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Happy Monday morning. And Happy Memorial Day.
In case you somehow missed it – you didn’t, we know – Speaker Kevin McCarthy and President Joe Biden came to an agreement to lift the debt limit for two years. The Fiscal Responsibility Act also cuts spending slightly, speeds permitting for energy projects, redirects $20 billion from the IRS to other agencies, enacts some new requirements on food stamps and TANF and rescinds $28 billion in unspent Covid money.
Government spending could decrease by roughly $1 trillion over the long term, a White House official suggested, although there’s no budget score yet.
Is this a monumental piece of legislation for Biden, McCarthy or the country? No, it’s not. The bill doesn’t raise taxes or deal with entitlement programs. Modest is a better description. Yet it will drive what happens the rest of this year on Capitol Hill legislatively.
And it will defuse – for now — questions over whether the U.S. government will pay its bills. Just the threat of default caused some credit agencies to consider downgrading the United States’ rating for the second time in a dozen years.
Practically speaking, it also highlights a pair of important dynamics for Washington. House Republicans were able to drag Biden to the negotiating table – something White House officials and Hill Democrats swore wouldn’t happen. Biden, in turn, was able to protect his legislative priorities — including the Inflation Reduction Act – from deep spending cuts and limited GOP wins to a few discrete areas.
“The agreement also represents a compromise, which means no one got everything they want. But that’s the responsibility of governing,” Biden acknowledged Sunday night from the White House.
This is how divided government works. As we’ve been reporting for months, McCarthy was always aiming for a spending caps deal that imposed work requirements, included permitting reform and reclaimed billions of dollars in Covid relief funding. That’s exactly what he ended up getting.
There’s now one week until a default. The federal government runs out of borrowing authority June 5. The House returns Tuesday night for a series of suspension votes, which will give GOP and Democratic leaders the opportunity to whip lawmakers in person.
So let’s get into the challenges McCarthy and Biden face as they head into a crucial week.
Rules: The beginning of any process to bring a major bill to the floor is taking it to the House Rules Committee. Rules preps the bill by setting the parameters for debate. A bill of this nature won’t be subject to amendments since opening up the legislation to last-minute changes will kill it. The Rules Committee will meet at 3 p.m. Tuesday.
But getting it out of Rules intact may be a challenge. The committee has nine Republicans and four Democrats. Three conservative Republicans on the panel – Reps. Tom Massie (Ky.), Ralph Norman (S.C.) and Chip Roy (Texas) – have railed against the bill publicly. If all three vote no, GOP leadership will need Democrats to get the bill through Rules.
Senior House Democratic sources have told us that it’s the GOP’s responsibility to move the legislation out of Rules and, at this point, they don’t intend to provide votes. “Why would we do that?” one senior House Democratic leadership aide told us Sunday night.
This will be a major flashpoint for House GOP leadership and they need to move quickly to manage it.
The count: All along in the negotiations with the White House, McCarthy has represented to Democrats that he could provide two-thirds of the vote total for this package, according to sources involved in the talks. That would amount to 140 to 150 votes – a very big number.
Now listen, we understand that McCarthy believes he has been underestimated at every turn. But this will take an enormous amount of work from House Majority Whip Tom Emmer and the entire whip team. Every vote will count, so expect McCarthy to be leaning on GOP holdouts directly.
On the Democratic side, there has been a lot of unhappiness with this bill among progressives. Rep. Pramila Jayapal (D-Wash.), chair of the Congressional Progressive Caucus, said Sunday on CNN’s State of the Union that she was “not happy with some of the things I’m hearing about.”
Yet Democratic sources suggested moderates, including the New Democrat Coalition and Problem Solvers Caucus, are likely able to back it. This would give Biden and House Minority Leader Hakeem Jeffries a huge chunk of votes. If McCarthy can deliver two-thirds of the vote total, that would ensure the 218 votes needed for passage.
– Jake Sherman and John Bresnahan
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Skeptical Senate faces debt-limit test
As soon as Thursday, the Senate will begin consideration of the debt-limit compromise clinched by Speaker Kevin McCarthy and President Joe Biden.
With the June 5 default deadline looming even larger by that point, it will take some Senate magic to pass this legislation by then. It’s unclear right now whether senators who have threatened to throw up roadblocks — such as Sen. Mike Lee (R-Utah) — will ultimately resort to that. It’s also possible that they could demand amendment votes.
Several Senate conservatives have expressed open hostility toward the deal. Progressives aren’t happy either, but they’re mostly keeping it to themselves for now.
Passage in the Senate will likely require at least 30 senators from each party, give or take a few, to vote for it. That’s more than half of both the Democratic Caucus and Republican Conference. As is the case with the House, conservative and progressive hardliners won’t vote for this bill.
So where do things stand now?
For starters, the deal got a ringing endorsement from Senate Minority Leader Mitch McConnell. Even though the bill caps defense spending at the level of Biden’s budget request, which McConnell has deemed insufficient, the Senate GOP leader said the legislation “sets meaningful limits on the administration’s spending agenda.”
“Today’s agreement makes urgent progress toward preserving our nation’s full faith and credit and a much-needed step toward getting its financial house in order,” McConnell said.
McCarthy and Rep. Garret Graves (R-La.) briefed GOP senators on the agreement Sunday afternoon. After some technical difficulties, McCarthy made the same pitch he has publicly — Democrats didn’t get anything they wanted, there are no new taxes while spending is cut, and permitting reform is an added boost.
Yet there were concerns among Senate Republicans. Some Republicans on the call were unhappy with the topline spending figure for the Pentagon. McCarthy countered that Republicans were able to permanently sever any link between defense and non-defense spending increases.
McCarthy also said the long-term spending deal will allow Congress to get back to regular order by passing 12 annual spending bills, not a giant omnibus package rushed through at the last minute. The deal with the White House includes a mechanism designed to “incentivize” lawmakers to do that.
“It will be a real tough sell to conservatives,” said one GOP senator who took part in the call. “The conservative world has already convinced themselves they hate this deal. The longer it sits out there… the less people are gonna like it. It will be a real battle to get conservatives to sign onto this.”
Sen. Lindsey Graham (R-S.C.) suggested he might not back the legislation because of the defense cap. In a statement, Graham said House Republicans “compromised our national security for marginal changes on the non-defense side.”
But both Democrats and Republicans who are expected to support this bill suggested over the weekend that it’s the best outcome in a divided government. Conservatives were never going to get the draconian cuts they were seeking, while progressives weren’t going to get a clean debt-limit hike or new taxes.
We spoke with Sen. Kevin Cramer (R-N.D.) about this dynamic. Cramer had this message for the bill’s conservative critics: Republicans would be “complicit” if the debt limit were raised without any reforms at all, which was the alternative.
“It doesn’t cut spending enough and I share the concerns it doesn’t fund the military enough,” Cramer said of the agreement. “That said, I don’t see how Kevin and his team could have negotiated a better outcome given the hand they were dealt. I suspect rank and file Democrats are more upset with the White House negotiators than Republicans are with ours.”
Across the aisle, Sen. Chris Coons (D-Del.) also appealed to skeptics to support the bill. Coons, Biden’s top ally on the Hill, said “this is the best deal that could be reached, given the damaging demands of House Republicans.”
“To my colleagues who have serious misgivings about this deal, I say this is far better than defaulting,” Coons added.
Progressives, though, believe this is a false choice. One Senate liberal told us that Democratic leaders set “a terrible precedent to say no negotiations over the debt limit and then ultimately negotiate.”
“It’s bad policy to make it harder for poor people to put food on the table while making it easier for rich people to cheat their taxes,” this person added.
During a call with Senate Democrats Sunday night, White House negotiators focused heavily on what wasn’t included in the final product — such as the spending cuts passed by House Republicans earlier this year.
Senate Majority Leader Chuck Schumer has yet to officially say he’ll back the bill — although there’s no doubt he will.
Schumer had said for months that there should be no negotiations surrounding the debt limit, so he lost that battle. In a note to Democratic senators on Sunday, Schumer seemed to acknowledge this by nodding to the White House’s argument that the Biden-McCarthy deal is the only way to avoid a default at this point.
“These have been a difficult few weeks given how intransigent and extreme the MAGA Republicans are, but nonetheless we must avoid default and its grave consequences for the American people,” Schumer said.
— Andrew Desiderio and John Bresnahan
Oversight Dems bash Comer’s Wray battle
House Oversight and Accountability Committee Chair James Comer (R-Ky.) is training his ire on FBI Director Christopher Wray. Comer is locked in a subpoena fight with the FBI as he demands access to an internal document that allegedly contains details of a bribery scheme implicating then-Vice President Joe Biden.
Comer has set a Tuesday deadline for Wray to turn over the FD-1023 document that serves as a record of an interview the FBI conducted with an informant.
These forms aren’t evidence of any wrongdoing. But Comer has threatened to hold Wray in contempt of Congress if he fails to comply with the subpoena.
Oversight Democrats, led by Ranking Member Jamie Raskin (D-Md.), are blasting Comer’s threats as “a ludicrously overblown response.”
“It just sounds preposterous to me that you will hold the FBI director in contempt over a tip sheet that they think someone submitted to the FBI,” Raskin told us. “[Comer is] making a mountain out of something that is not even a molehill.”
Rep. Gerry Connolly (D-Va.), a senior Democrat on the Oversight Committee, connected Comer’s standoff with Wray to a wider anti-federal law enforcement shift among Hill Republicans.
“It’s part of the assault on the FBI that the Republicans have launched, fueled by Trump’s hatred of the FBI,” Connolly told us.
This dynamic came to the fore earlier this month after Special Counsel John Durham released a report criticizing the FBI’s handling of the Russia-Donald Trump investigation. The same week, House Republicans tweaked a pro-police resolution to narrowly focus on “local law enforcement,” leaving out the FBI and federal agencies.
Yet in the eyes of former Oversight Chair Darrell Issa (R-Calif.), Comer’s fight against the FBI is one worth having.
“Reining in the FBI and Department of Justice after their Durham report — showing that they will, in fact, go after people for political purposes without a predicate — I think it’s overdue for all the committees to do it,” Issa said.
Issa knows a thing or two about holding Cabinet officials in contempt of Congress. During the Fast and Furious investigation, the House voted to hold Eric Holder, then-President Barack Obama’s attorney general, in contempt of Congress. It was the first time that had ever happened.
“The process is still in its early stages,” Issa said. “Just like Eric Holder, who ultimately lost in court and was proved to have lied to Congress, James is going through a process to establish our requirement and our accuracy. And the accuracy is that they’re hiding the ball.”
Comer did secure a victory last week when his office announced he and Sen. Chuck Grassley (R-Iowa) will speak with Wray on Wednesday. But based on the FBI’s communications to Comer — which have warned disseminating the FD-1023 could put investigations at risk — it appears unlikely Comer will gain access to the document anytime soon.
— Max Cohen
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AAN launches ad buy on debt limit deal
American Action Network, the Speaker Kevin McCarthy-aligned non-profit, has a new ad touting that House Republicans brought President Joe Biden to the negotiating table on the debt limit. The spot is running mostly on conservative TV.
– Jake Sherman
8:30 a.m.: President Joe Biden and First Lady Jill Biden will host a breakfast in honor of Memorial Day.
10:40 a.m.: The Bidens will leave for Arlington National Cemetery, where they will lay a wreath at the Tomb of the Unknown Soldier.
11:15 a.m.: Biden will speak at the 155th National Memorial Day Observance. Vice President Kamala Harris and Second Gentleman Doug Emhoff will also attend.
6 p.m.: Biden will leave the White House for Delaware.
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“Why Spending Cuts Likely Won’t Shake the Economy,” by Jim Tankersley
“Manchin Gets Mountain Valley Pipeline Deal Into Debt Bill,” by Jennifer Jacobs
“Traders Ready to Embrace Riskier Assets After Debt-Cap Deal,” by Carter Johnson
“Wall Street Mobilizes for a Presidential Election, Reluctantly,” by Cara Lombardo
“Fight still ahead for Texas’ Ken Paxton after historic impeachment deepens GOP divisions,” by Acacia Coronado, Jim Vertuno and Jake Bleiberg
Editorial photos provided by Getty Images. Political ads courtesy of AdImpact.
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