Update 726 — Out of the Frying Pan: Speaker Fight Raises Shutdown Risk

Be careful what you vote for. The House, having voted to remove Kevin McCarthy as Speaker, is now consumed by the struggle to replace him. The proximate cause of his removal: McCarthy offered a bipartisan CR to keep the government open that passed overwhelmingly, but it enraged his House GOP critics. The next Speaker is not likely to make that mistake again, certainly not the candidate for the job who secured Donald Trump’s endorsement yesterday.

That raises the prospect of a stalemate in the fiscal year 2024 budget negotiations. In 42 days, we face the same shutdown predicament we just survived. Moody’s is threatening a downgrade of the U.S. debt rating if we are unable to restore fiscal order. These concerns aside, though, the week saw sanguine signs. This morning’s report that the economy added 336,000 jobs in September shows the labor market remains robust. And the Supreme Court expressed skepticism about a case challenging the constitutionality of the CFPB in oral argument this week. More below…

Good long weekends, all. 

Best,

Dana 

Headline News

House Speakership Vacant; Another Shutdown Looms

Representative Kevin McCarthy (R-CA) was removed from his role as Speaker of the House on Tuesday night after eight Republicans joined with Democrats to support a motion to declare the office of Speaker of the House of Representatives vacant. The motion – offered by Representative Matt Gaetz (R-FL) just two days after a short-term spending bill was secured to avert a government shutdown – passed in a 216-210 vote. 

So for the first time in history, a motion to vacate the office has succeeded. McCarthy’s roughly nine months in the role ended when a small group from his own conference used the leverage they negotiated in January — securing the motion to vacate provision in the deal that allowed McCarthy to become Speaker in the first place — to remove him. McCarthy has announced that he will not seek the position again. 

Representative Patrick McHenry (R-NC), the House Committee on Financial Services chair, will serve as speaker pro tempore until the election of a Speaker to replace McCarthy, an election that McHenry will be responsible for administering. Until then, legislative action on the House floor cannot occur without a majority vote to allow it. This will keep the House from formal budget action as the time bought by the current continuing resolution (CR) to keep the government funded until November 17 runs down. On the Senate side, 20 Republican senators have sent a letter to Majority Leader Chuck Schumer (D-NY) stating that they will not support any vote that is unrelated to appropriations. 

The House will not meet again until next Tuesday, when Republicans are expected to hold an internal candidate forum followed by an internal election for Speaker on Wednesday. While McCarthy’s replacement remains unclear, Majority Leader Steve Scalise (R-LA), the second-highest-ranking House Republican and Representative Jim Jordan (R-OH), Chair of the House Judiciary Committee, are likely to seek the position. Former President Donald Trump has endorsed Jordan for the position. 

Obstruction by a few House Republicans has made it almost impossible for Congress to fulfill some of the most basic functions it was elected to carry out. The same eight members who voted to oust McCarthy this week also opposed the resolution that averted a shutdown of the federal government last weekend. Now their obstruction is consuming the fleeting time left to negotiate and secure crucial funding for the 2024 fiscal year. 

Other Developments

September Jobs Report: Hotter than Expected

This morning, the Bureau of Labor Statistics released a strong jobs report for September showing total nonfarm payroll employment rose by 336,000 over the month, far exceeding expectations. Job growth in July and August were also revised upward, with about 119,000 more jobs having been added to the economy over both months than had been previously recorded. The upward revision was driven by higher government employment than previously estimated. All this brings the average monthly gains over the last three months to a remarkably strong 266,000. 

Job growth in September was driven by gains in leisure and hospitality, with 96,000 such jobs added. Additionally, 73,000 government jobs and 70,000 education and health jobs were added over the month. Meanwhile, unemployment remained steady at 3.8 percent. Unemployment has remained at or below 4 percent since December 2021, a longer stretch of such low unemployment than has been seen since the 1960s.

Wage growth appears to be slowing. Average hourly earnings rose 0.2 percent over the month, representing the lowest level of monthly wage growth since February of last year. Wages rose 4.2 percent over the past year. 

This morning’s data shows that the labor market remains stubbornly resilient. This is likely to draw concern from the Federal Reserve ahead of the next Federal Open Market Committee (FOMC) meeting to decide the fate of interest rates on October 31 and November 1.

Justices Skeptical of Payday Lenders in Constitutional Case Against CFPB

On Tuesday morning, the Supreme Court heard oral arguments in Consumer Financial Protection Bureau (CFPB) v. Community Financial Services Association of America, Limited (CFSA), a case that threatens to undermine the bureau’s work to protect consumers and honest businesses and create havoc within the broader financial system. 

The case stems from a 2018 lawsuit filed against the Bureau by the CFSA, the payday lending industry’s top lobbying group, to challenge the Bureau’s 2017 Payday Lending Rule. Last year, the U.S. Court of Appeals for the Fifth Circuit ruled that CFPB’s power to establish the rule came from its “unconstitutional” funding structure and invalidated the rule. The case before the Supreme Court challenges the Fifth Circuit’s decision. 

Even conservative justices were skeptical of arguments presented by Counsel for the payday lenders, former Trump Solicitor General Noel Francisco, who failed to offer any text or legal history to support his claim that Congress cannot appropriate funding for federal agencies as it did when legislating the CFPB’s funding mechanism. Justices also seemed frustrated by Francisco’s failure to articulate any kind of limiting principles for the Supreme Court to uphold the Fifth Circuit ruling and void the payday lending rule, while preserving the Bureau’s broader work. 

Solicitor General Elizabeth Prelogar presented a strong defense of the Bureau and outlined the risk of invalidating its rules protecting consumers and providing stability for markets. The fate of additional agencies is also at risk. If the Court rules against the CFPB, every agency funded outside the appropriations process would be open to legal challenges. Social Security, Medicare, the Federal Reserve, the Federal Deposit Insurance Corporation, US Citizenship and Immigration Services, the US Postal Service, and the Farm Credit Administration are all funded outside of the appropriations process. 

20/20 Vision was proud to join over 40 organizations in releasing a joint statement on Tuesday in defense of the CFPB. We hope the Supreme Court will quickly overturn the Fifth Circuit’s dangerous ruling. 

Status of Ongoing Strikes

The UAW Strike Continues

The United Auto Workers (UAW) union strike against the Big Three Detroit automakers — Ford Motors, General Motors, and Stellantis — enters its fourth week as negotiations over the contracts of 146,000 autoworkers remain unresolved. About 25,000 workers have joined the picket line. 

This week, GM proposed its sixth new contract since discussions began, but gaps remain between the parties. Today the union’s president confirmed that the strike will not be expanded, as it had been over the previous three weeks, signaling progress in ongoing negotiations. The UAW’s president cited that the union was prepared to expand the strike to one of GM’s largest plants and credited that threat with pushing the company to more seriously negotiate. 

Kaiser Permanente Workers Join the Picket Line

On Wednesday, about 75,000 members of the Coalition of Kaiser Permanente Unions, representing roughly 40 percent of workers at Kaiser Permanente hospitals and clinics across the country, walked off the job. The Coalition approved a three-day strike in California, Colorado, Oregon and Washington. It is the largest health care strike in U.S. history. 

The coalition is calling for:

• Fair wages of $23 per hour
• A strategy to address staff shortages
• Outsourcing protections

The coalition says that it is planning a longer strike in November if contract negotiations are not completed by then. The Kaiser Permanente system serves almost 13 million Americans. 

Hearing

Senate Commerce Examines CHIPS Implementation

Commerce Secretary Gina Raimondo and Director of the National Science Foundation (NSF), Dr. Sethuraman Panchanathan testified before the Senate Committee on Commerce, Science, and Transportation on Wednesday afternoon in a hearing focused on the implementation and oversight of the CHIPS and Science Act. 

Senator Amy Klobuchar (D-MN) focused her questioning on the workforce gap of both skills and manpower that must be filled for America to meet its industrial policy goals. Senator Klobuchar stated that the nation will need 100,000 new semiconductor technicians and an additional 140,000 to build semiconductor manufacturing facilities. Secretary Raimondo recognized the importance of addressing the gap and discussed her Department’s work to establish the National Semiconductor Technology Center in collaboration with the NSF, a component of which will be dedicated to shoring up the domestic workforce. 

Ranking Member Ted Cruz (R-TX) discussed an amendment to the National Defense Authorization Act that he led with Senator Mark Kelly (D-AZ) to exclude the majority of CHIPS-funded semiconductor projects from environmental permitting required under the National Environmental Policy Act (NEPA). Secretary Raimondo highlighted her support for the move to streamline the permitting process while ensuring that necessary environmental standards are adhered to.