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March 22, 2023
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THE TOP
Happy Wednesday morning.
The recent collapse of two large regional banks rattled global markets, raising concerns about financial stability during a precarious moment for the U.S. economy. Would this backdrop of uncertainty, we wondered, cause House Republicans to grow wary of launching a debt limit showdown?
From our conversations with top GOP lawmakers at the House Republican retreat this week in Orlando, the answer is a hard no.
Instead of expressing caution, senior GOP lawmakers are leaning into their plans to demand spending cuts in return for raising the nation’s borrowing limit. The Republicans we spoke to doubled down, arguing the same factors that led to the failure of Silicon Valley Bank and Signature Bank necessitate urgency in reducing government spending.
“This is the best time to do it,” House Budget Committee Chair Jodey Arrington (R-Texas) said of the debt limit fight. “That interest rate pressure that is creating some risk in the banking industry is a result of the inflation that has been induced by the massive amounts of spending.”
To be clear, a U.S. default on its $31.4 trillion debt would have catastrophic consequences for this country and the world. Treasury Secretary Janet Yellen has said the federal government will exhaust extraordinary measures to stave off a default in or around early June.
Arrington’s panel will play a central role in the Republican posture heading into negotiations with President Joe Biden. While House Republicans have yet to release their budget, GOP leaders have vowed to roll back spending to FY 2022 levels. That would mean a cut of roughly $130 billion from last year’s funding level. Democrats and the White House have assailed the plan as an attack on working families, seniors and veterans, while Republicans insist the cuts are necessary to rein in inflation.
The Texas Republican said it “makes sense that when you have a debt ceiling negotiation,” lawmakers would “reflect on the indebtedness of our country” and look to cut spending at the same time.
Rep. John Rose (R-Tenn.), who sits on the House Financial Services Committee, also drew a connection between the bank failures and the upcoming debt limit fight.
“The very problems that created the stress in the banking sector, I think are also at play in the debt ceiling increase issue, which is just runaway government spending,” Rose told us.
This is a constant refrain we heard from the House majority during the retreat, including moderates. Rep. Carlos Gimenez (R-Fla.), who flipped a blue seat in 2020 and is part of the Main Street Caucus, said he believes “the vast majority, if not the entire conference” is united in a desire to curb “out of control spending.”
“We’re going to pay our bills,” GOP Conference Secretary Lisa McClain, who’s a member of the Budget Committee, told us. “But if we don’t change our behaviors and our actions that got us to this place — meaning spend, spend, spend, spend, spend with no accountability — we’re only going to exacerbate the problem.”
Also: The Parents Bill of Rights, a centerpiece of the House GOP agenda, will be in front of the House Rules Committee today. Here’s what the bill would do, per CRS.
— Max Cohen and Brendan Pedersen
Tomorrow: Punchbowl News founder Anna Palmer discusses women’s access to healthcare with House Appropriations Committee Ranking Member Rosa DeLauro (D-Conn.) at 9 a.m. ET. There’s still time to RSVP here to join us on the livestream (in-person RSVPs are full).
THE UPPER CHAMBER
Senate shrugs at House GOP’s Trump defense
Top Senate Republicans are dismissing an effort by House GOP leaders to target Manhattan District Attorney Alvin Bragg over a potential indictment of former President Donald Trump.
As they returned to the Capitol Tuesday night, GOP senators weren’t eager to defend Trump or endorse their House counterparts’ demand for testimony and documents from the Manhattan prosecutor.
Some even suggested it’s an inappropriate intervention into a criminal case over which the Congress has no jurisdiction.
It’s just the latest example of GOP senators being much less eager than House Republicans to defend Trump. While agreeing that Bragg’s motives should be under scrutiny, Senate Republicans indicated they were waiting to see the evidence laid out in any indictment before embracing such a full-throated defense of Trump.
“I would hope they would stick to the agenda they ran on when they got elected to the majority,” Sen. John Cornyn (R-Texas) said of House Republicans.
Sen. Shelley Moore Capito (R-W.Va.) dismissed it entirely: “The House is gonna do what the House is gonna do.”
And others said it was important for Congress not to be seen as trying to interfere with a criminal proceeding, despite the extraordinary circumstances of a city district attorney pursuing criminal charges against an ex-president.
“You’ve got to fall short of getting involved in the legal process,” said Sen. Thom Tillis (R-N.C.), warning against getting into the “substance” of the claims about Trump.
Here’s more Tillis:
There’s also the question of “prioritization” at the Manhattan D.A.’s office, as Senate Minority Whip John Thune put it, with violent crime in New York City and other major urban areas getting worse.
But Thune also distanced himself from the House effort, joking to reporters: “I try to stay out of talking about the House.”
There are, of course, a few Senate Republicans who are solidly in Trump’s corner, including the five who have already endorsed his 2024 presidential bid.
“New York is a disaster zone, [there are] all kinds of problems. If you’re going to go after the president of the United States, you better be prepared to take on anything,” Sen. Tommy Tuberville (R-Ala.), a Trump backer, told us.
The Coverage:
| → | NYT: “DeSantis, Doubling Down, Presses Questions About Trump’s Character,” by Maggie Haberman |
— Andrew Desiderio and John Bresnahan
BANKING BULLETIN
Senators don’t envy the Fed’s tough call on rate hikes
It’s gonna be a weird day for the Federal Reserve. We’ll know whether the U.S. central bank plans to raise interest rates at 2 p.m. today.
Inflation is still high, yes, but it’s also been less than two weeks since federal regulators mounted a dramatic intervention following the sudden collapse of two regional banks. The Fed would really like to use higher rates to crush inflation – even at the expense of the U.S. employment rate – but not if it costs the stability of the banking sector.
Suffice it to say today’s announcement, along with Fed Chair Jay Powell’s subsequent remarks to the press at 2:30 p.m., will be the one of the most sharply scrutinized events from the central bank in years.
As we wrote Tuesday there’ll be a lot of ways to spin the Federal Open Market Committee’s choice to hike or not pause. This story last week from Bloomberg’s Steve Matthews does a good job laying out the particulars.
So what’s the Fed to do? We don’t know, and most of the senators we spoke with last night didn’t either.
Here’s three opinions from the Senate:
Sen. Jon Tester (R-Mont.) doesn’t think we should be asking Congress about this. The Federal Reserve is supposed to be independent, after all.
More from the moderate Democrat, who is up for reelection in 2024:
But not all moderates are aligned with this take. Sen. Mark Warner (D-Va.) said a pause in hikes starting today would make sense, given the sector’s instability this week and last – though things seemed to have smoothed out a bit in the last couple days.
Warner joins Senate progressives like Sens. Sherrod Brown (D-Ohio) and Elizabeth Warren (D-Mass.) in calling for a pause.
Here’s the full quote from Warner:
Last up is Sen. Thom Tillis (R-N.C.) who tried to empathize with Powell’s predicament while stressing the risks of inflation to consumers.
– Brendan Pedersen
PRESENTED BY THE AMERICAN INVESTMENT COUNCIL
62% of the investments that private equity makes are in small businesses, with 46% in companies smaller than 100 people.
2022 ELECTION
PA county ballot dispute in House spotlight
On Election Day, Rep. Matt Cartwright (D-Pa.) defeated Republican Jim Bognet by roughly 6,600 votes, an impressive win for a Democrat in a R+4 district. It was largely a replay of the 2020 race, when Cartwright also beat Bognet.
Yet Bognet and House Republicans remain angry over a ballot shortage in Luzerne County, Pa., on Nov. 8. And they’re planning to use a hearing next week in the House Administration Committee to elevate their claims that thousands of voters were impacted.
The only problem? The people who actually know what went wrong aren’t expected to participate.
House Administration Committee Chair Bryan Steil (R-Wis.) is calling the March 28 hearing the “2022 Midterms Look Back Series: Government Voter Suppression in Luzerne County, Pennsylvania.”
Yet Democrats argue there’s no proof of any voter suppression in Luzerne County, which is part of Pennsylvania’s 8th District, much less that the government was behind it.
No Luzerne County officials are expected to testify at the hearing. They’re waiting for Luzerne County District Attorney Sam Sanguedolce to finish his probe into what happened on Election Day. And it’s unclear when that will occur. Sanguedolce’s office didn’t respond to a request for comment.
Instead, Bognet will testify, while Cartwright will not.
Bognet, though, isn’t seeking to overturn the election results, and the House Administration Committee isn’t reviewing a formal challenge. So, Democrats ask, what is next week’s hearing really about?
Cartwright said he’s supportive of an investigation and even of a hearing, but not right now.
“Luzerne County has a very capable D.A., and he is conducting that investigation,” Cartwright said. “What we should not do is name the hearing beforehand ‘government voter suppression’ and grandstand about it without any basis for such a thing.”
But Steil is upset that Luzerne County officials aren’t coming, and he vowed to hold his hearing anyway:
Everyone agrees that there was a serious problem in Luzerne County on Nov. 8. News reports from that day show that some polling places ran out of ballots as early as 9 a.m. due to a paper shortage. Voters were able to file provisional ballots, but the process was hectic. Republicans successfully filed a legal challenge that allowed voters to have two additional hours to cast their ballots due to the debacle.
What’s under dispute, though, is what impact the paper shortage had on the final outcome. Bognet, Steil and GOP officials claim thousands of ballots were affected, while Democrats suggest it was less than 100 and had no impact on the outcome of the election.
Rep. Dan Meuser (R-Pa.), who represents roughly half of Luzerne County, plans to attend the hearing and ask some questions, though the Pennsylvania Republican said the title for the hearing is misleading.
Meuser said that the hearing sounded “too conclusionary” and that “we shouldn’t be giving that perception.”
However, after a discussion with Steil, Meuser said he felt the hearing could aid the ongoing county probe by the district attorney.
“Ours is more procedural,” Meuser added. “If we were to learn something from their report, maybe they’ll learn something from our report.”
– Mica Soellner and John Bresnahan
INVESTIGATION UPDATE
Weaponization Committee goes after Garland in new report
The Weaponization of the Federal Government Subcommittee released an interim staff report Tuesday night arguing Attorney General Merrick Garland improperly directed law enforcement to quell school board protests as part of “a political offensive.”
The 21-page brief details a list of incidents Republicans say prove the Biden administration purposely went after conservatives during 2021 school board protests. The select subcommittee, chaired by House Judiciary Committee Chair Jim Jordan (R-Ohio), cited subpoenaed documents they obtained from the FBI, Justice Department and Education Department in the report.
Here’s a key section from the report: “The FBI acknowledged for the first time that it opened 25 ‘Guardian assessments’ of school board threats, and that six of these investigations were run by the FBI’s Counterterrorism Division.” Parents being treated as “domestic terrorists” has been a frequent GOP rallying cry.
Democrats argued the report was a selective presentation of dissenting viewpoints that left out positive feedback from local district attorneys with regards to school protest guidance.
The Justice Department declined to comment on the report. But Garland rebutted many of the report’s claims earlier this month while testifying in front of the Senate Judiciary Committee. Garland told the Senate panel that DOJ’s school board memorandum wasn’t aimed at parents and “came in the context of a whole series of other kinds of violent threats and violence against other public officials.”
Jordan has made protecting parental expression at school board meetings one of his top priorities this Congress. A Judiciary subcommittee will hold a hearing on parental rights on Thursday.
Rep. Jerry Nadler (N.Y.), top Democrat on the Judiciary Committee, dismissed the report as a distraction from former President Donald Trump’s legal problems. Nadler also accused Jordan of “cherry picking” data that backs his claims against the administration.
“Almost all of the source material appears to have been publicly available for months,” Nadler said. “This stuff may play well in MAGA world, but Mr. Jordan continues to do a poor job of convincing the country that even his most basic theories are tethered to reality.”
– Mica Soellner and Max Cohen
PRESENTED BY THE AMERICAN INVESTMENT COUNCIL
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