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September 28, 2023
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PRESENTED BY
THE TOP
Happy Thursday morning.
Here’s something that might surprise you: Speaker Kevin McCarthy and President Joe Biden have had no conversations about the impending government shutdown.
Yes, the two most important players in this crisis haven’t met or spoken in any meaningful way during this standoff. And despite the enormous stakes in this funding dispute — millions of federal employees, including military service members, won’t be getting paid starting Oct. 1 — there’s no plan for the two men to confer.
The White House isn’t entirely flying blind here. McCarthy and his staff have kept in touch with Steve Ricchetti, the counselor to the president, and Shuwanza Goff, the legislative affairs director. McCarthy and Ricchetti dealt with each other extensively during the debt-limit negotiations. Goff is well-respected by House Republicans and has long had a close rapport with Team McCarthy.
McCarthy also hasn’t spoken to a single Cabinet secretary about the looming shutdown either. It’s been crickets.
Let’s break this down.
The politics for McCarthy: McCarthy is desperately trying to drag Biden into the government shutdown fray — rhetorically and substantively. Why? Biden is an easy target for the California Republican. The president’s poll numbers are terrible. And the speaker’s most hardline critics have no interest in cutting deals with the White House. Former President Donald Trump — who McCarthy has all but endorsed — is lashing out at Biden as well. So why shouldn’t McCarthy?
McCarthy is also on a different page than his Capitol counterpart, Senate Minority Leader Mitch McConnell, on government funding, Ukraine and other issues. McCarthy is struggling to rally support in his own conference. Hitting Biden, including launching an impeachment inquiry, makes sense internally for McCarthy. It’s a useful distraction.
Here’s a perfect example. Check out what McCarthy said Wednesday evening (this is lightly edited for clarity):
The politics for Biden: Why in God’s name would Biden engage here? McCarthy is flailing, let him get himself out of the mess he’s in. That’s the White House’s take, at least.
From the White House’s point of view, McCarthy is an unreliable partner. McCarthy backed away from the top-line spending targets that he personally agreed to with the president back in the spring as part of the Fiscal Responsibility Act. McCarthy touted that deal as a big win for House Republicans. Now McCarthy is the only congressional principal no longer abiding by the agreement.
Instead, under pressure from conservative hardliners, McCarthy directed House appropriators to come up with another $100 billion in spending cuts. That move has led to the current crisis and likely government shutdown. Administration officials question why they’d sit down with him again.
“President Biden did sit down with Speaker McCarthy — in May,” White House Deputy Press Secretary Andrew Bates said.
Also, if you’re the White House, why not wait to see what McCarthy can actually pass? The House is slated to vote today on four GOP-drafted spending bills — Defense, Homeland Security, Agriculture and State-Foreign Operations. There’s no guarantee that McCarthy can pass any of them, as evidenced by last night’s maneuvering in the House Rules Committee to cut $300 million in Ukraine funding from the Defense bill. (The House still might not pass the Defense bill, even without the Ukraine money).
McCarthy has to prove he can actually get himself to the negotiating table by passing bills. Otherwise, he’ll get rolled by the Senate. (We’ll note the speaker has made this argument to his colleagues as well.)
Team McCarthy vehemently disagrees with the White House’s characterization of the speaker’s position, pointing to the fact that the Senate wants to go beyond the spending caps laid out in the debt-limit bill.
“If you give two kids each $100 budget for dinner — and one spends $80 and the other spends $120, who broke the deal?” a McCarthy ally said Wednesday night.
The truth here is that the White House may have to engage — and soon. Once the government shuts down, congressional leaders will need to find their way out of it. And Congress will need to know how far Biden is willing to go.
Also: Sen. Bob Menendez (D-N.J.) will address Senate Democrats behind closed doors today about his federal indictment on bribery and corruption charges. Menendez pleaded not guilty on Wednesday. A majority of the Democratic Caucus has called on him to resign, including nearly all the Senate Democratic leadership. But not Senate Majority Leader Chuck Schumer.
— Jake Sherman and John Bresnahan
Join us next week on Tuesday, Oct. 3 at 9 a.m. ET for a conversation with Sen. Mark Warner (D-Va.). Punchbowl News Founder & CEO Anna Palmer and Senior Congressional Reporter Andrew Desiderio will discuss national security and foreign policy with Warner. RSVP now!
WASHINGTON X THE WORLD
Despite overwhelming majorities, no clear path for Ukraine aid
One week after Ukrainian President Volodymyr Zelensky delivered a plea for additional American aid, a sobering reality has set in on Capitol Hill — Congress has no clear path, as of this moment, to approve new funding for the embattled U.S. ally.
The issue has become tied up in the dispute over government funding, with Speaker Kevin McCarthy refusing to include new Ukraine aid in any stopgap spending measure over fears that a conservative revolt could cost him his post. In some ways, McCarthy’s own standing has become tied to this issue.
Ukraine in general has become such a charged issue for House Republicans that party leaders late Wednesday night stripped a small portion of Ukraine aid from their version of the FY2024 Defense spending bill. That came just hours after the House overwhelmingly defeated an amendment to strip this exact same funding from the bill. The vote was 330-104. Those 104 “no” votes were all Republicans — nearly half the GOP conference.
Think about that — the House voted against removing the funding from the bill, yet the GOP leadership did it anyway because they may not be able to pass the Defense package if they don’t. This is because they’re only using GOP votes to jam though funding bills, and Ukraine is toxic to many House Republicans.
This doesn’t mean Congress won’t eventually appropriate new funding for Ukraine; there are clear supermajorities in both chambers that back Ukraine aid. Yet right now, supporters don’t have a viable plan to get it across the finish line, with House Republicans remaining the chief roadblock.
The dynamic is worrying many top lawmakers. They say the congressional debate is creating a level of uncertainty about the United States’ commitment to Ukraine, and that’s playing right into Russian President Vladimir Putin’s hands.
“There’s no doubt in my mind he’s using what’s going on right now to bolster [Putin’s] position and undermine the Western world’s position,” Sen. Thom Tillis (R-N.C.), who backs long-term funding for Ukraine, told us. “This whole debate — I mean, it’s BS.”
In early August, President Joe Biden asked for $24 billion to meet Ukraine’s military, economic and humanitarian needs through the end of the year. That number has now been trimmed to $6 billion in a bipartisan Senate stopgap funding proposal designed to keep the government open past Saturday’s deadline — one that Senate Minority Leader Mitch McConnell backs.
At one point during those behind-the-scenes talks on the short-term funding bill, the White House and State Department came up with the $6 billion figure, estimating that would keep the funding spigot turned on for Ukraine over the duration of that Senate stopgap bill — 47 days.
Many Senate Republicans now prefer a clean CR so that Congress can consider and pass a longer-term Ukraine package in a single vote next month. Their preference is to pass a year’s worth of funding that could sustain Ukraine through the 2024 presidential election. These Senate Republicans also believe it would help McCarthy and House Republicans avoid a government shutdown by taking the Ukraine Issue off the table for the moment.
Yet this year-long number could be truly staggering — something in the range of $60 billion to $80 billion. That’s going to be a very difficult vote. So voting multiple times on smaller packages would guarantee that the fissures over Ukraine inside the GOP remain in the headlines.
“We can’t be doing this every three months,” House Foreign Affairs Committee Chair Michael McCaul (R-Texas) told us. “It’s going to have to pass eventually. There’s too much support for it.”
House Democrats, meanwhile, want GOP Ukraine supporters like McCaul to be more aggressive in pushing for a vote. The House Armed Services Committee’s top Democrat, Rep. Adam Smith (Wash.), said that without their nudging, McCarthy “is giving all the appearances of having decided to abandon Ukraine.”
“OK, how are you going to make it not a problem? Because the sit-around-with-your-thumb-up-your-ass plan doesn’t seem to be working at the moment,” Smith said.
— Andrew Desiderio and John Bresnahan
THE MONEY GAME
House GOP outside groups raised $80M so far this year
News: The Congressional Leadership Fund, the Speaker Kevin McCarthy-linked super PAC, and American Action Network, a related non-profit group, have raised $80 million this year.
The total is $20 million more than they raised in the first three quarters of 2021. The $60 million the two groups booked then was an internal record.
CLF is a huge part of the House Republican political machine. It has the most leeway to conduct overtly political business. It’s raised $36 million this cycle already.
The two groups raked in $48 million during the third quarter, including $26 million in September alone.
Let’s be clear: McCarthy can’t directly ask for sums above the federal donation limit. But donors understand that these are McCarthy-allied groups and make these donations as a vote of confidence in the California Republican.
What McCarthy will say today: McCarthy will announce this morning at a GOP meeting that he’s donating money to 32 targeted House Republicans.
McCarthy will dish out $2.5 million from his “Protect the House 2024” joint fundraising committee, bringing his total giving to House Republicans to $10.1 million.
McCarthy will also announce that he’s transferring $2.5 million to the NRCC. The speaker will have sent $20 million to the NRCC for the cycle following this transfer.
— Jake Sherman
PRESENTED BY META
What to know before the first impeachment inquiry hearing
The House impeachment inquiry’s first hearing is upon us. The House Oversight Committee is kicking off its made-for-TV presentation of what Republicans claim is evidence linking President Joe Biden to overseas business deals conducted by his son, Hunter Biden.
It’s a tough backdrop for the first hearing, though. Democrats are bashing the GOP for holding the hearing just days before a likely government shutdown. A number of House Republicans, led by the vocal Rep. Ken Buck (R-Colo.), are speaking out against the probe.
And crucially, there’s still no concrete connection to wrongdoing on the part of Joe Biden.
Here’s what to watch.
The Republican argument: In a sign of the inquiry’s three-committee approach, Oversight Committee Chair James Comer (R-Ky.) is splitting up his 10-minute opening statement with Judiciary Committee Chair Jim Jordan (R-Ohio) and Ways and Means Committee Chair Jason Smith (R-Mo.), who is being waived onto the panel today.
“President Biden has lied to the American people about his knowledge of and participation in his family’s corrupt business schemes,” Comer will say in his opening statement.
Each GOP member will use their question time to focus on a specific piece of evidence. There will be a focus on bank records Comer has subpoenaed, testimony from former Hunter Biden associate Devon Archer and the disclosures Wednesday from the Ways and Means panel.
Expect Republicans to also cite wire transfers that showed Hunter Biden directly received money from a Chinese businessman in 2019. It’s a rare example of a direct transfer of funds from a foreign source to the president’s son. Hunter Biden used the elder Biden’s Wilmington, Delaware, home as the beneficiary address for the transaction.
Check out this Republican memo summarizing what the investigatory committees see as the legal basis of the impeachment inquiry.
The Democratic pushback: Democrats will seek to present GOP claims as debunked conspiracy theories and portray the hearing as a distraction from the looming shutdown and former President Donald Trump’s alleged criminal misdeeds.
Their argument: Biden hasn’t done anything wrong and the Comer-led probe is just lots of partisan noise.
“It’s hard to grasp the complete derangement of this moment,” ranking member Jamie Raskin (D-Md.) said in a statement. “Why impeach a president who has committed no high crimes and misdemeanors, no low crimes and misdemeanors, and no crimes at all?”
We got our hands on a new memo from Democratic Oversight and Judiciary staff that takes aim at “Republicans’ false claim that President Biden interfered in the investigation and prosecution of his son, Hunter Biden.”
“Routine procedures and typical challenges—not political interference–drove the investigative decision-making,” the memo argues.
— Max Cohen
The road to weed banking is getting shorter — and bumpier
The Secure and Fair Enforcement Regulation Banking Act cleared the Senate Banking Committee Wednesday on a bipartisan vote.
It’s a significant milestone for the cannabis sector. This was the first time that the Senate has taken any formal vote on cannabis banking reform after more than a decade of advocacy.
But already, the politics surrounding the high-profile issue are starting to get tougher to manage. Progressives and conservatives are pulling hard (and in opposite directions) to expand the bill’s scope. The bigger this bill gets, the harder it will be to meet the Senate’s 60-vote threshold on passing anything of substance.
It was never going to be easy to get SAFER Banking through the Senate, but the challenges are cropping up fast.
Progressives want more: Sen. Raphael Warnock (D-Ga.) was the lone Democratic vote against the package on Wednesday, and his opposition was stark.
But many progressives aren’t exactly comfortable with a bill that, on its face, does more for banks and weed investors than any other bloc. Sen. Chris Van Hollen (D-Md.) all but threatened to vote against the bill on the floor unless there’s also a vote on the HOPE Act, which would help fund nonviolent weed expungements.
And Sen. Elizabeth Warren (D-Mass.) told us in an interview after the markup that “now is the time to push for racial justice.”
Waning Republican support: Three GOP members of the Senate Banking Committee supported cannabis banking Wednesday. That’s not bad, but advocates of the reform were hoping for a better showing.
Sens. Steve Daines (R-Mont.), Cynthia Lummis (R-Wyo.) and Kevin Cramer (R-N.D.) backed the bill. But lobbyists tracking these negotiations had hoped to pick up other committee members, including Sens. Thom Tillis (R-N.C.) or Katie Britt (R-Ala.).
It didn’t happen, and that gives Senate Majority Leader Chuck Schumer a smaller runway to deliver on cannabis reform. That’s making some proponents nervous.
Conservatives (also) want more: A key conflict for lawmakers in the weeks leading up to the markup was over Section 10 of the bill, which would crack down on regulators’ ability to discourage banks from working with certain businesses.
House Republicans have already made clear they’re not jazzed about the Senate’s approach for not going far enough. Rep. Blaine Luetkemeyer (R-Mo.) said in a statement Wednesday night he believed the SAFER Banking Act would still give regulators “broad discretion” to close the accounts of controversial causes.
“In its current state, the SAFER Banking Act will not make it through the House,” Luetkemeyer said.
Republican senators off the Senate Banking Committee will also introduce wrinkles of their own when the bill makes it to the floor.
We’re told that Sen. Ted Cruz (R-Texas) plans to introduce an amendment that would expand the Section 10 language beyond regulators to banks and other financial institutions themselves. That’s part of a broader focus from Republicans on the Senate Commerce Committee on how some banks may have pressured other businesses into terminating relationships with gun manufacturers in Texas.
ICYMI: The second edition of The Vault, our quarterly financial services newsletter, landed Wednesday. It features an exclusive interview with New York Department of Financial Services Superintendent Adrienne Harris, a look at how Wall Street is betting on Washington and more. Follow this link to read the full edition.
— Brendan Pedersen
PRESENTED BY META
PUNCHBOWL EVENTS
Did you miss our conversation Wednesday with Sen. Raphael Warnock (D-Ga.) on his farm bill priorities, the potential government shutdown and agricultural innovations? You can watch the full video here.
Plus: Wednesday night, Punchbowl News CEO and Founder Anna Palmer sat down for a fireside chat with Coinbase co-founder and CEO Brian Armstrong and Paradigm co-founder and managing partner Fred Ehrsam about the crypto community, the state of crypto legislation and regulation, and the future of the industry. The event was hosted by Stand with Crypto, a grassroots organization focused on mobilizing the crypto constituency.
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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.