Happy Monday! We’ve got a big week on tap. Obviously, the historic and unprecedented arraignment of former President Donald Trump on federal criminal charges Tuesday will dominate the headlines, but we’re also expecting a fair amount of fiscal news. Here’s what’s happening.
GOP Hardliners End Their House Blockade … for Now
The new week started with the same headache for Speaker Kevin McCarthy: The 11 House Freedom Caucus conservatives who last week revolted against their own leaders by preventing floor votes on a group of partisan Republican messaging bills had yet to give up their blockade. But by the end of the day, the rebels reportedly relented after McCarthy apparently agreed to rework a “power-sharing agreement” he had made in January to win support for his bid to become speaker.
“Emerging from McCarthy’s office on Monday evening, those hardliners said no firm agreement has been reached with the Speaker,” The Hill reported. “But they’re encouraged by the direction of the talks and will release their stranglehold on the House this week while those discussions continue.”
The group of 11 agreed to support a vote as soon as Tuesday on a new rule covering bills that were held up last week, Rep. Ralph Norman of South Carolina said, according to Roll Call. But Reps. Matt Gaetz of Florida and Matt Rosendale of Montana warned that conservatives could still shut down legislative action in the future if they did not see enough progress on their demands.
“It has to be renegotiated in a way so that what happened on the debt limit vote would never happen again, where House conservatives would be left as the less desirable coalition partner than Democrats,” Gaetz said.
The hardliners were able to bring House floor proceedings to a halt because Republicans only have a narrow 222-213 majority in the chamber, meaning that they can’t afford to lose more than four votes on any legislation that Democrats oppose.
Spending still an issue: The GOP rebels reportedly were pressing for concessions on federal spending levels and the appropriations process. McCarthy said he’s open to the idea of setting spending levels below the caps he agreed to as part of his deal with the White House to suspend the debt limit. “You can always do less,” he told reporters — but Democrats are sure to oppose further cuts, and some Republicans insist that defense spending levels in the deal are too low and will need to be supplemented.
Why it matters: The infighting hasn’t yet derailed any key legislation, but it could still complicate critical votes and deadlines ahead, including on annual spending bills, defense authorization and more. The tactics of the House Freedom Caucus could also prompt a backlash that affects future votes.
What else is ahead this week: There’s plenty happening this week even as House floor action is stalled. The House Ways and Means Committee will meet Tuesday morning to mark up the new Republican tax cut package. Also on Tuesday morning, the House Appropriations Committee will begin its markup of the fiscal year 2024 Military Construction and Veterans Affairs bill. And Treasury Secretary Janet Yellen will testify before the House Financial Services Committee on the state of the international financial system.
On top of all that, the Federal Reserve’s policymaking committee will meet Tuesday and Wednesday to decide whether to pause its rate-hiking campaign after 10 straight increases. We’ll hear from Fed Chair Jerome Powell on Wednesday afternoon.
Quote of the Day
“They love attention, and they behave well when you’re giving them a lot of it. And then as soon as you’re done giving them attention, they get mad and you’ve got to give them more attention. … I’m not sure some of them understand the magnitude of their responsibility, quite honestly. There’s a group of them, evidently, who didn’t want a Republican Speaker. They wanted a Republican king.”
– Republican Sen. Kevin Cramer of North Dakota, likening the conservative hardliners who have paralyzed the House to his grandchildren in an article at The Hill detailing growing concerns among GOP senators about the ability of their House counterparts to govern, particularly given the legislative deadlines approaching at the end of the fiscal year in September.
$400 Billion in Pandemic Aid Was Stolen, Wasted or Misspent: Analysis
The greatest grift in American history? That’s how a new report from the Associated Press characterizes the staggering levels of theft from Covid-19 aid programs. Analysts found that crooks may have stolen more than $280 billion from the $4.2 trillion the federal government has dispersed to help individuals and businesses suffering as a result of the pandemic. Another $123 billion has been wasted or misspent, the AP says, bringing the total to about $400 billion — or roughly 10% of all aid provided so far.
The number is expected to grow as more scams are uncovered, even as the government continues to distribute the remaining $1 trillion from the total of $5.2 trillion Congress provided during the pandemic.
“How could so much be stolen?” asks the AP’s Richard Lardner. “Investigators and outside experts say the government, in seeking to quickly spend trillions in relief aid, conducted too little oversight during the pandemic’s early stages and instituted too few restrictions on applicants. In short, they say, the grift was just way too easy.”
Thieves came from far and wide and include some involved in organized crime groups from around the world. But more prosaic figures were involved as well, such as a soldier in Georgia, a pastor in Texas and a former state lawmaker in Missouri. Identity theft has been a common tactic, with thieves collecting money in the name of people both dead and alive. And lots of small businesses, some fictitious or created purely for the purpose of graft, pulled in cash despite being ineligible for aid.
The U.S. is conducting thousands of investigations into fraudulent payments, and more than 2,230 people have been charged so far. Government estimates of the total value of the theft from the programs are lower, but Inspector General Michael Horowitz, who leads the federal Pandemic Response Accountability Committee, told the AP that fraud is clearly in the range of tens of billions of dollars, and could top $100 billion after all is said and done. Still, Horowitz said it will take years of review and analysis until officials know for sure.
What about next time? Looking ahead, experts say there is plenty the government could do to reduce fraud in any future emergencies. For example, although time was of the essence in the early days of the pandemic, the Small Business Administration could have attempted to weed out fraudulent borrowers by using historical tax data to verify applicants — something the agency was forbidden to do under the terms of the CARES Act, a $2.2 trillion stimulus bill signed into law by President Donald Trump in March 2020. That restriction was later revoked, but not before billions of dollars were given to borrowers who self-certified their legitimacy.
“If you open up the bank window and say, give me your application and just promise me you really are who you say you are, you attract a lot of fraudsters and that’s what happened here,” Horowitz said.
Gene Sperling, a former director of the National Economic Council who now oversees the implementation of the $1.9 American Rescue Plan in the Biden White House, told the AP that in the future, the federal government will need to both move quickly and maintain standards for providing relief. “The prevention strategy going forward is that in a crisis, you can focus on fast delivery to people in desperate situations without feeling that you can only get that speed by taking down common-sense anti-fraud guardrails,” he said.
Number of the Day: $1.1 Trillion
The House Ways and Means Committee is taking up a new package of tax cuts called the American Families and Jobs Act, which has yet to receive a score from the Congressional Budget Office. According to an analysis by the nonpartisan Committee for a Responsible Federal Budget, the legislation as written would cost the government $80 billion by 2033. If, however, the temporary tax cuts included in the bill, which are set to expire in 2025, were to be made permanent, the bill would cost over $1.1 trillion over 10 years.
Fiscal News Roundup
Views and Analysis
- If You Thought the Debt Fight Was Tough, Get Ready for Spending Season – Caitlin Emma and Jennifer Scholtes, Politico
- Biden’s Global Tax Surrender Hurts US Businesses, Workers, Economy. Here’s How – Rep Jason Smith (R-MO), Fox News
- Fed Poised for Respite on Rate Hikes. Now the Hurt Begins – Victoria Guida, Politico
- Why Greedhead Pharma Interests Are Suing the Government – Timothy Noah, New Republic
- Spend More on Defense? Let’s Focus on Spending Better – Jane Harman and Eric Edelman, Defense One
- The White House Should Retire This Lame Talking Point on Student Loans – Charles Lane, Washington Post
- Why the U.S. Electric Grid Isn’t Ready for the Energy Transition – Nadja Popovich and Brad Plumer, New York Times
- How Houston’s Homelessness Breakthrough Could Be a National Game-Changer – Marc Eichenbaum and Michael Nichols, CNN