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May 3, 2023
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PRESENTED BY
THE TOP
Happy Wednesday morning.
Senate Republicans haven’t been this united in a long time.
From the dealmakers and moderates to hardline conservatives, GOP senators are in lockstep behind Senate Minority Leader Mitch McConnell’s hands-off approach to the debt-limit crisis. President Joe Biden and Speaker Kevin McCarthy must take the lead in resolving this crisis, McConnell insists, and the Senate should play a rare supporting role.
It’s a surprising show of unity for a GOP leader who six months ago faced the first real challenge to his role atop the Republican conference. McConnell was criticized by conservatives for working too closely with Democrats in the last Congress.
“I think McConnell’s analysis is right,” said Sen. Rand Paul (R-Ky.), a frequent McConnell critic. “I don’t always agree with him. But on this, I think his analysis is right.”
Here’s how Sen. Tommy Tuberville (R-Ala.) put it:
There’s zero appetite among Senate Republicans to do anything that would undermine McCarthy’s negotiating position ahead of a May 9 White House meeting between Biden and the Big Four leaders.
Of course, Republicans of all stripes would like to see some sort of spending cuts, so it does them no good to break from McCarthy.
“Whatever Kevin McCarthy comes to with the president, that’s great. We’ll be there to support the speaker,” Sen. Joni Ernst (R-Iowa) said. “[McCarthy] can take a real strong lead here. We don’t want serious fractures happening in the House.”
Even GOP senators who voted against McConnell in the November leadership race and have been critical of his deal-making with Democrats are saying he’s employing the right strategy.
“I don’t know his motivations, but I agree with what he’s saying right now,” Sen. Ted Cruz (R-Texas) said of McConnell.
“I think it’s just the reality of the situation,” added Sen. Ron Johnson (R-Wis.), who supports the House GOP’s Limit, Save, Grow Act.
McConnell was emphatic during his Tuesday press conference that there’s no debt-limit solution to be found in the Senate, and he’s fully behind McCarthy. McConnell made reference to the 2011 debt-limit crisis, which ended with him and then-Vice President Biden clinching an agreement on spending caps and raising the debt limit.
This time is different, McConnell said, because the House was able to coalesce around a bill that Republicans believe should jump-start negotiations with the White House.
“If you look at the House, what they accomplished was a surprise to everyone given the various factions,” McConnell said. “Their having achieved an outcome — it should be clear to the administration that the Senate is not a relevant player this time.”
Democrats and the White House, meanwhile, aren’t backing off of their demand that the debt limit be raised without conditions.
In the last few days, some in the Capitol have floated a short-term debt-limit boost to allow McCarthy and Biden to try to come to an agreement. Our conversations with House Republican leaders indicate that the prospect for such a measure is far from a sure thing.
Several House GOP leadership sources said they would want to see the Senate pass a short-term debt-limit hike before the House would consider it. Furthermore, it’s unclear that the right would have the appetite to give Biden and McCarthy more time unless an acceptable deal is truly in the offing.
Schumer unveils new China push
News: At Tuesday’s Senate Democratic lunch, Senate Majority Leader Chuck Schumer detailed his upcoming focus on a bipartisan China package, according to a source familiar with the caucus discussion.
Schumer previewed this new push during our interview with the New York Democrat last week. He told rank-and-file Senate Democrats that the legislation will involve limiting the flow of U.S. investments and advanced technology to China, getting allies on board to blunt China’s Belt and Road Initiative and deterring an invasion of Taiwan.
Schumer has asked his committee chairs to work with their respective GOP counterparts to craft different pieces of the broader legislation in the coming months.
The Senate Appropriations Committee announced a hearing scheduled for May 16 that will focus on U.S.-China competition. It will feature testimony from Secretary of State Antony Blinken, Defense Secretary Lloyd Austin and Commerce Secretary Gina Raimondo.
— Andrew Desiderio, John Bresnahan and Jake Sherman
Don’t miss out! In two weeks, Punchbowl News Founder and CEO Anna Palmer and Financial Services reporter Brendan Pedersen will interview Rep. Nancy Mace (R-S.C.) on Wednesday, May 17, at 9 a.m. ET. They’ll discuss innovative approaches to job creation, economic growth and sustainability. RSVP!
THE SENATE
Solar tariff bill divides vulnerable Senate Democrats
A standoff is brewing among swing-state Democrats ahead of a Senate vote this evening on whether to reinstate tariffs on solar panels from Asia.
The Congressional Review Act resolution, sponsored by Sen. Rick Scott (R-Fla.), is expected to pass the Senate with a number of Democrats likely to vote with Republicans. While President Joe Biden has vowed to veto the measure, there are still fascinating policy and campaign dynamics at play among the group of endangered Senate Democratic incumbents.
On one side is Sen. Jacky Rosen (D-Nev.), who’s leading the charge to prevent tariffs from being reimposed. Rosen argues the move would all but decimate the U.S. solar panel industry, hurt union jobs and harm the country’s ability to transition to renewable energy.
“The CRA is a job killer. It’s going to kill American jobs. It’s going to stall the American solar industry,” Rosen told us. “And what we want to do is create jobs, expand jobs and lower costs for families.”
Rosen acknowledged that the CRA will clear the Senate. But the Nevada Democrat said she wants to make sure there isn’t a veto-proof majority supporting the resolution.
A number of vulnerable Democrats, led by Sens. Sherrod Brown (Ohio), Bob Casey (Pa.) and Joe Manchin (W.Va.), see the issue differently. Brown and Casey wrote to Biden in March demanding the tariffs be reinstated to punish Chinese companies for unfair trade practices.
“Too often, China gets away with undermining our markets, undermining our companies,” Casey told us. “And every time they cheat, we lose jobs in Pennsylvania.”
The coalitions here aren’t as cut and dry as they may seem. Rosen pointed out that labor groups, including the International Brotherhood of Electrical Workers, are on her side. The conservative National Taxpayers Union is also opposing the CRA and said it’s a tax increase.
This is a rare instance where Brown is maneuvering to align with Republicans. In typical Brown fashion, he’s framing his support for the CRA as an Ohio-centric, pro-worker rights position that would boost American manufacturing.
Manchin is a co-sponsor of Scott’s CRA and has said he views the administration’s guidance as an example of U.S. over-reliance on foreign countries for its energy needs.
The issue dates back to June 2022, when Biden announced the administration wouldn’t enact any new tariffs on solar imports for two years. The pause marked a temporary reprieve for American solar panel manufacturers, who are largely dependent on imports to create their products.
But the two-year tariff pause was contingent on a Commerce Department review into whether Chinese solar producers skirted rules by running their products through four Southeast Asian nations. If an investigation found wrongdoing, the White House said tariffs could be applied retroactively.
This Congress, CRAs have been a consistent way for the Senate Democrats running in red and purple states to show their independence from the White House. Congress has already passed resolutions disapproving of a Biden WOTUS rule, a D.C. crime bill and ESG investing guidelines in recent months.
– Max Cohen
BANKING BULLETIN
What to know about today’s Fed move
Federal Reserve Chair Jay Powell will go before reporters at 2:30 p.m. following the Federal Open Market Committee’s decision on whether to raise interest rates once again. The FOMC is expected to announce a 25 basis points increase — one-quarter percentage point — as the latest move in the Fed’s campaign to bring inflation under control.
But there’s growing pressure on Powell and other Fed governors to hit “pause” on rate hikes.
The red-hot job market is finally showing signs of cooling. Layoffs are rising. The U.S. economy is barely growing. Regional banks are getting hammered. And Hill Republicans and President Joe Biden are locked in a standoff over government debt with a potential default looming.
A group of top progressive Democrats led by Sens. Elizabeth Warren (Mass.), Bernie Sanders (I-Vt.) and Sheldon Whitehouse (R.I.) and Reps. Pramila Jayapal (Wash.), Brendan Boyle (Pa.) and Katie Porter (Calif.) warned Monday that the “Fed’s monetary policy strategy of more rate hikes could trigger a recession, throw millions out of work, and crush small businesses.”
So Powell’s press conference — always closely scrutinized — will garner even more attention than usual across Washington and other global financial centers. Is the Fed ready to pause? What is Powell’s view on continued inflationary pressures? How do central bankers see the state of the U.S. economy? Lots to parse here.
Meanwhile in Congress: The Senate Banking Committee announced some consequential hearings for later this month that you won’t want to miss.
Let’s start with the bankers. Banking Committee Chair Sherrod Brown (D-Ohio) and Sen. Tim Scott (S.C.), the panel’s top Republican, managed to secure appearances by Greg Becker, former CEO of Silicon Valley Bank, and Scott Shay, former president and co-founder of Signature Bank. The hearing is scheduled for May 16.
SVB and Signature were closed by regulators in March, kicking off a regional banking crisis we’re still feeling. But at SVB in particular, the decisions and conduct of executives including Becker has come under significant scrutiny.
Expect some not-quite-friendly questioning from both sides of the aisle about how Congress could strengthen the ability of regulators to punish bad bank executive behavior, including through salary clawbacks after an institution fails.
Speaking of regulators, there will also be a hearing on May 18 featuring a bevy of financial regulators. The usual list of federal officials will be there, including Michael Barr, vice chair for supervision at the Federal Reserve, Martin Gruenberg, chair of the Federal Deposit Insurance Corp., Todd Harper, chair of the National Credit Union Administration and Michael Hsu, acting Comptroller of the Currency.
Key state-level bank regulators will also testify. New York State Department of Financial Services Superintendent Adrienne Harris and California Department of Financial Protection and Innovation Commissioner Clothilde Hewlett will testify as well.
– John Bresnahan and Brendan Pedersen
AIRLINE WARS
Delta coalition takes their case to TV
We’ve extensively covered the push by the Delta Air Lines backed coalition to expand the flight perimeter at Washington Reagan National Airport. Delta is a member of a coalition called the Capital Access Alliance that wants to relax the 1,250-mile flight radius at DCA.
United opposes this — they have a hub at Washington Dulles. If DCA starts allowing long-haul flights, that would interrupt United’s dominance in coast-to-coast travel.
Well, the new coalition is taking their message to the TV airwaves in an attempt to build a case for the policy change. The ad will run in D.C., California, Texas, Utah, Virginia and Washington state. Why? The coalition has signaled that Delta would want to add flights from DCA to San Antonio and San Diego. And we surmised — correctly, it seems — that Delta would attempt to add flights from DCA to Los Angeles, Salt Lake City and Seattle.
Here’s the spot:
– Jake Sherman
THE CAMPAIGN
The NRSC is out with a new ad this morning hitting Sen. Joe Manchin (D-W.Va.) over his posture on the Inflation Reduction Act. The ad is backed by a five-figure digital buy, we’re told, and is being run across West Virginia.
The ad argues that Manchin changed his position on the IRA — which he helped negotiate — only after his poll numbers dropped. Manchin, of course, has said that the Biden administration isn’t implementing the IRA according to how it was written, in particular the energy provisions.
Here’s the spot:
— Andrew Desiderio
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Presented by Wells Fargo
At Wells Fargo, we cover more rural markets than many large banks, and nearly 30% of our branches are in low- or moderate-income census tracts. What we say, we do. See how.