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February 15, 2023
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PRESENTED BY
THE TOP
Happy Wednesday morning.
Senate Republicans are warning their House GOP counterparts to stay away from the Pentagon’s budget as part of any proposed spending cuts tied to upcoming debt-limit talks.
Republican senators are generally supportive of Speaker Kevin McCarthy in negotiations with President Joe Biden over cutting spending in exchange for raising the nation’s borrowing limit. But they say recent suggestions by top House Republicans that defense spending would be on the chopping block is unacceptable.
Defense spending has risen significantly in recent years despite efforts by some lawmakers in both parties to slow it down. China’s growing military might, as well as Russia’s invasion of Ukraine and Iran and North Korea’s nuclear programs, are motivating Congress’ defense hawks to once again substantially boost, not slash, defense spending.
Sen. Lindsey Graham (R-S.C.) pressed McCarthy on this issue during Senate Republicans’ closed-door retreat last week. Graham implored McCarthy to oppose any defense budget that falls below 3.2% of GDP. It’s currently at 3.3%. McCarthy responded by saying he’d look at potentially rooting out waste in the Pentagon.
“My goal is to get Kevin and everybody looking at the defense needs based on threats. And the threat portfolio, the threat picture, doesn’t justify being on the low end of GDP,” Graham told us. “I don’t want to go backward because, when you look at the threat China [presents], we don’t have the military footprint where we need it to be.”
Yet some of the newly empowered House Republicans favor slashing defense spending, arguing the Pentagon has become too large, inefficient and bloated. Progressives agree.
There’s also opposition among House and Senate conservatives to any more money for Ukraine. Congress has appropriated more than $110 billion to counter Russia’s nearly year-old invasion. More than half of that total – $62 billion – has gone to military funding for Ukraine.
Yet House Republicans also face an intractable political math challenge as they seek to reduce the $1.4 trillion deficit.
McCarthy and other House GOP leaders have taken Medicare and Social Security cuts off the table, and they won’t raise taxes. So to get back to FY2022 spending levels as promised, House Republicans must make dramatic cuts to Medicaid and other entitlement programs – which leads to all sorts of substantive and political difficulties – and/or slash tens of billions of dollars from non-defense discretionary spending.
But such cuts won’t pass the Senate or get Biden’s approval. That means House GOP leaders will make their vulnerable freshmen march the plank on politically untenable votes. Or they have to look at the Pentagon’s budget because, as the old saying goes, that’s where the money is.
Senate Minority Leader Mitch McConnell has vocally opposed Biden’s proposed defense budgets, noting that the Armed Services Committee has voted overwhelmingly to increase topline spending above the president’s request. McConnell – a member of the Defense subcommittee on Appropriations – will never back a reduced defense budget.
“Members are talking to me about everything from defense spending to NIH to child care – a wide variety” of issues, said Sen. Susan Collins of Maine, the top Republican on the Senate Appropriations Committee. Maine is home to Bath Iron Works, and the pro-defense Collins has pushed hard for additional destroyer funding. “The idea that we would go back to FY 2022 [spending] is alarming to many people.”
Sen. Deb Fischer (Neb.), the No. 2 Republican on the Armed Services Committee, responded with an emphatic “no” when asked if the defense budget should be targeted as part of any debt-limit talks:
Republicans in both chambers have floated the idea of targeting “waste, fraud and abuse” in the Pentagon’s budget without actually reducing the topline or cutting essential programs. But others GOP senators aren’t so sure.
“If you just do the platitudes of ‘waste, fraud and abuse,’ you’d repeat what has been a 200-year-old chorus here,” said Sen. Thom Tillis (R-N.C.), a newly minted member of McConnell’s leadership team. “What I worry about is something that goes across all platforms without any value judgment about programs.”
And there’s also the problem that one lawmaker’s waste, fraud and abuse is another lawmaker’s vital program. This New York Times’ story on the heavily troubled Littoral Combat Ship program is worth a read.
For now, House conservative are getting a boost from some of their Senate colleagues — dubbed the “Breakfast Club” — who believe that Republicans need to seek cuts in both domestic and defense spending.
“Anyone who’s serious about the debt has to look at spending everywhere, all across the entire budget,” said Sen. Rand Paul (R-Ky.), who has long pushed for a leaner defense budget.
— Andrew Desiderio and John Bresnahan
CLASSIFIED DOCS
Gang of Eight to get classified docs briefing this month — with a catch
News: Biden administration officials will brief the Gang of Eight at the end of February on the classified documents discovered at the homes of President Joe Biden, former President Donald Trump and former Vice President Mike Pence.
But members of the group aren’t expected to learn anything about the specific documents that were recovered. Instead, the upcoming briefing will simply outline the process the Justice Department will use to give lawmakers access to the materials.
“My understanding is that the briefing is not about what the documents actually are, but more about some process that they want us to agree to for reviewing what it is that was found,” Senate Intelligence Committee Vice Chair Marco Rubio (R-Fla.) told us.
Rubio joked that “maybe they’ll bring in an appetizer” to give senators a taste of what types of materials were mishandled by the three men.
This is a step forward for congressional leaders and the Senate and House Intelligence panels. Both parties have been publicly bashing the Justice Department over its refusal to share information related to the classified documents.
As we’ve told you before, lawmakers view this as a crucial part of their intelligence oversight duties. The Justice Department, meanwhile, has maintained that the existence of special counsels in both the Trump and Biden cases limits its ability to share information with Congress.
Senate Intelligence Committee Chair Mark Warner (D-Va.) told us last week that he’d use a DOJ briefing to “make doubly clear what I expect” of the Biden administration. That, of course, includes not just access to the classified materials but also an assessment of national security risks stemming from the mishandling of the documents.
Warner and Rubio are very much aligned on this. The House side is a different story, where Intelligence Committee Chair Mike Turner (R-Ohio) and ranking member Jim Himes (D-Conn.) have some work to do to restore bipartisanship on the panel.
— Andrew Desiderio
TAX BATTLES
Rosen, Tester introduce resolution condemning GOP sales tax plan
Sens. Jacky Rosen (D-Nev.) and Jon Tester (D-Mont.) are introducing a resolution formally opposing a much-maligned Republican proposal to establish a national sales tax. The move shows vulnerable Senate Democrats want to hammer home this economic message, even while top Republican leaders have distanced themselves from the sales tax effort.
Rosen and Tester’s resolution, which boasts 12 cosponsors, also “supports the passage of a responsible tax cut” to benefit middle-class families. The Democrats don’t expand much more on this in the resolution.
The resolution “opposes paying for any tax cuts with cuts to Social Security, Medicare, or Medicaid, or cuts to pay and benefits for our service members, veterans, or law enforcement.”
The best way to view this effort is the continuation of the Democratic messaging push to portray Republicans as out-of-touch on economic issues. In announcing the resolution, Rosen and Tester slam the proposal as a tax hike on working families already struggling with rising inflation.
Some context: Several House Republicans, including a number of antagonists to Kevin McCarthy’s speaker bid, have pushed for a vote on the FairTax Act of 2023. The bill cuts off all funding for the Internal Revenue Service and replaces existing taxes with a flat 23% national sales tax run by the 50 states. McCarthy has since said he opposes the proposal.
But that hasn’t stopped Democrats from bashing Republicans on the plan. The national sales tax has been a fixture of President Joe Biden’s economic speeches since late January. Senate Majority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries also held a joint presser condemning the plan.
— Max Cohen
PRESENTED BY AMERICAN BEVERAGE ASSOCIATION
The Coca-Cola Company, Keurig Dr Pepper and PepsiCo are offering more choices with less sugar. In fact, nearly 60% of beverages sold contain zero sugar. BalanceUS.org
DIGITAL DISPATCH
Gillibrand has ‘many concerns’ about Gensler, SEC approach to crypto
Sen. Kirsten Gillibrand (D-N.Y.) blasted Securities and Exchange Commission Chair Gary Gensler in an interview Tuesday night, accusing the Biden administration official of ignoring crypto businesses that pro-actively sought regulation.
Gillibrand is one of the crypto sector’s top allies in the Senate, and Gensler’s agency has cracked down on digital asset firms with a particular force this month. But the New York Democrat’s criticism is an escalation from previous remarks about the SEC.
“I have many concerns about Chairman Gensler and his approach to this space,” Gillibrand said. “There are many, many companies that have asked to be regulated and who have been ignored for years.”
This isn’t the first time Gensler and Gillibrand have butted heads in public, albeit indirectly. Gillibrand and Sen. Cynthia Lummis (R-Wyo.) introduced a broad crypto bill in June 2022. Gensler responded later that month by arguing the package could “undermine” certain securities laws.
The SEC convenes today to review proposed rulemakings unrelated to crypto, including a closely-watched proposal to shorten the time it takes to settle securities transactions. But Gillibrand told us she’d be listening closely to Gensler’s opening remarks for guidance on the agency’s crypto approach.
Gillibrand also argued that digital asset policy is “Congress’s job, not the regulators’ job.”
More:
– Brendan Pedersen and John Bresnahan
LEADER LOOK
Schumer, Stabenow tell Democrats: Tout your achievements back home!
With Congress divided and big-ticket legislating looking like a thing of the past, Senate Majority Leader Chuck Schumer and Sen. Debbie Stabneow (D-Mich.) are urging Democrats to use the upcoming recess to “highlight the great projects and programs that will show the American people the benefits” of the bills that President Joe Biden signed into law during the last two years.
In a letter to their Democratic colleagues, Schumer and Stabnow – Democratic Policy and Communications Committee chair – urged Democrats to hold events keyed off government providing free shingles vaccines and $35 insulin, infrastructure projects, “lower energy bills” from the Inflation Reduction Act, manufacturing and construction jobs and mental health resources.
The leaders’ note is a recognition that achievements will be limited with Republicans in control of the House. And Democrats feel as if what they did in the last Congress – namely the bipartisan infrastructure law and the IRA – will tide them over to the 2024 election.
Remember: The Senate and House are on recess next week, so expect a lot of home-state, ribbon-cutting events by Democrats.
– Jake Sherman
PRESENTED BY AMERICAN BEVERAGE ASSOCIATION
America’s beverage companies are delivering more choices with less sugar. BalanceUS.org
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