April 21, 2023

Thought of the Week

Immediately following the two-week long Easter/Passover recess, and preceding a Congressional session that will take official Washington all the way to the July 4 recess, would seem to be the perfect time to host a rooftop open house…that’s also exactly what Delta Airlines thought as they celebrated the opening of their new Government Affairs office. A testament to their reach in the nation’s capital, the event was essentially a who’s who of lobbyists, trade association executives, consultants, Biden administration officials, congressional staffers, and members. The event attracted 10 Senators, 50 Congresspersons, and 1 Cabinet Secretary, including: former Transportation Secretary Chao; Commerce Secretary Raimondo; Senate Majority Leader Schumer (D-NY); House Majority Leader Scalise (R-LA); Sens. Lee (R-UT), Stabenow (D-MI.), Thune (R-SD), Risch (R-ID), and Klobuchar (D-MN); and Reps. McBath (D-GA), Graves (R-MO), Larson (D-CT), Clyburn (D-SC), Johnson (D-GA.), Owens (R-UT), Hern (R-OK), and McClain (R-MI). I spent most of my time chatting up Congressman Eric Burlison (R-MO), a freshman whose district includes Bass Pro Shops’ world headquarters. The Congressman is a member of the Japan Caucus, as well as the Transportation and Infrastructure Committee, including the subcommittees on Highways and Transit; Railroads, Pipelines, and Hazardous Materials; and Water Resources and Environment. The rooftop offered spectacular views of Pennsylvania Ave., the Capitol Building, and the Supreme Court, and provided the perfect setting for networking, giving “elevator speeches” explaining a company’s footprint in a district, and to arranging follow-up meetings. So, how is it permissible for lobbyists get away with attending events like this that provide the chance to chat up multiple members over glasses of California reds. Well, Congressional gift rules permit Senate/House Members and employees to accept invitations of free attendance to “Widely Attended Events” from the event sponsor. To accept free attendance, the event must: (1) have at least 25 non-Hill attendees; (2) be open to the public or to a wide range of individuals; and (3) be connected to one’s official duties. In addition, members and their staff may generally accept “food or refreshments of nominal value offered other than as part of a meal; the provision is interpreted to permit members and staff to accept free attendance at receptions when the fare will consist of reasonable hors d’oeuvres and refreshments, which generally limits alcoholic beverages beer and wind, and not a full meal. When involving Senators, House Members, and/or their staff, ethics guidance on gifts, travel, and receptions can be quite involved. Although much of the information can be found on the House and Senate Committee on Ethics’ websites (House Committee on Ethics |)/(U.S. Senate Select Committee on Ethics), more information can be obtained from the Washington office. 

Thought Leadership from our Consultants, Think Tanks, and Trade Associations

While Capital Alpha Sees Debt Limit Prospects Improving…The prospects for a successful increase in the debt limit are getting better, not worse. The debt limit legislation is also moving faster than expected. If House Speaker McCarthy (R-CA) can get a debt limit package through the House by April 28, then attention will move immediately to the Senate, where a bipartisan group of senators would be expected to craft a reply. Getting that Senate bill through the House will be the point of greatest risk, so the less time and effort Speaker McCarthy spends on preliminaries now, the better. The reality is that the Speaker has been working the debt limit since January; so, much of the heavy lifting to get a House bill done has already been accomplished. In terms of specifics, expect no repeal of the clean energy tax credits from the Inflation Reduction Act. 

…Eurasia Group Sees the Debt-Limit Debate as a High-Stakes Showdown. House Speaker McCarthy (R-CA) has officially released the text of his proposal to cut spending and extend the debt ceiling; McCarthy needs his caucus to back the proposal to grant him the leverage he needs to force the White House, which publicly rejected the proposal, to negotiate. If McCarthy can get his caucus behind him, it would make May negotiations likely and increase the chances of a disruptive showdown over the debt limit in Q3; if the House doesn’t back McCarthy, the debt limit will likely be punted into December and the showdown will happen then. In either scenario, the showdown seems increasingly likely to take the nation to the brink of prioritization, as lawmakers will require market backlash to force them to a deal. Although it remains highly unlikely that the U.S. will cross the x-date, the impact of any showdown, whether it happens in the summer or winter, will be disruptive to markets.  McCarthy’s bill is first and foremost a political document designed to align his caucus; meaning that many of the provisions included in the package—such as wholesale elimination of green energy tax credits—will be dropped from whatever final deal is reached to raise the debt limit later this year. McCarthy has already been negotiating behind the scenes to solidify support ahead of next Wednesday’s planned vote. Key signposts to watch through the weekend are public statements of support from moderates and confirmation that the far-right won’t demand even more cuts and rescissions to back the plan. 

Observatory Group: Marc Short, former Chief of Staff to Vice President Pence, Previews the 2024 Presidential Election. One of the closest policy and political advisors to former Vice President Pence, who is considering a run for the White House in 2024, as well as a former Director of White House Legislative Affairs, Short is uniquely positioned to offer informed thoughts on the upcoming elections. In terms of the 2024 elections and Trump’s chances of winning the primary, he says to forget the current polls and reminds us that at this time in past cycles candidates such as Rudy Giuliani (2008), Michele Bachmann (2012), Scott Walker (2016), and Bernie Sanders (2020) led in the polls. With so many unknown variables in this cycle, nobody will have any sense of where the race is actually headed until fall after all the candidates have been on the debate stage together (the first GOP Presidential Primary debate is in August). In terms of Trump’s chances, his indictment for Stormy Daniels’ hush money is the least relevant of what he may be about to be charged with. Georgia is likely to indict him next month, and federal charges could follow shortly thereafter. Both are much more serious than the current indictment, and it will be important to watch what Iowans say after the next wave of indictments (Iowa holds the first contest on the Republican primary calendar). With multiple indictments coming down, even those who liked Trump’s policies may think twice about signing up for another four years. What’s more, unlike 2016 when there were 16 candidates, expect only 8-9 initial GOP candidates, winnowed down to 5 or 6 before voting starts in Iowa. While the smaller field does not work in Trump’s favor, he still retains 60% odds in favor of winning the nomination. Major GOP donors from outside the party itself will soon begin a decentralized effort to defeat Trump’s candidacy.  Regarding Trump’s potential reaction to losing the primary, it’s possible he could go scorched earth against the GOP a la the 2020 Georgia Senate race, but he may consider the possibility of cooperating with the hope that a GOP president would pardon him. Florida Governor DeSantis was the great hope of the non-Trump supporting GOP after his decisive re-election in 2022, but he’s had a rocky couple of months. Major donors are unhappy with his comments on Ukraine, and while shipping migrants to Martha’s Vineyard played well with the base, they didn’t seem presidential. For DeSantis, trying to run in Trump’s lane, rather than creating his own, isn’t working. It’s not clear whether a bid by Liz Cheney, the darling of the Democrats after her work on the January 6 committee, would strip more votes from Trump or Biden.

“Off the Record”

Congress Returned to Town This Week After an Extended Absence. And after getting off to a slow start, K Street lobbyists are mapping out how lawmakers will manage to get through everything on their lengthy to-do list over the next few months, starting with brinkmanship over raising the debt ceiling. While pressure to hunker down is ramping up, with House Speaker McCarthy (R-CA) hoping to tee up a vote on his debt limit proposal as soon as next week, the process is expected to be messy and laborious. In a memo to clients Hogan Lovells says they expect the next several months in Congress to rival the final weeks of Succession in terms of drama, palace intrigue, egos, insults, backroom negotiations, and ineptitude. At the same time, Tiber Creek Group says in its memo to clients that it is highly likely any debt ceiling deal will come only after several failed votes, ramped-up political fighting, and warning shots from the credit rating agencies. Apart from the debt ceiling, both memos attempt to game out other legislative possibilities over the coming months, in particular where there may be a shot at bipartisan movement. Pushing back against China seems to be the single issue that transcends partisan lines, although there may be potential in the bipartisan rail safety proposal. While farm bill negotiations provide another avenue for bipartisanship, given the extent of polarization in Congress and next year’s presidential election, an extension, rather than a new bill, similar to the one enacted in 2008 will probably be the likely outcome.

In Other Words

“We will clearly communicate to the PRC our concerns about its behavior. And we will not hesitate to defend our vital interests. Even as our targeted actions may have economic impacts, they are motivated solely by our concerns about our security and values,” Treasury Secretary Yellen noting that while the U.S. does not seek “winner take all” competition, it will prioritize security interests, even at an economic cost, with regard to U.S.-China ties.   

Did You Know

New York was ranked as the wealthiest city on the planet with 340,000 millionaires. The ten wealthiest cities and their millionaire population are as follows: (1) New York: 340,000; (2) Tokyo: 290,300; (3) San Francisco Bay Area: 285,000; (4) London: 258,000; (5) Singapore: 240,100; (6) Los Angeles: 205,400; (7) Hong Kong: 129,500; (8) Beijing: 128,200; (9) Shanghai: 127,200; (10) Sydney: 126,900.

Graph of the Week

Speaker of the House McCarthy (R-CA) proposed a bill to raise the debt limit for about a year and cut federal spending; the House plans to vote on the proposal next week. The plan would increase the debt ceiling by $1.5 trillion, enough to stave off default until March 31, 2024. Although it contains a host of proposals that are non-starters with Senate Democrats and the White House, the McCarthy plan would bring discretionary spending to 2022 levels; in addition, future increases would be capped at a 1% yearly rate over the next decade. The plan would also rescind unspent Covid funds, impose tougher work requirements for anti-poverty benefits, and ease regulations on energy projects. Passage of the bill through the House would force President Biden to engage in talks to resolve the stalemate over raising the $31.4 trillion debt ceiling. Without an increase or suspension, the U.S. could default on payment obligations as soon as June.


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