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March 9, 2023
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PRESENTED BY
THE TOP
It’s Thursday morning.
We first reported the news last night that Senate Minority Leader Mitch McConnell was hospitalized after falling at a GOP event.
Here’s David Popp, McConnell’s communications director:
The 81-year-old McConnell was at the Waldorf Astoria DC when the fall occurred, Heather and Bres heard from multiple sources. We don’t have any more information at this time on the extent of McConnell’s injuries or his prognosis.
McConnell – who became the longest-serving party leader in Senate history earlier this year – fractured his shoulder in a 2019 fall at home. McConnell contracted polio as a child, and the disease left him with a slight limp.
Several senators have been hospitalized recently. Sen. Dianne Feinstein (D-Calif.) is suffering from shingles, while Sen. John Fetterman (D-Pa.) is being treated for depression.
“Sandy and I are praying for Leader McConnell’s speedy recovery and look forward to seeing him back in the Capitol soon,” Sen. John Cornyn (R-Texas) said in a statement.
Talking budget with Biden’s OMB director
President Joe Biden will travel to Philadelphia today to unveil his 2024 budget blueprint. Budgets are political documents as much as policy statements. This one will provide a peek into the White House’s priorities for the sprawling federal bureaucracy, as well as how Biden wants to fight the battle over the debt limit, spending and the deficit as he gears up to run for reelection next year.
So we thought it was the right time for us to talk to OMB Director Shalanda Young. Young is a member of the president’s Cabinet and is charged with managing the budget and federal spending. She’s a familiar figure to many on Capitol Hill. Young worked on the House Appropriations Committee for 14 years, rising to staff director.
The Biden budget proposal that will be unveiled at noon today – his third as president – will cut the deficit by a projected $3 trillion over the next decade, Young told us.
Biden also wants to boost Medicare’s solvency for the next 25 years by raising taxes for Americans making over $400,000 annually. Biden will call for a new 25% tax on billionaires. And the corporate tax rate would go from 21% to 28% under Biden’s approach.
Other tax-related provisions include higher capital gains taxes, ending the carried-interest loophole and curtailing a tax break for offshoring. A tax break for profits on real-estate investments would also be eliminated.
While Republicans have blamed Biden-backed spending for trillions of dollars in additional deficits and the worst inflation in decades, Young countered that Biden actually has a good record on this front:
Biden declared during the State of the Union address last month that his budget proposal would cut the deficit by $2 trillion, but Young says administration officials were able to find even greater reductions.
“When we started the process, we had a goal of $2 [trillion],” Young noted. “The budget is a long process, and [Biden’s] policies actually overperformed. That’s not a bad thing.”
Young said the additional $1 trillion in deficit reduction came from a mixture of tax increases, economic growth and other policy changes.
As usual, health care will be a huge chunk of the federal budget, particularly Medicare and Medicaid. Biden proposed earlier this week several provisions to benefit Medicare, including allowing the federal government to negotiate cost savings on more prescription drugs and closing some loopholes used by the wealthy to avoid Medicare taxes. Prescription-drug negotiations would save $200 billion over 10 years, the White House estimates.
The Biden budget proposal will never become law, of course. But the change in Biden’s focus is dramatic in just two years. In 2021, Biden proposed trillions of dollars in new spending that would remake the U.S. economy as the country emerged from the Covid-19 pandemic. Now Biden is seeking trillions in deficit reduction as inflation and federal debt dominate the political debate.
Yet for Young and other senior administration officials, release of the president’s budget also starts the clock on House GOP leaders offering their own budget plan. Speaker Kevin McCarthy promised conservatives he’d try to pare spending back to FY 2022 levels, which would require $130 billion-plus in spending cuts. Democrats aren’t convinced that McCarthy can get 218 House Republicans to vote for that once rank-and-file members see which programs would have to be slashed.
Young also noted that Congress raised the debt limit repeatedly under former President Donald Trump without threatening a debt default to force policy changes:
– John Bresnahan, Jake Sherman and Heather Caygle
THE FORMER SPEAKER
In the midst of merger fight, Kroger enlists Boehner for help
News: Kroger, the supermarket giant in the midst of a proposed $25 billion merger with Albertsons, has hired Squire Patton Boggs and former Speaker John Boehner to help navigate the choppy waters of official Washington.
Boehner will provide Kroger with “strategic counsel,” but will not register to lobby. Two of Boehner’s former aides also at SPB – Tommy Andrews and David Schnittger – will lobby for Kroger, however. Kroger is based in Cincinnati and Andrews, Schnittger and Boehner are all Cincinnati natives.
Caren Street, the former chief of staff to former Rep. Karen Bass (D-Calif.) – now the mayor of Los Angeles – will also lobby for Kroger.
Andrews, Schnittger and Street have deep relationships with members on both sides of the aisle.
Kroeger also has Smith-Free Group and Arnold & Porter as lobbyists. In addition, Kroger has recently expanded its internal lobbying operation. Albertsons employs several lobbyists, including Miller Strategies, the firm helmed by Jeff Miller, a close adviser and friend of Speaker Kevin McCarthy.
We’ve written a good deal about the political implications of the Kroger-Albertsons merger. In October, Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.) called on the FTC to block the mega-merger, raising antitrust and labor concerns. Consumer advocates and labor unions are opposing the deal too.
A Kroger-Albertsons merger would combine the two largest supermarket chains in the country, although Walmart has by far the largest share of the overall grocery market.
– Jake Sherman
INSIDE THE HOUSE GOP
McCarthy and Scalise in no rush to hold TikTok vote
During the last week, there’s been renewed urgency in Washington to take action on TikTok, the enormously popular Chinese-owned social media app. But that doesn’t mean Congress is about to ban — or even address — TikTok.
The House Foreign Affairs Committee cleared a bill last week that would allow President Joe Biden to ban TikTok. But Speaker Kevin McCarthy and House Majority Leader Steve Scalise told us they are in no rush to move that – or any – legislation to the floor.
Some more TiKTok news: Rep. Michael McCaul (R-Texas) – the chair of the Foreign Affairs Committee – is in talks with Senate Intelligence Committee Chair Mark Warner (D-Va.) to hash out a bicameral bill to address the issue.
Warner, Senate Minority Whip John Thune (R-S.D.) and a bipartisan group of senators have introduced their own bill to set up a process by which the Biden administration could take action against TikTok and other foreign tech companies. The White House supports this effort.
“Warner and I have worked on things in the past, and I think it’d be better if we could work out this compromise language,” McCaul told us. “[We shouldn’t] try to score political points. It’s too important national security-wise.”
McCarthy said he wants to consider just one bill, and he noted that multiple committees have jurisdiction and are working on legislation.
McCarthy also said he wants to “sit and talk to Warner” about a potential compromise between the House and Senate measures. The two pols have worked well together on the Gang of Eight over the years.
So it’s clear McCarthy has no interest in legislating on this issue without first aligning the various proposals.
Also of note, the Biden administration hasn’t reached out to McCarthy to see what his plans are in terms of crafting a TikTok bill.
“The administration doesn’t talk to me about anything,” McCarthy said.
Here’s more McCarthy:
Scalise said three different House committees are considering action related to TikTok – Energy and Commerce, the China select committee and Foreign Affairs. Furthermore, Energy and Commerce will hear from Shou Zi Chew, TikTok’s CEO, on March 23.
Here’s Scalise:
We asked Scalise if we should expect a floor vote soon. “There’s still a lot of work being done on it,” Scalise responded.
On the Senate side, Majority Leader Chuck Schumer has been noncommittal about efforts to go after TikTok. Schumer said this week he would take a look at the Warner-Thune proposal before opining publicly on the issue.
But there’s a competing bill led by Sen. Marco Rubio (R-Fla.) that outright bans TikTok from operating in the United States. That bill has bipartisan support and a House companion as well.
Rubio told us Wednesday that he doesn’t believe the White House actually wants to take action against TikTok — a view echoed by Sen. Tom Cotton (R-Ark.).
“The Warner bill gives vast, unfettered discretion to the Commerce Department to do nothing because Joe Biden wants to do nothing because Joe Biden and Democrats want to use TikTok for political purposes,” Cotton said.
Rep. Raja Krishnamoorthi (Ill.), the top Democrat on the China select committee, said he was undecided on the Warner bill. He previously co-sponsored the Rubio TikTok ban.
“Anything that we can do to make sure that user data and algorithms are not ultimately under the control of the Chinese Communist Party, we’ll be looking at favorably,” Krishnamoorthi said. “I need to just look at the details on it.”
There’s no doubt, however, that the U.S. intelligence community believes TikTok is a national security threat. Take a look at this exchange between Rubio and FBI Director Christopher Wray at the Intelligence Committee’s annual worldwide threats hearing Wednesday:
— Jake Sherman, Andrew Desiderio, John Bresnahan and Heather Caygle
PRESENTED BY ALIBABA
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DEBT LIMIT DUSTUP
Democrats prepare for debt limit brawl in Ways and Means
Ways and Means Democrats are sharpening their knives ahead of a markup this morning on a GOP bill to institute “debt prioritization” if the U.S. government defaults on its $31 trillion debt.
Debt prioritization is a policy bogeyman. The idea is that, in the event of a debt-limit breach, the Treasury Department could finagle some way to continue paying bondholders, theoretically preventing what would otherwise be a global financial crisis.
It’s been quietly floated by Wall Street and Republicans for years but forcefully denied by the Treasury Department as a viable option.
Yet this might be the week where the rhetoric around this issue ratchets up in earnest. The release of President Joe Biden’s FY 2024 budget plan today will give Republicans a menu of spending priorities to tear into, for one.
Ways and Means Democrats are eager to slug it out with the GOP on their debt prioritization bill, which they say is an admission that conservatives are playing a dangerous game with the debt limit. It’s a bit like “preparing for defeat ahead of time,” Rep. John Larson (D-Conn.) told us.
The amended GOP bill – which you can read here – introduces a tiered list of who would still receive payments in the event of a default. The first tier involves interest on public debt. In other words, the U.S. government’s bondholders.
That’s a diverse group and would cover a good chunk of Wall Street. But that also means foreign governments, including China, could potentially see payments before the Department of Defense gets funded during a default. That’s something Democrats plan to hammer home today.
Rep. Richie Neal (D-Mass.), Ways and Means’ top Democrat, told us this in a statement:
We asked Ways and Means Committee Chair Jason Smith (R-Mo.) if Republicans were preparing to default on the U.S. debt by marking up this bill.
“Congress will not default. We will not default,” Smith said. “We have never defaulted.”
Also: Neal and the Ways and Means Democrats raised $2.1 million for the DCCC at a fundraiser Wednesday night – even more than they raised last year in the majority. House Minority Leader Hakeem Jeffries and House Democratic Caucus Chair Pete Aguilar were in attendance.
– Brendan Pedersen and John Bresnahan
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