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February 1, 2023
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PRESENTED BY
THE TOP
Happy Wednesday morning and welcome to February.
President Joe Biden and Speaker Kevin McCarthy will meet one-on-one for the first time today. The White House has positioned this meeting as a relatively standard session, during which the leaders will discuss a range of topics.
McCarthy, however, sees this as a face-to-face with the president that will focus on two of his key legislative priorities this Congress – boosting the debt limit and cutting government spending.
To review, Biden says he won’t negotiate over the debt limit and believes it should be lifted without preconditions. Several senior White House aides tell us that even if Biden and McCarthy were to cut a deal, they’re skeptical McCarthy would have the support to pass it through the fractious House.
We sat down with McCarthy Tuesday to discuss Biden, the debt limit and his strategy heading into this meeting.
The basics: The way McCarthy sees it, he’ll force Biden into a negotiation – now or later in the summer. McCarthy said he’s ready to put his staff in a room with Biden’s to begin those talks immediately. But McCarthy said he’s “skeptical” of the White House’s posture and whether they’re “serious.” Administration officials seem skeptical of the speaker, as well.
Here’s McCarthy:
To be fair, there are other ways this could play out. Biden could refuse to negotiate and insist Congress pass a clean debt limit. However, it’s not clear at this point that Senate Majority Leader Chuck Schumer would be able to find 60 votes to pass a debt limit without some spending concessions.
Cratering financial markets – plus the growing risk of a recession – could force McCarthy to back down. House Democrats could team up with a handful of Republicans to try to force the chamber to take up a clean debt-limit bill via a discharge petition later this spring or summer.
And of course, there’s some political hypocrisy here on the part of Republicans. They lifted the debt limit three times during Donald Trump’s presidency without concessions of any kind. Republicans counter that Biden and Democrats accepted negotiations on the debt limit in the past.
What the speaker wants: McCarthy essentially wants a budget-cap agreement to reduce federal spending back to 2022 levels. We don’t anticipate much progress today on setting these levels, but that type of deal would be an ideal outcome for McCarthy.
What the White House wants to know: The White House put out a “memo” from NEC Director Brian Deese and OMB Director Shalanda Young Tuesday posing two questions to McCarthy: Will McCarthy lift the debt limit, and when will House Republicans put out their budget?
Biden and Democratic leaders have said the onus is on McCarthy to detail where he wants to cut spending since he is the one making those demands.
We’ll note that the White House didn’t release its budget until March 28 last year. The appropriations process was also a mess in the Democratic-controlled Congress due to partisan squabbling.
On the debt limit: McCarthy said “yeah” when we asked if he believes, as a matter of principle, the debt limit needs to be lifted. Then McCarthy added this:
We’re not looking forward to all the “family budget” analogies that will be trotted out during the next few months.
On the timing for the GOP budget: House Republican leaders have six weeks after the president releases his budget to release theirs. The White House plans to unveil its proposal – although there are questions about how much specificity it will include – on March 9. McCarthy says he hopes House Republicans release theirs by April.
Senate Minority Leader Mitch McConnell and McCarthy met privately Tuesday afternoon ahead of today’s session. McConnell knows something about negotiating with Biden, having hashed out the 2011 Budget Control Act during the last debt-limit crisis.
We asked McConnell whether he thinks Biden is interested in a deal, given he is in a far different position than he was a dozen years ago. Here’s what McConnell told us, with a smile.
For what it’s worth: We expect McCarthy to speak at the White House sticks after the meeting.
– Jake Sherman and John Bresnahan
Tomorrow: Join us online at 9 a.m. ET for our conversation with Department of Transportation Secretary Pete Buttigieg! We’ll discuss how the recent investment in infrastructure will impact communities for decades. RSVP here.
INSIDE THE HOUSE
Omar vote looms on House floor
The House is moving toward a vote as early as today to remove Rep. Ilhan Omar (D-Minn.) from the Foreign Affairs Committee over her past anti-Semitic comments.
Technically, Omar isn’t on Foreign Affairs yet because Democrats haven’t offered a resolution on the floor naming her to the panel. That could happen today. Republicans named their HFAC members Tuesday, surprising the Democrats as the minority party had been waiting several days for the GOP to catch up.
Republicans also rushed their Omar resolution through the Rules Committee last night during an “emergency meeting,” the panel’s first of the 118th Congress. The rule for this resolution will be voted on today at a minimum, although GOP leaders believe the underlying measure will get taken up too.
This action came after Rep. Victoria Spartz (R-Ind.) announced she’d support the resolution booting Omar from Foreign Affairs. Spartz initially opposed the move on due process grounds. However, the Indiana Republican said Speaker Kevin McCarthy – who has been lobbying members to act against Omar – agreed to add language to the resolution addressing this issue.
Here’s that language:
We’re not at all sure what this means. As Democrats point out, the speaker doesn’t put anyone on standing committees. That’s something for the full House to do.
Also, how would the Ethics Committee handle such a case? Can Omar file an immediate appeal? How likely is it that the evenly divided Ethics Committee – whose Republican members are appointed by McCarthy – would vote in Omar’s favor after the speaker led the effort to kick her off Foreign Affairs? Would this change in six months or a year?
– John Bresnahan and Jake Sherman
INFLATION NATION?
What Congress is saying about interest rates before today’s FOMC meeting
The Federal Reserve will announce its latest interest rate move this afternoon, with both analysts and investors expecting a hike of 25 basis points.
It’s been a while, so let’s review the last couple of years in monetary policy. After dropping the Federal Funds rate to near-zero in early 2020, the Federal Open Market Committee began to hike it back up last May when it announced the first 50-basis point increase since 2000. Annual inflation was approaching 9% when rates the FOMC began its efforts.
What followed was a historic campaign from Fed Chair Jay Powell and the rest of the FOMC’s voting members. This included four consecutive hikes of 75 basis points and a final 50 point hike in December. That makes today’s expected hike the smallest increase since 2018.
You won’t hear much celebrating from Capitol Hill, though – even from congressional Democrats who have asked the Fed to slow down since the fall. The last few months have seen the longest stretch of falling prices since inflation first exploded onto the macroeconomic scene in 2022.
So for a lot of Democrats, a slowdown by the Fed at this point should be a given, and a pause would be much preferred.
We spoke with Rep. Chuy Garcia (D-Ill.) about this ahead of today’s meeting. The Financial Services Committee member’s rationale is good distillation of where many Democrats sit on this issue:
Republicans, meanwhile, continue to support the path that the Fed is on. Rep. Andy Barr (R-Ky.), chair of the Financial Services subcommittee in charge of monetary policy, told us he believed “in Fed independence on the monetary policy side,” even if he was a critic of some of the central bank’s regulatory moves.
And echoing other GOP lawmakers we spoke to this week, Barr said:
The calculus for the Fed and Powell in this FOMC meeting is roughly the same as it was in December’s session – a balancing act that acknowledges the progress made so far against inflation while still trying to clamp down on overexuberance from Wall Street, which could make inflation “stickier.”
The stakes for economic policymakers over the coming months are high, even as the U.S. jobs market remains robust and unemployment near record lows. Wherever the Fed settles on interest rates before pausing their climb will have broad ripple effects over the costs paid by consumers and businesses alike.
Senate Banking Committee Chair Sherrod Brown (D-Ohio) told us in a statement that it was “important that the Federal Reserve keeps workers and families in mind.” That about sums up Powell’s challenge in the early months of 2023 and beyond.
Also in financial news today: The Consumer Financial Protection Bureau will unveil a new proposed regulation cracking down on credit card fees by narrowing the criteria companies can use to grow fees over time, including inflation.
The agency estimated that “excessive” credit card late fees currently cost Americans about $12 billion a year. The proposed rule could reduce that pot by as much as $9 billion per year by closing this “loophole.” We’ll have more to say about this in the coming days.
– Brendan Pedersen
STRATEGY MEMO
What to watch for in Oversight and Judiciary today
Today is a big one for House GOP investigators. The top two panels on that front — Oversight and Accountability, and Judiciary — are holding their first hearings. Here’s what to look out for.
Oversight: “Federal Pandemic Spending: A Prescription for Waste, Fraud, and Abuse”
The GOP argument: Republicans are training their focus on the reported billions of dollars fraudulently siphoned from massive Covid-19 spending programs. Oversight Chair James Comer (R-Ky.) has said he wants to look into fraud committed under both Donald Trump and Joe Biden, and find out what Biden has done “to try to claw back any wasteful spending.”
Here’s a snippet of Comer’s opening statement:
Rep. Nancy Mace (R-S.C.) told us that Covid fraud was “a huge problem.” “Democrats should be asking just as many questions as Republicans,” Mace added.
The Democratic pushback: Democrats will seek to defend Biden and argue the Covid-19 spending programs were necessary to rescue the U.S. economy as it teetered on the brink of collapse during the pandemic.
“You want to talk about fraud and abuse? That’s great. Let’s also talk about the waste that went on in the first year of the pandemic response,” said Rep. Jared Moskowitz (D-Fla.), who previously served as the emergency manager in GOP Gov. Ron DeSantis’ administration.
“Cities like Long Beach and cities across the country were saved because of the resources coming from the federal government,” Rep. Robert Garcia (D-Calif.) added.
“The truth is that the president acted responsibly in the middle of a crisis,” Rep. Kweisi Mfume (D-Md.).
The witnesses:
| → | Michael Horowitz, chair of the Pandemic Response Accountability Committee |
| → | Gene Dodaro, comptroller general, U.S. Government Accountability Office |
| → | David M. Smith, assistant director, Office of Investigations, U.S. Secret Service |
| → | The Democratic witness is Rebecca Dixon, executive director of the National Employment Law Project |
Judiciary: “The Biden Border Crisis: Part I”
The GOP argument: Republicans, led by Judiciary Committee Chair Jim Jordan (R-Ohio), are set to repeatedly accuse Biden of creating a “crisis” at the U.S.-Mexico border. Immigration and border security are top priorities for House Republicans. Expect Homeland Security Secretary Alejandro Mayorkas to come up often.
The first hearing will center on the “physical security” of the border, Rep. Scott Fitzgerald (R-Wis.) said.
“We will continue to expose the absurdity that is the current administration’s open borders that are destroying our country,” Rep. Chip Roy (R-Texas) said. Rep. Troy Nehls, another Texas Republican, said the GOP will demand answers on how fentanyl is making it across the border.
The hearing comes as Republicans were forced to shelve consideration of Roy’s border bill last week. The legislation, which would alter the asylum process, was removed from the floor schedule amid opposition from GOP moderates.
The Democratic pushback: Judiciary Democrats will shift the focus to the GOP infighting over the Roy bill, framing the proposal as so extreme that even Republicans can’t agree on it.
Ranking Member Jerry Nadler’s (D-N.Y.) opening statement will also rebut a major GOP talking point about the flood of fentanyl and Biden’s border policies. Here’s a first look:
The witnesses:
| → | Judge Dale Lynn Carruthers of Terrell County, Texas. |
| → | Sheriff Mark Dannels of Cochise County, Arizona. |
| → | Brandon Dunn, founder of the fentanyl awareness initiative Forever15 Project. |
| → | The Democratic witness is El Paso County Judge Ricardo Samaniego. |
— Max Cohen
DIVERSITY ACROSS THE AISLE EVENT
Punchbowl News was proud to be the media partner for an important celebration of the 118th Congress for #DiversityAcrossTheAisle last night. The event at The Pendry welcomed lawmakers and staffers to the new Congress, together with the Diversity Staff Associations and other organizations in Washington. Thanks to all who joined!
Raising a glass: Congressional Hispanic Caucus Chair Nanette Barragán (D-Calif.) and Reps. Yvette Clarke (D-N.Y.), Robert Garcia (D-Calif.), Tony Cárdenas (D-Calif.), Rob Menendez (D-N.J.), Jimmy Gomez (D-Calif.), Andrea Salinas (D-Calif.), Joaquin Castro (D-Texas), and Marc Veasey (D-Texas).
Also joining us were Erica Johnson Creamer and Phillip Wallace of Walmart, Isaac Reyes of Target, Marc Littlejohn of Cargill, Cristina Antelo, Mark Williams and Debra Dixon of Ferox Strategies, Estuardo Rodriguez of The Raben Group, Ibn Akbar T. Salaam of Waste Management, Katie Jones and Del Lebel of Alexion, Steve Haro of Televisa Univision, Jessica Montoya of FoodCorps, Kim Hays of Intuit, Virginia Zigras of Charter Communications, Marcela Urrutia Zamora of Verizon and Alexa Verveer of Warner Bros Discovery.
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THE HOUSE MINORITY
New: The New Democrat Coalition’s leadership team is trying to call House Republicans’ bluff on Rep. Maria Elvira Salazar’s (R-Fla.) resolution “denouncing the horrors of socialism.”
Here’s a statement signed by all 10 members of the group’s leadership:
Republicans are likely to slam any Democrats who won’t support the messaging resolution. New Dems’ approach is a look inside how center-left Democrats are approaching the vote, which may turn out to pass by a wide, bipartisan measure.
– Max Cohen
DOWNTOWN DOWNLOAD
| → | Paramount Global, the media giant, has hired Capitol Tax Partners to lobby on “Issues related to Federal income tax.” |
– Jake Sherman
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