majority Leader Steny Hoyer’s office. So that’s likely to change as well. A lot will depend on the Senate’s timetable for action, as that will be the biggest difficulty to overcome. As always.

WASHINGTON X WALL STREET

New: Bipartisan House group urges Yellen to provide “clarity” on crypto

We’ve reported on this a bit in the past: The recently enacted infrastructure law included reporting requirements for cryptocurrency that the industry found to be onerous and unfair. Crypto players were caught completely flat footed during negotiations over the $1 trillion package, and they lost the battle on Capitol Hill in a swift and embarrassing way.

Luckily for the industry, there are lawmakers who are interested in the topic. Rep. Patrick McHenry (R-N.C.) and Rep. Tim Ryan (D-Ohio) have penned a letter to Treasury Secretary Janet Yellen asking for “clarity to the digital asset ecosystem.” The letter is here, and Punchbowl News readers are getting a sneak peek. 

Here’s a key excerpt:

Specifically, Section 80603 is ambiguous such that it affords the Department of Treasury the ability to interpret who within the digital asset ecosystem qualifies as a “broker.” This subjective interpretation has the potential to reach those beyond the intent of Congress. To help constrain a potentially expansive reading of the “broker” definition, we would point you to the definition of “broker” proposed in H.R. 6006. This definition clearly avoids placing unworkable customer reporting obligations on persons who do not, in actuality, have customers (e.g. miners, stakers, protocol nodes, payment channel nodes, developers of protocol or decentralized application software, or similar non-custodial entities). 

Additionally, the Act provided the Secretary with broad authority to define a digital asset. We would point you to the definition of a digital asset set forth in H.R. 6006 to ensure the parameters of the definition are clear. It is also crucial that Treasury narrowly specify the information that is intended to be captured by a “broker” when transferring a digital asset to an account maintained by a non-broker. Separately, the addition of “any digital asset” to the definition of cash for purposes of Section 6050I of the Internal Revenue Code should be carefully examined prior to its implementation to ensure unintended consequences are mitigated. Over hasty application of these requirements risks the creation of an unlevel playing field for transactions in digital assets and those required to provide them. 

As nascent financial technologies develop, we must ensure requirements imposed on the digital asset ecosystem are both crafted and implemented in such a way to ensure the United States remains at the forefront of financial innovation. We believe consistent information reporting on digital asset transactions is necessary. However, it should not prevent these technologies and the ecosystem from continuing to flourish due to unclear regulations that only create uncertainty.

This letter is timely as the Biden administration is issuing preliminary guidance on crypto in the coming days. Crypto investors have been getting routed in the last few weeks, so this may be a small bright spot in an otherwise disastrous month for the entire industry.

→ Rep. Stephanie Murphy (D-Fla.), who isn’t running for reelection, reported she has $1.7 million in the bank.

→ Rep. Dusty Johnson (R-S.D.) has $2.2 million in the bank, a large sum for a safe Republican in a state like South Dakota.

→ We thought some people might be interested in this. George P. Bush is running for attorney general of Texas. Here’s an ad running in Dallas-Ft. Worth of him riding an ATV along what appears to be the border wall. Thanks to AdImpact for this one.

JOB MOVE

Ray Zaccaro, senior adviser and communications director to Sen. Jeff Merkley (D-Ore.) and Rep. Frank Pallone (D-N.J.), chair of the House Energy and Commerce Committee, is joining Klein/Johnson Group as a principal. In addition to more than a decade on the Hill, Zaccaro worked in state and local government and politics, as well as nonprofit management.

FRONTS

MOMENTS

Vice President Kamala Harris is en route to Palmerola, Honduras, for Xiomara Castro’s inauguration as president of Honduras.

9:30 a.m.: President Joe Biden will get his intelligence briefing.

12 p.m.: Harris will attend the inauguration ceremony at National Stadium of Tegucigalpa. 

12:30 p.m.: Jen Psaki will brief.

3:05 p.m.: Harris will hold a meeting with Castro.

3:30 p.m.: Biden will get his weekly economic briefing.

6:20 p.m.: Harris will return to D.C.

CLIP FILE

NYT

→ "Kremlin says U.S. response to its demands does not offer ‘much cause for optimism,’" by Anton Troianovski in Moscow

→ “Republican Rift on Ukraine Could Undercut U.S. Appeals to Allies,” by Jonathan Weisman

→ “Russia’s Military, Once Creaky, Is Modern and Lethal,” by Anton Troianovski in Moscow and Michael Schwirtz and Andrew E. Kramer in Kyiv

→ “Yes, Omicron Is Loosening Its Hold. But the Pandemic Has Not Ended,” by Apoorva Mandavill

WaPo

→ “As it weighs action in Ukraine, Russia showcases its new military prowess,” by Paul Sonne, Isabelle Khurshudyan and Mary Ilyushina

AP

→ “US offers no concessions in response to Russia on Ukraine,” by Vladimir Isachenkov and Matthew Lee

Politico

→ “Judge orders Eastman to speed effort to get documents to Jan. 6 committee,” by Kyle Cheney

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Editorial photos provided by Getty Images