McCarthy Faces Conservative Mutiny

McCarthy Faces Conservative Mutiny

McCarthy may suffer another embarrassing defeat on his own spending bills.
By Yuval Rosenberg and Michael Rainey
Wednesday, September 13, 2023

Good evening. The House has been back from its recess for two days now and Speaker Kevin McCarthy already faces an embarrassing defeat on a spending bill — at the hand of his own members. Here’s what’s happening.

McCarthy Faces Conservative Mutiny Over Spending, Shutdown

With a looming September 30 deadline to avert a government shutdown, House Speaker Kevin McCarthy is boxed in by his own conference, and Republican hardliners are making it clear that the newly ordered impeachment inquiry into President Joe Biden isn’t going to make them any more cooperative when it comes to funding federal agencies.

The latest sign the House is sinking into chaos: McCarthy and House Republican leaders were forced Wednesday to postpone consideration of their version of the $826 billion annual defense appropriations bill because they didn’t have the support to get it through a procedural vote. Republican hardliners were reportedly demanding a plan to cut spending in areas beyond defense.

“It’s become clear that McCarthy’s move to placate his right flank by launching an impeachment inquiry into President Joe Biden isn’t working,” Politico noted. “He still lacks the votes to pass a stopgap bill to keep the government open past Sept. 30. And some conservatives are still threatening to force a vote stripping him of the speakership.”

Even if House Republicans were all on the same page, their defense bill would not be able to pass the Senate anyway and the White House had also threatened to veto it because it is laden with culture war provisions targeting the Pentagon’s abortion travel policy, transgender care and diversity initiatives.

While the House Freedom Caucus pushes for McCarthy to demand steeper spending cuts in negotiations with Biden and the Senate, the speaker reportedly had told his members that approving their own “domestic security” appropriation package, with emergency disaster relief funding attached, would strengthen his hand in upcoming spending talks.

As of now, though, McCarthy has little leverage — and no clear path forward. The speaker reportedly asked his members if they can’t pass their own appropriations bills or a stopgap measure to fund the government and won’t do an omnibus package that rolls up annual spending bills, what can they do? And he has acknowledged that the spending fight pits three against one: Senate Democrats, Senate Republicans and the White House against his House GOP conference.

“McCarthy can’t do a thing, can’t do anything. He’s completely paralyzed by his conference,” Jake Sherman of Punchbowl News told MSNBC Wednesday.  “And by the way, McCarthy has no idea how he’s going to get out of this because he’s hamstrung by the right wing of his conference which basically wants him out and doesn’t want him to do anything.”

What’s next: The defense funding bill appears to be on hold. Roll Call reports that House Republicans are discussing a three- or four-week funding bill to avert a potential shutdown after September 30 and that their plan “would push decisions on military and economic aid for Ukraine as well as disaster relief into the regular fiscal 2024 spending bills.”

For now, though, there are few if any signs that McCarthy and his members will be able to pull together behind any strategy that might fund the government and avoid a shutdown. As Politico’s Sarah Ferris, Jordain Carney and Olivia Beavers point out, “the reality is that his conservative members have enough votes to derail every one of McCarthy’s spending priorities — the defense spending bill on Wednesday, virtually all of the other 10 bills still on the docket and any kind of short-term funding bill.”

McCarthy’s other short-term option would be to rely on Democrats to prevent a shutdown. That could cost him his job, though it remains unclear which other Republican could get enough votes to succeed him.

Inflation Accelerates as Gas Prices Move Higher

Inflation picked up in August, the Labor Department reported Wednesday, with the topline consumer price index coming in at 3.7% on a 12-month basis, up from the 3.2% annual rate recorded in July. On a monthly basis, consumer prices increased 0.6% — the largest month-over-month increase in a year.

Driven in large part by the cost of gasoline — up 10.6% in August, accounting for more than half of the overall increase – the rise in the price index serves as a reminder that it could take some time to get inflation all the way back down to pre-pandemic levels, and the path ahead could be rocky.

Still, some analysts saw encouraging signs in the details of the report.

Core inflation — an alternative measure closely watched by the Federal Reserve that strips out fuel and food prices — rose 4.3% on an annual basis. That’s a better result than the 4.7% rate recorded in July, though it was higher than expected and still well above the Fed’s 2% target. Economist Justin Wolfers of the University of Michigan noted that core inflation has been low for several months in a row, long enough to declare a trend. “There’s a lot of cause for optimism. In fact, core CPI over the past three months has risen at an annual rate of only 2.5%, which is remarkably lower than the rates we’d been seeing earlier,” he told CNN.

Economist Paul Krugman echoed that sentiment, saying that “we've seen remarkable disinflation” as far as the core measure is concerned. “And bear in mind that core is still being distorted by lags in the measured price of shelter,” he added. “So basically the data are now saying that the war on inflation has been pretty much won — without a recession.”

But most economists say it’s too early to declare victory in the battle against inflation. “The path down on inflation is littered with potholes. We hit one in August,” Diane Swonk, chief economist at KPMG, wrote. “The Fed needs to see quarters, not months, of fundamentally cooler inflation to cut rates. We are not even close.”

Fed to hold steady for now: Although the latest data show inflation moving in the wrong direction, Fed officials are expected to treat it more as a blip than a trend, and most analysts expect the central bank to hold steady on interest rates at the next meeting of the Federal Open Market Committee, later this month. If such a blip appears again, however, the Fed could feel the need to continue raising rates.

“Today's inflation report likely does not move the needle much for the FOMC ahead of its session next week – no rate hike remains the base case, especially given the considerable tightening that has yet to completely work its way through the economy,” Jason Pride, chief of investment strategy and research at Glenmede, said in a note. “However, the pickup in inflation may increase the chance of additional tightening before year-end, as getting the inflation genie back in the bottle does not appear as straightforward as some would have hoped.”


Quotes of the Day

"I'll put the child tax credit up against any other federal program in terms of its success.”

— House Appropriations Chair Rosa DeLauro, a Connecticut Democrat, quoted in a Politico report that a group of congressional Democrats dubbed the “CTC Six” is pledging to fight to restore the pandemic-era child tax credit. Census Bureau data this week showed a surge in child poverty last year after the enhanced tax credit expired at the end of 2021.

“I have spent my last 25 years in public service of one kind or another. At the end of another term, I’d be in my mid-eighties. Frankly, it’s time for a new generation of leaders. They’re the ones that need to make the decisions that will shape the world they will be living in.”

— Sen. Mitt Romney, announcing on Wednesday that he will not seek a second term in the Senate in 2024. In a statement, the Utah Republican, who served as governor of Massachusetts and was the Republican presidential nominee in 2012, made clear his disapproval of the current leaders of the two main political parties in the U.S. “We face critical challenges—mounting national debt, climate change, and the ambitious authoritarians of Russia and China,” he charged. “Neither President Biden nor former President Trump are leading their party to confront them.”

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