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IN THIS EDITION

The post-McCarthy California landscape

What Mike Johnson told us about Israel and his 2025 plans

The Vault: In interview, Yellen defends Fed on housing

Cole up with another two ads in primary race against political newcomer

THE TOP

The post-McCarthy California landscape

Happy Thursday morning.

SANTA CLARITA, Calif. — California House Republicans agree that life after former Speaker Kevin McCarthy isn’t smooth sailing.

There’s widespread acknowledgment from at-risk Southern California members that Speaker Mike Johnson isn’t keeping up with McCarthy’s vaunted ability to raise cash and boost his Golden State allies.

The vulnerable incumbents are still confident that they’ll successfully defend their seats in this critical House battleground come November. And some Republicans are boldly claiming it’s no big deal, arguing they’ve been outspent in the past and still won.

“All of our FEC reports are public. So you see we’re getting less from the current speaker than the previous speaker, so we got to work a little harder,” Rep. Mike Garcia (R-Calif.) told us after a Memorial Day service. “But we get outraised in Southern California by the Democrats all the time. They can have all the money in the world, but they’re on the wrong side of the policies.”

McCarthy’s ouster last fall sent shockwaves through California politics. The Bakersfield, Calif., native was renowned for his intense focus on boosting Republicans in his home state. Thanks to McCarthy’s sprawling political operation and network of fundraising committees, the California incumbents were the former speaker’s biggest benefactors.

“I miss McCarthy. Of course, McCarthy helped me a lot. I think Mike Johnson is working so hard to try to raise a lot of money,” Rep. Michelle Steel (R-Calif.) told us. But Steel reiterated that even without McCarthy in power, she’s been raising more than a million dollars per quarter.

There’s no bad blood between California Republicans and Johnson. Every vulnerable incumbent we spoke to shared Rep. Ken Calvert’s (R-Calif.) view that, “It’s hard to just walk in and take over overnight” in terms of matching McCarthy.

But the numbers don’t make for pretty viewing.

We calculated the average McCarthy gave and raised for lawmakers through last year versus the average Johnson gave and raised through in the last quarter of 2023 and the first quarter of this year. This analysis included all of the various political arms of both Republicans and joint fundraising accounts created for funneling money to rank-and-file GOP lawmakers.

Garcia received $121,989 less per quarter from Johnson than he did compared to McCarthy. Rep. John Duarte (R-Calif.) got $124,944 less, Calvert received $120,578 less and Steel got $128,857 less.

Johnson’s team said the more accurate comparison would be between Q1 2022 and Q1 2024, and argued it was rare for speakers to divert money to incumbents in an election year when they were more focused on challengers. McCarthy did end up directing $800,000 to incumbents in Q1 2022. And while some Republicans — like Steel and Rep. Young Kim (R-Calif.) — did get more from Johnson in Q1 2024 than Q1 2022, there was a huge discrepancy for Calvert.

Calvert received $94,575 from McCarthy in Q1 2022 and only $15,204 in Q1 2024.

In the era of super PACs, money is sure to be flowing to nearly every endangered lawmaker on both sides of the aisle. But direct cash into the coffers of lawmakers is still more valuable because candidates can buy TV time cheaper than PACs or other outside groups.

Democrats are taking notice of the fundraising disparity.

“Calvert was relying on McCarthy to remain speaker to help him keep his seat,” Will Rollins, Calvert’s challenger, told us. “He’s had more trouble getting the money in the committee transfers than he might have had McCarthy been in power.”

Democrat George Whitesides, who’s running against Garcia, told us the fundraising math will allow Democrats to define Garcia in a way former challenger Christy Smith hadn’t.

“His fundraising has really totally taken a nosedive following McCarthy’s ousting,” Whitesides said. “We’re going to have the firepower to take his record and make sure that people know about it.”

— Max Cohen

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THE SPEAKER

What Mike Johnson told us about Israel and his 2025 plans

It’s recess, but we had the opportunity to catch up with Speaker Mike Johnson Wednesday on a host of critical topics and wanted to share what we’ve learned.

Bibi’s speech: Johnson is on the brink of sending a letter to Prime Minister Benjamin Netanyahu to formally invite him to address a joint meeting of Congress. The letter needs to be signed by Senate Majority Leader Chuck Schumer and Johnson — and that part is done. House Minority Leader Hakeem Jeffries is reviewing the letter. Senate Minority Leader Mitch McConnell is already on board. Jeffries and McConnell don’t need to sign the letter in order to invite Netanyahu but Hill leaders usually like to make such invites bipartisan and bicameral, if possible.

Johnson told us he anticipates Netanyahu will address Congress some during the next eight weeks — before the August recess — as we previewed last week. Here’s Johnson:

Johnson has provided Netanyahu with the days Congress is in session between now and August and the speaker said “as soon as possible is the objective.”

Reconciliation: We reported last week that House Majority Leader Steve Scalise was already planning for reconciliation should Republicans keep the House and win the Senate and White House in November. This would allow Republican leaders and former President Donald Trump to overcome any Senate Democratic filibuster for a big-ticket package.

Johnson has some thoughts as well, as you might imagine. Yet remember this: It’s very easy to talk in hypotheticals about what a Republican Washington would be able to do. It’s even more difficult to execute on it. Take the GOP record from 2017 through 2019 on repealing Obamacare as proof of that.

The speaker said he feels as if Republicans didn’t take full advantage of reconciliation in 2017 because party leaders kept the bill they eventually passed narrowly focused on tax cuts. Johnson wants to think more expansively about the budget reconciliation process in 2025 if Republicans control all of Washington; he’s thinking about border security and energy policy, similar to Scalise. Here’s Johnson:

Republicans have been saying that the Inflation Reduction Act, which Democrats passed using reconciliation, is a roadmap for the GOP. Republicans will try to shoehorn as many policies as possible into their reconciliation bill if they take the majority.

Johnson added that he started the preparation earlier this time around because Republicans “wasted at least a couple of months” during the first quarter of former President Donald Trump’s term because most lawmakers thought Hillary Clinton would win.

Appropriations: There’s been some chatter in the Capitol of pushing the end date for any continuing resolution this fall — needed to finish work on the FY2025 spending bills post-election — until the early part of next year. Conservative Republicans, in particular, argue that Trump could come in and inject his own priorities into the spending process.

Johnson said he’s aware of the chatter and said it’s an idea that “should be considered.” But he seems bearish on this approach:

— Jake Sherman and John Bresnahan

The Vault: In interview, Yellen defends Fed on housing

Treasury Secretary Janet Yellen defended the Federal Reserve’s approach to reconciling housing and monetary policy, pushing back in an interview with us on calls from some progressive lawmakers for U.S. central bankers to more explicitly weigh the impact of interest rates on shelter costs.

One of inflation’s top drivers has been the costs of shelter since 2022. The reasons are complicated, but economists generally attribute this to a longstanding lack of housing supply and restrictive zoning laws across the United States. These laws prevent denser housing.

On top of all that, rising interest rates have driven up the price of mortgages. That’s been a problem for lawmakers like Sen. Elizabeth Warren (D-Mass.) and Senate Banking Committee Chair Sherrod Brown (D-Ohio), who have pushed officials like Fed Chair Jay Powell to consider whether the Fed is keeping housing costs elevated with rates and — by extension — contributing to inflation.

Yellen, a former Fed chair, doesn’t quite buy it.

“The Fed has an overall price stability mandate, and they have made clear they interpret that as 2% inflation, as measured by PCE price index. The PCE price index includes housing,” Yellen said in a recent interview. “They don’t have a separate housing price objective. They have one price stability objective, and housing is part of it.”

Back in January, Warren led a letter to Powell urging the U.S. central bank to cut rates for the sake of housing affordability. She wrote:

Later that month, Powell addressed these concerns at a news conference. “Our statutory goals are maximum employment and price stability, and that’s what we’re targeting. We’re not targeting housing price inflation, the cost of housing, or any of those things,” he said.

Yellen defended the Fed’s posture here in part by pointing to the pandemic, which introduced any number of weird economic phenomena that are still impacting the country.

“There’s a lag in these rental prices coming down. There’s very good reason to believe they will come down, but look — the pandemic plus low interest rates led to a boom in housing [and] drove up house prices,” Yellen said. “We’re living with that. It’s really something that was pandemic related.”

Inflation nation: Yellen won’t dispute the difficulties that Americans have experienced under rising prices in general. It doesn’t help that core consumer costs “including grocery prices and rent are up more,” the Treasury secretary said.

Of course, like many economists in and around the Biden administration, Yellen is quick to say that wage growth has kept up rising prices.

“Wages have also gone up on average — weekly earnings — by a little bit more than prices have gone up. So on average, people aren’t worse off,” Yellen said. “But things that are very salient to people’s budgets, like rent and food, have gone up more. I think that’s what people are focused on.”

— Brendan Pedersen

ON AIR

Cole up with another two ads in primary race against political newcomer

Another day, and yet another pair of campaign ads from House Appropriations Committee Chair Tom Cole (R-Okla.) designed to help fight off a primary challenge from self-funder Paul Bondar.

This is just more evidence that the 75-year-old Cole – who has served more than two decades in the House – is taking this race seriously.

One spot is positive, one is negative.

The negative spot includes interviews with Oklahomans saying they don’t know Bondar, he doesn’t answer questions and he’s not from the Sooner State. Cole has knocked Bondar for being from Texas and having lived in Illinois, with minimal connections to Oklahoma.

The positive spot is quite fascinating. It notes that former President Donald Trump has endorsed Cole. And it features a testimonial from former Oklahoma Gov. Frank Keating and a host of Oklahomans, with text flashing on the screen “Tom Cole loves Oklahoma.” The catchphrase at the end of the ad is “One of us. Always for us.”

— Jake Sherman

… AND THERE’S MORE

The federal government has paid for a new ad for Rep. Jen Kiggans (R-Va.). In the ad, Kiggans is sitting in a nurse’s coat saying that she is representing older Virginians in Washington.

Novo Nordisk, the pharmaceutical company with the science behind Ozempic, has hired Arnold & Porter Kaye Scholer to lobby on “manufacturing capacity and supply chain resiliency.”

— Jake Sherman

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