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January 30, 2023
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Happy Monday morning.
President Joe Biden and Speaker Kevin McCarthy will meet on Wednesday, their first one-on-one session of the 118th Congress. It marks the kickoff for what’s likely to be a months-long showdown over the debt limit, federal spending and the deficit.
As we told you last week, McCarthy views even sitting down with Biden as a win, while White House officials continue to make clear that the president isn’t negotiating over the debt limit.
“I know the president said he didn’t want to have any discussions, but I think it’s very important that our whole government is designed to find compromise,” McCarthy said during an appearance on CBS’ “Face The Nation” Sunday.
McCarthy told Margaret Brennan that he doesn’t want a default, yet House Republicans are demanding tens of billions of dollars in spending cuts that Democrats will reject. McCarthy says he won’t touch Medicare or Social Security; Medicaid and other entitlement programs weren’t mentioned. And the Pentagon budget is on the table, at least as far as “waste” is concerned.
Which leads to the obvious question — where does this all end up?
In a number of ways, this sounds a lot like 2011 and the leadup to what became the Budget Control Act. And two of the key players in cutting that bipartisan deal are still around: Biden and Senate Minority Leader Mitch McConnell.
McConnell — who’s noted the parallels to 2011 himself — has been adamant that Biden and McCarthy need to take the lead on any debt-limit negotiations.
“Even though the debt ceiling could originate in either the House or the Senate, in this current situation, the debt-ceiling fix — if there is one or how it’s to be dealt with — will have to come out of the House,” McConnell told reporters last week. “I wish [McCarthy] well in talking to the president.”
But Senate conservatives — the self-styled “The Breakfast Club” — are arguing that McConnell should insert himself into the talks if needed, citing his past work with Biden. We’ll also note that these are the same GOP senators who have criticized McConnell over the years for, in their view, caving to Democrats when it comes to spending increases.
Here’s Sen. Mike Braun (R-Ind.):
Sen. Ted Cruz (R-Texas) was cryptic, saying only that “time will tell” whether McConnell should ultimately get involved. Cruz this week actually praised GOP leaders for “standing strong” in 2011 and called the Budget Control Act “the most significant constraint in federal spending in modern times.”
Sen. Josh Hawley (R-Mo.) — who said Medicare and Social Security must be exempted — said spending caps “could be a step in the right direction.”
Hawley, though, warned any potential cuts to the Pentagon budget would be a problem for Senate Republicans. “There’s gonna be a question about defense immediately,” Hawley said.
McConnell was instrumental in negotiating the BCA, which mandated caps on government spending as part of a deal to raise the debt ceiling. At the time, the balance of power in Washington was similar to what it is now — a GOP-run House, a Democratic Senate, and a Democratic president. The U.S. economy also was emerging from the Great Recession, which had seen the federal government rack up huge deficits.
Biden, as vice president, dealt directly with McConnell on the BCA effort after talks between President Barack Obama and Speaker John Boehner stalled.
In his comments Tuesday, McConnell said the BCA “actually worked” at cutting spending for two years in a row. Several years later, both parties found themselves hamstrung by the deal politically and walked away from it.
McConnell’s deputies are echoing him on the “House-must-go-first” approach. Senate Minority Whip John Thune said, “We need to give [McCarthy] space to try to figure out if there’s a path forward, and I think that’s what [McConnell] is trying to do.”
Here’s more Thune:
Whether the McCarthy-Biden negotiations yield something similar to the BCA remains to be seen.
McCarthy wants to clinch an agreement on budget caps. But that will be a tall order, especially since he has almost no relationship with Biden. Senate conservatives’ desire for McConnell to be at least on standby can be interpreted as a reflection of that dynamic.
— Andrew Desiderio and John Bresnahan
Reminder: Don’t forget to RSVP for our event next week with House Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-Wash.)! We’ll be talking to McMorris Rodgers on Wednesday, Feb. 8 at 9 a.m. ET about her priorities for this key committee in the 118th Congress, including spectrum and the conversation around wireless data. RSVP to join us in-person or on the livestream!
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Big issues of the week
We’re watching a few things in the Capitol this week and two big things outside.
Outside: The Federal Open Market Committee is meeting this week and we’ll find out how much the central bank has been persuaded by recent inflation data to scale back its rate-hike campaign. The meeting is Jan. 31-Feb. 1.
On Wednesday, most analysts expect the Fed to announce a 25 basis points increase, smaller than recent bumps. Fed Chair Jay Powell will hold a press conference to discuss the state of the U.S. economy.
On Friday, the Bureau of Labor Statistics will release the January jobs numbers.
Inside: The House will consider a number of GOP-drafted bills this week. You can check out the list here. Several measures are related to moving the country past the Covid-19 pandemic.
Rep. Brett Guthrie (R-Ky.) wants to end the public health emergency for Covid-19, while Rep. Jeff Duncan (R-S.C.) seeks to repeal the federal mandate on Covid vaccines for health care workers. This proposal by Rep. James Comer (R-Ky.), chair of the Oversight and Accountability Committee, would force federal employees back to their offices, something D.C. officials would welcome.
Rep. Maria Elvira Salazar (R-Fla.) also has a resolution denouncing the “horrors of socialism.”
One thing we’re keeping an eye on: whether Speaker Kevin McCarthy moves to kick Rep. Ilhan Omar (D-Minn.) off the House Foreign Affairs Committee. Omar has formally been nominated to the panel by Democrats. It would take a vote of the full House to remove her, and there are several skeptics in the GOP ranks. With Rep. Greg Steube (R-Fla.) still recovering after falling off of a ladder at his Florida home, McCarthy doesn’t have much room for error.
The Senate – which has yet to organize for the 118th Congress due to problems on the GOP side of the aisle – has a light schedule again this week. There’s a vote set for tonight at 5:30 p.m., but Senate Majority Leader Chuck Schumer has yet to formally announce what’s being voted on.
We expect the Senate to approve an organizing resolution this week once Republicans have their committee assignments set.
Schumer will be in New York City on Tuesday with President Joe Biden for an event touting federal funding for the Gateway Tunnel project. This is a huge priority for New York and New Jersey’s political and business leaders.
Due to Schumer’s absence, Senate Democrats have moved their weekly policy lunch from Tuesday to Wednesday. Schumer and Democratic committee chairs will hold their first bi-weekly lunch of the new Congress on Thursday.
– Jake Sherman and John Bresnahan
OVERSIGHT WATCH
DOJ’s Hill liaison on Jordan, compliance and more
The relationship between House Judiciary Committee Chair Jim Jordan and the Justice Department, perhaps predictably, has gotten off to a rocky start this year.
After DOJ’s legislative affairs chief Carlos Uriarte sent Jordan a five-page letter laying out longstanding department policy that featured lines about protecting the integrity of ongoing investigations, Jordan’s team shot back on Twitter: “Why’s DOJ scared to cooperate with our investigations?”
Uriarte doesn’t see it that way.
We had a long conversation with Uriarte late last week. The assistant attorney general said the letter’s purpose “was to really demonstrate our interest and willingness to cooperate with [Republicans] in their investigations,” consistent with historical norms.
House Republicans, led by Jordan, are promising a flurry of investigations into the DOJ. From the FBI’s treatment of school board protests to the department’s reaction to President Joe Biden’s classified document case, very little is off limits for Jordan and his allies.
But Uriarte has signaled that House Republicans won’t get much information on active probes, a position that DOJ has maintained for decades under both Democratic and Republican presidents, administration officials note.
We were curious if Uriarte would lean on the congressional stonewalling of former President Donald Trump and his administration to justify denying some GOP requests. But Uriarte reached back far longer.
“The precedent related to oversight goes back quite a long way — over multiple decades — including back to [former Attorney General] Robert Jackson, who spoke eloquently about the importance of protecting the integrity of our investigations,” Uriarte said. Jackson served as attorney general under FDR in 1940-1941.
A former counsel for Oversight Committee Democrats, the coronavirus select subcommittee and Rep. Judy Chu’s (D-Calif.) office, Uriarte has five years of Capitol Hill experience. Uriarte told us he’ll draw on his time in the executive branch and Congress to “help each institution understand the equities and prerogatives of each other.”
| → | We asked Uriarte if he sees Jordan as an honest broker. “I think Rep. Jordan, just like any member of Congress, has a set of goals that he wants to accomplish as chair.” |
Uriarte is eager to redirect the focus from the GOP’s investigations and towards less controversial legislative priorities, such as local law enforcement grants.
“We want to make sure that [Jordan’s] committee and members have access to information about all of the activities across the department, including grants that we make to state and local law enforcement in the districts that he and his members represent,” Uriarte said.
| → | Can the DOJ work with House Republicans in any meaningful way? |
Here was Uriarte’s response: “We make an individual determination based on every request that comes our way with the goal of identifying what information we can share with Congress to meet their informational need without undermining the integrity of our work.”
| → | What does Uriarte make of the new subcommittee, also chaired by Jordan, that is tasked with investigating whether the federal government has been “weaponized” against the right? |
“I can assure you that what [DOJ agents] are focused on is making sure that we are protecting the American people from a host of threats, and that we do so in a way that ensures that like cases are treated alike and that the rules apply, regardless of a person’s political affiliation, race, wealth or social status.”
— Max Cohen
CENTRAL BANK BULLETIN
As inflation cools, Hickenlooper again urges Fed to stop rate hikes
News: Sen. John Hickenlooper (D-Colo.) is urging the Federal Reserve to “pause” future rate hikes for the second time since late October.
Addressed to Fed Chair Jay Powell this morning, Hickenlooper’s letter is part warning, part victory lap. The Colorado Democrat was one of the first lawmakers in Washington to ask the U.S. central bank to reconsider just how fast it was driving up rates, and inflation has cooled significantly in the months since.
Nonetheless, the Fed is still widely expected to bump rates by 25 basis points later this week.
Here’s the letter.
The risks of rising unemployment remain top of mind for many the Democratic lawmakers. The U.S. labor market is historically strong for the moment, coming in at less than 3.5% in December. But that would almost certainly change for the worse if the country enters a full-tilt recession, though we’re not there yet.
We don’t expect Hickenlooper to be the last lawmaker to complain about the Fed’s approach this week or in the months to come. And after pols stop fighting about how high rates should go, they’ll shift to how long they stay high – which we expect to be a significantly longer conflict between monetary policy hawks and doves.
– Brendan Pedersen
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What we’re watching
| → | Monday: The House Rules Committee will hold an organizational meeting and then consider a slew of bills headed for the floor this week. Here are the committee rules for the 118th Congress. This will be the debut for the new GOP members of the panel. |
| → | Tuesday: The House Judiciary Committee will meet to organize for the 118th Congress, as will the Oversight and Accountability panel. House Rules will meet on the “denouncing the horrors of socialism” resolution. The Senate Intelligence Committee will have a closed briefing. |
| → | Wednesday: The House Transportation and Infrastructure Committee will have its organizational meeting. The panel will then hold a hearing on “The State of Transportation Infrastructure and Supply Chain Challenges.” |
The House Judiciary Committee will have its first border hearing. The House Oversight Committee will have a hearing on pandemic waste, fraud and abuse.
Senate Agriculture will have a hearing on the farm bill. Senate EPW will have an organizational meeting. And Senate Intel will get a closed briefing.
| → | Thursday: The Senate Judiciary Committee will consider a slew of nominations. The Senate Commerce Committee will have its organizational meeting. The Senate Energy and Natural Resources Committee will have a hearing on the implementation of the Infrastructure Investment and Jobs Act. |
– Jake Sherman
PRESENTED BY BLUE CROSS BLUE SHIELD ASSOCIATION
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