Republican Hardliners Push Back Against GOP Funding Plan

Republican Hardliners Push Back Against GOP Funding Plan

This week will be a big test for the new speaker.
Jack Gruber/USA Today
By Yuval Rosenberg and Michael Rainey
Monday, November 13, 2023

Good evening. We’ve got a busy week ahead of the November 17 deadline to avert a government shutdown. As lawmakers work to pass a stopgap spending bill, this week will also bring new data on inflation and a closely watched meeting between President Joe Biden and Chinese President Xi Jingping.

Here’s what’s happening:

House Speaker’s Unconventional Plan to Avert Shutdown Faces First Big Test

The House Rules Committee is set to vote tonight on a stopgap extension of federal funding that would prevent a government shutdown starting Saturday — the first big test for the unconventional, two-tiered plan put forth Speaker Mike Johnson.

An even bigger test could follow, as Johnson reportedly may have to rely heavily on Democratic votes and parliamentary maneuvering to pass his plan in the face of growing conservative opposition.

A clean, laddered CR: Johnson on Saturday proposed a plan that some lawmakers had previously warned would be overly complicated. His 32-page continuing resolution adopts a two-step approach favored by the House Freedom Caucus and is meant to ensure that lawmakers focus on individual appropriations bills rather than a mammoth year-end package that rolls up multiple pieces of spending legislation.

The bill would fund some federal agencies — those covered by the Military Construction-VA, Agriculture, Energy-Water and Transportation-HUD spending bills — until January 19 and keep agencies covered by the other eight annual spending bills funded to February 2. But the plan also would keep spending at current levels, without the steep cuts or additional border policies demanded by hard-right Republicans. And the legislation leaves out the supplemental funding requested by the White House, including emergency aid for Ukraine and Israel.

“The bill will stop the absurd holiday-season omnibus tradition of massive, loaded up spending bills introduced right before the Christmas recess,” Johnson said in a statement. “Separating out the CR from the supplemental funding debates places our conference in the best position to fight for fiscal responsibility, oversight over Ukraine aid, and meaningful policy changes at our Southern border.”

The proposal was reportedly formulated after the speaker spent his first couple of weeks on the job listening to the various factions within his splintered conference — and received conflicting feedback on the path forward. In the end, he picked an approach that The Washington Post’s Marianna Sotomayor and Leigh Ann Caldwell write was “meant to appease the hard right while trying not to alienate the centrists.”

Some on the far right rejected it quickly, though. At least eight Republicans have reportedly come out against it already, including Rep. Scott Perry, the chairman of the House Freedom Caucus, and Rep. Chip Roy of Texas.

That means the bill will need Democratic support to advance to the Senate and reach President Joe Biden’s desk — and Democrats thus far have sent some mixed messages, but they may be willing to provide enough support to pass the plan.

* Senate Majority Leader Chuck Schumer said Monday he is “pleased” with the Johnson plan, though he also called it “far from perfect” in remarks on the Senate floor. “For now, I am pleased that Speaker Johnson seems to be moving in our direction by advancing a CR that doesn’t include the highly partisan cuts that Democrats have warned against,” Schumer said. He added that it was important that the defense funding deadline was in the February group. “Democrats historically fear that Republicans would be willing to shut down the entire government if defense funding is complete,” The Washington Post notes. “This proposal keeps defense funding on the table to provide incentive to fund the rest of the government.”

* House Democratic leaders said in a letter to colleagues that they are “carefully evaluating” the Johnson plan and discussing it with their members, adding that they are concerned about the multiple deadlines and the lack of supplemental funding provisions.

* The White House on Saturday called the bill unserious and a waste of time. “This proposal is just a recipe for more Republican chaos and more shutdowns—full stop,” Press Secretary Karine Jean-Pierre said in a statement. “House Republicans need to stop wasting time on their own political divisions, do their jobs, and work in a bipartisan way to prevent a shutdown.” But Biden on Monday held off on saying whether he would sign the bill or veto it. "I'm not going to make a judgment on whether I'd veto or I'd sign,” he told reporters. “Let's wait and see what they come up with.”

The bottom line: The House Rules Committee vote sets up a vote on the House floor as soon as Tuesday. If Johnson can steer his bill through to passage, it may have a good shot of getting through the Senate as well. Neither side wants a pre-Thanksgiving shutdown.

“If he can’t get the two-step plan through both chambers, Johnson plans to offer up a full-year CR with increases only for defense and national security priorities,” Roll Call reported over the weekend, citing talking points circulated to House Republicans. That approach, which would slash non-defense programs by about 8%, might not be able to pass the House and would go nowhere in the Senate, likely leading to a showdown.

Moody’s Sends a Warning on US Debt

Moody’s Investors Service on Friday changed its outlook for the U.S. credit rating from “stable” to “negative,” citing both the rapidly expanding national debt during a time of high interest rates and American politicians’ inability to deal with the situation.

The move is less serious than an actual credit-rating downgrade but does signal that Moody’s analysts are growing more concerned about the dynamics underlying the growth of the national debt. Moody’s is the last of the big three ratings agencies to maintain its top rating on U.S. credit; earlier this year, Fitch lowered its the United States from AAA to AA+ in the wake of a fierce political battle over raising the debt ceiling. S&P Global made the same move in 2011 during an earlier fight over the debt limit.

“The key driver of the outlook change to negative is Moody's assessment that the downside risks to the US' fiscal strength have increased and may no longer be fully offset by the sovereign's unique credit strengths,” the analysts wrote. “In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues, Moody's expects that the US' fiscal deficits will remain very large, significantly weakening debt affordability. Continued political polarization within US Congress raises the risk that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability.”

At the same time, Moody’s said that the “exceptional economic strength” of the U.S. allows the agency to maintain its current top rating. “The affirmation of the Aaa ratings reflects Moody's view that the US' formidable credit strengths continue to preserve the sovereign's credit profile,” the analysts wrote.

The politics of debt: The move by Moody’s could be a political liability for Democrats and the Biden administration as they fight with Republicans over spending levels in the 2024 budget. Citing concerns about the debt and deficit, Republican hardliners in the House want to slash spending below levels agreed to by former speaker Kevin McCarthy last summer — with McCarthy’s failure to win spending cuts in the 2024 budget agreement being the driving factor behind his overthrow.

On Monday, Russell Vought — who led the Office of Management and Budget in the final two years of the Trump administration and is expected to play a major role in a new Republican administration should Donald Trump win the election in 2024 — used Moody’s move to criticize the new plan from House Speaker Mike Johnson to fund the government for its lack of spending cuts. “Unfortunately, todays House CR fully funds Biden’s woke & weaponized bureaucracy on the heels of yet another credit agency warning,” Vought wrote on social media.

The political dynamic can cut both ways, though, with the White House blaming Republicans for the persistent political turmoil over the debt. “Moody’s decision to change the U.S. outlook is yet another consequence of congressional Republican extremism and dysfunction,” White House Press Secretary Karine Jean-Pierre said in a statement.

Deputy Treasury Secretary Wally Adeyemo also pushed back against the Moody’s decision, arguing that the economy “remains strong, and Treasury securities are the world’s preeminent safe and liquid asset.”

However the politics play out, analysts expect the debt to be an unavoidable issue for the foreseeable future. “Interest rates have shifted materially and structurally higher,” William Foster, a senior credit officer at Moody’s, told Bloomberg. “This is the new environment for rates. Our expectation is that these higher rates and deficits around 6% of GDP for the next several years, and possibly higher, means that debt affordability will continue to pressure the US.”

As for what happens next, Foster said lawmakers need to address the problem directly. “While we could resolve the outlook next year if we see meaningful progress, it’s more likely in 2025,” he said. “We need to have evidence that the government will reduce deficits either through lower spending, or other measures or raise revenues.”

Chart of the Day: The Waning of the Estate Tax

Revenues from the estate tax have plummeted in recent years, thanks to changes in the tax code that shield the great majority of households from having to pay anything as wealth is transferred from one generation to another.

As The Washington Post’s Andrew Van Dam explains, a big part of the story is the increase in the exemption level for estates, a process that began during the Reagan administration and accelerated under Presidents George W. Bush and Donald Trump. In 1980, the exemption stood at $161,000, but in 2023, $12.92 million in wealth is exempt from tax for an individual and $25.84 million for couples.

As a result, the number of estates being taxed has dropped sharply. “Just 2,192 estates were subject to the tax in 2019, down from 51,159 at the turn of the millennium, and it raised just $14.6 billion, down from more than $35 billion in 2000, adjusted for inflation,” Van Dam writes. “Even among the elite, most estates today go untaxed.”


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