Capitol Hill: New Talks, A Stormy GOP Leadership Race

Published on September 30, 2015

With all eyes focused on the contentious House Republican leadership elections just announced for October 8, it can almost be forgiven that after all the sound and fury over the passions in shutting down the federal government in order to defund Planned Parenthood, the House is expected to easily pass a Senate-written “clean” Continuing Resolution ensuring that the government operates until December 11.


And indeed, last Friday’s stunning announcement by House Speaker John Boehner that he would be resigning effective October 30 turns out to have only been the opening act to a fast paced political theater of power plays within the fractured Republican Party, relentlessly building from the leadership elections towards high stakes “must pass” bills to increase the federal debt ceiling and to replace the expiring CR later this year.


*** While the most conservative factions within the House Republican Conference are seeking further cuts in the FY2016 budget outlays by threatening to block an increase in the debt limit later this year,  outgoing House Speaker John Boehner and Senate Majority Leader Mitch McConnell are about to start budget talks with President Obama and the Democratic leadership to adjust domestic spending, upwards, in a possible two-year budget deal — a deal whose ambitions could tie together the 2016 appropriations, some type of long-term debt reductions, long-term highway funding, perhaps even the debt ceiling increase. It is far too soon to handicap the talks, but we caution against cynicism. ***


*** Meanwhile, House Majority Leader Kevin McCarthy still looks likely to win the House Republican conference nomination to become the next Speaker, even as his bid quickly ran into resistance with GOP dissidents seeking to deny him a first ballot win, even if they have no candidate of their own. The Majority Leader contest between Majority Whip Steve Scalise and Budget Committee Chairman Tom Price is equally riven with disquiet, leading to a failed, last minute to push Trey Gowdy, the South Carolina chairman of the committee investigating Benghazi, into the race. ***


*** If the ambitious leadership budget talks fail or are defeated on the House floor — whatever they produce is almost certain to run into fierce resistance among GOP budget hawks and the dissident House members demanding no compromise negotiating purity — the new Speaker McCarthy could quickly find himself in an almost impossible position. What’s more, his room for maneuver is likely to be limited by the promises he makes to win over the dissident wing, while Price, a fierce budget hawk, could as Majority Leader work to undercut a budget deal that includes higher domestic spending. The risk of a major political crisis in late November and early December should not be underestimated. ***


In other words, the battle is now fully underway on Capitol Hill to determine whether there is a retrenchment in federal spending, reversing the modest fiscal tailwind of recent years, and whether there will be headline shocks of renewed threats of defaults or government shutdowns that could erode consumer and business confidence and spending.


And on that front, we would be remiss not to note the political brinksmanship on Capitol Hill is also likely to complicate the Federal Reserve’s current base case for a first rate hike at its mid-December meeting (SGH 9/18/15, “Fed: The Morning After”).


McCarthy’s Promises — McConnell’s Constraints


The Senate is expected to pass later this afternoon Majority Leader McConnell’s CR without the Planned Parenthood defunding that he attached as an amendment to an unrelated House bill, H.R. 71, and which he pushed through a 77-19 cloture vote on Monday to eliminate the filibuster threat by Texas Republican Ted Cruz.


Cruz in fact failed to win over a single Republican co-sponsor in a proposed amendment to defund Planned Parenthood, and to block funding for the Iran Nuclear Agreement for good measure, and the Senate vote this morning now clears the way for a same day House vote sometime later today that will extend the federal funding at FY2015 levels until December 11.


The quick fading of the showdown over the Planned Parenthood funding was in any case already being overshadowed by the scramble within the fractious Republican House Conference to select its new leadership.


With no real rival to face, Majority Leader McCarthy remains the most likely successor to Boehner as Speaker. But his path quickly ran into resistance as he made the rounds of key GOP political factions yesterday as well as the media outlets making his case for the job.


In particular, he met for over an hour with the Freedom Caucus, the 40 strong House Republicans led by Ohio’s Jim Jordan, who nearly defeated Boehner as the Speaker in January of this year. Under the group’s rules, its members would only vote as a bloc if four of five in total agree on a candidate. The Freedom Caucus has two problems: their numbers are too small to control their colleagues and they have no candidate of their own who is attracting more than a handful of votes. Instead, they use their numbers to frustrate and delay.


So McCarthy is still almost sure of an eventual nomination. But the question is what promises McCarthy will have to make to secure that nomination by the majority Republicans, which would then be put to a full House floor vote.


The Freedom Caucus is understood to have demanded a change in the way legislation is brought to the floor — that is, their favored legislation that might have been previously blocked in the powerful Rules Committee by Speaker Boehner — or in winning more Committee seats or chairs for its members in the next congressional session.


McCarthy, as his way of calming hot tempers, has promised to take a hard line in future negotiations with House and Senate Democrats. It would not be too hard to imagine the vengeful attacks on the new Speaker if the current Speaker’s deal fails and McCarthy has to negotiate on the trifecta of key bills on the near docket, including the Highway Spending Bill, passing an Omnibus when the current CR expires, and of course, to increase the federal debt ceiling.


All of this, of course, will not be lost on Senate Majority Leader McConnell, who is also under enormous political pressure to “toughen up” his negotiations with Senate Minority Leader Harry Reid, who has successfully used the filibuster to stall spending bills, including the politically charged defense authorization bill.


In particular, that may make it more difficult for McConnell to push an increase in the debt ceiling through both the Senate and the House by constructing something similar to the so-called “McConnell mechanism” he used to make it possible for reluctant Republicans to increase the debt ceiling by voting no.


While that mechanism could still clear the Senate, it would be difficult this time round to do so in the House without perhaps fatally undermining McCarthy’s still untested political grip on the Speaker’s position.


A High Price in Majority Leader Race


Perhaps pulling the House Republican conference even further to the right would be if Budget Committee Chairman Price is elevated to Majority Leader. Majority Whip Scalise was first to announce his intentions to run for Majority Leader and he has quickly picked up the support of the House GOP defense hawks embittered over what they saw as Price’s stubborn resistance to their efforts to increase defense spending above the sequester’s spending caps.


But with McCarthy nearly a lock, the tempestuous House Republican Conference is rocking over who is the new Number Two. Yesterday afternoon, there was a sense Scalise’s momentum may have stalled somewhat while Price has been gaining traction after quickly winning the endorsement of two key committee chairmen, Ways and Means Committee Chairman Paul Ryan and Financial Services Chairman Jeb Hensarling. Price is also building on his support base among his fellow fiscal hawks and by reaching out to the religious and social conservatives positioning himself as the perfect pairing with McCarthy.


We see risk if Price wins the job as House Majority Leader. He is not a Freedom Caucus type, but he shares most of their policy objectives, even as he disdains their tactics. By default, Price could become the responsive leader to the dissent faction, a development that could be dangerous to a growth-supportive fiscal policy.


Price never really got a chance as new budget committee chairman to do as much to trim government spending as he wanted, since no one else wanted to veer too far away from the budget agreement reached in 2013 by then House Budget committee chairman Ryan and his Senate Budget Committee counterparty Patty Murray to circumvent the sequester by lifting federal outlays for the two years of the agreement.


But that may quickly change if he rises to Majority Leader, which would become a major stumbling block in the upcoming budget negotiations with the minority Democrats in the run up to the expiration of the CR in December, and President Obama, who have coordinated their strategy to increase non-defense discretionary spending to a level equal to the $90 billion the GOP added to the defense spending above the sequester caps by pushing the funds off budget into the Overseas Contingency Account.


Boehner’s Barn Cleaning


When Speaker Boehner made his announcement last Friday he would be stepping down October 30, he vowed that he would do is best to clear some of the most politically difficult bills from the docket for his successor, saying he would not want to leave behind “a dirty barn.”


Indeed, while all eyes were focused on the House Republican leadership elections, the outgoing Speaker got busy with that “barn cleaning,” working with Senate Majority Leader McConnell to re-open high level talks with President Obama. McConnell did try an end-run around Senate Minority Leader Harry Reid and House Minority Leader Nancy Pelosi by cutting them out of the talks, which Obama and even Boehner refused. And the GOP efforts can to some extent be seen as a political play to pull Obama into sharing any of the blame if everything goes south in the brawl over the debt ceiling or the CR.


But in effect, the new high level talks are nevertheless an eleventh hour attempt by the “establishment” leadership to pull together the basic framework to a two year budget deal that could equally link in movement on the Highway Spending Bill and working around the sequestered spending caps to both protect the GOP’s higher defense spending and to meet Democratic demands for higher non-defense discretionary spending.


Equally importantly, the five are seeking an understanding on some degree of longer term debt reduction — modeled on the successful Boehner-Pelosi deal earlier in the year on a healthcare program. In itself, such a deal could relieve if not remove the pressure to use the debt ceiling as a hostage in forcing budget cuts envisioned by Republican hawks.


And if this sounds a bit like the failed “Grand Bargain” of a few years ago by the same political leadership, it is because it is essentially that, a last gasp effort to have another go at some sort of far-reaching budget deal exactly because the stakes are that much higher.


Indeed, our sense is that one of the reasons Boehner chose to leave at the end of October rather than immediately or the end of the year is because that timing offered the optimal political pressures to enable him to go out with at least a framework of such a deal as a final farewell to his near quarter century on Capitol Hill.

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