What to Know in Washington: Speaker Fight Raises Shutdown Threat

A government shutdown is increasingly likely following the toppling of Speaker Kevin McCarthy and worsening of an intra-party Republican conflict in the House.

Hardline Rep. Matt Gaetz (R-Fla.) and other conservative critics presented McCarthy’s (R-Calif.) support for temporary funding to prevent an Oct. 1 shutdown as a central grievance in their successful campaign to oust him.

Eric Lee/Bloomberg

Rep. Matt Gaetz (R-Fla.) on Oct. 2 outside the US Capitol.

That is a powerful deterrent for McCarthy’s successor to consider before backing another round of temporary financing to keep the government open after the upcoming Nov. 17 deadline. At the same time, the vacuum opened in Republican leadership delays progress on spending negotiations. adding to the shutdown threat.

The move by just eight dissidents to remove McCarthy has unleashed fury among the broad swathe of House Republicans who supported the former speaker, further roiling relationships in a party with passionate internal differences over how far to go in pursuing an ultra-conservative agenda.

“The conference is not going to be able to quickly coalesce,” said Rep. Garret Graves (R-La.), a McCarthy ally.

“If there is a shutdown in November, that is 100% attributable to Matt Gaetz and the other 7 boneheads who forced this,” Graves said. Erik Wasson details what else is at stake.

While Democrats helped remove McCarthy and are glad to be rid of him, the GOP power struggle could easily result in an even more conservative speaker.

The House is likely to be paralyzed for an indefinite stretch as Republicans grope for a way forward. It took 15 ballots to name McCarthy speaker when he was the only clear option — and some Republicans were already predicting that this messy situation, with no heir apparent, could take even longer. Read the full story from Jonathan Tamari and Maeve Sheehey for lawmakers’ reactions.

BIDEN’S AGENDA

• President Joe Biden will receive a briefing on Ukraine from members of his national security team around noon.
• Press Secretary Karine Jean-Pierre will hold a briefing around 1:00 p.m.

CONGRESS’ SCHEDULE

• The House and Senate are out.

Speaker Fallout Continues

GAETZ says he backs speakership bids by both Reps. Steve Scalise (R-La.) and Jim Jordan (R-Ohio), emphasizing that the particular person is less important than their plan to reduce government spending. Read more.

• Lobbyists who represent business interests on Capitol Hill are assessing how either candidate could shift the legislative agenda. They said privately that if their industry had a vote, it would likely go for Scalise over Jordan, even as Jordan’s image is less rabble rouser than in past years. Read more.

REP. PATRICK MCHENRY wasted no time evicting Rep. Nancy Pelosi (D-Calif.) from the Capitol’s first-floor speaker emeritus office. Rep. Steny Hoyer (D-Md.), Pelosi’s longtime No. 2, also got the boot from his own unofficial digs in the Capitol. The quick moves by the interim speaker underscore that these rooms — which predate the actual House office buildings across the street — remain coveted property. Read more.

Also Happening on the Hill

Photographer: Eric Lee/Bloomberg

Rep. Andy Kim (D-N.J.) speaks at a rally.

REP. ANDY KIM said the US’ standing in the world has been shaken by the threat of a government shutdown and other upheaval in Washington, offering himself as part of a new generation of leaders ready to step up.

• The New Jersey Democrat, who plans to launch a primary challenge against Sen Robert Menendez (D-N.J.), said leaders from other countries keep asking if the US remains a reliable partner given the swings in policy that occurred under Donald Trump and again under Biden. Read more.

SIX EXPERTS have started year-long AI fellowships on Capitol Hill to help deepen lawmakers’ understanding of the technology and to assist with drawing up policy proposals. The fellows previously held positions in academia, federal agencies, and technology companies, including Microsoft, Meta, and Google.

• They have each been placed in different offices, working for Sens. Bill Cassidy (R-La.), Mark Kelly (D-Ariz.), Ron Wyden (D-Ore.), Martin Heinrich (D-N.M.), Mike Rounds (R-S.D.), and the Senate Banking, Housing, and Urban Affairs Committee. Read more.

SEN. JOE MANCHIN and a bipartisan group of lawmakers introduced a bill creating a permanent program offering up to $10 million in deposit insurance for non-interest-bearing transaction accounts primarily used by businesses for payroll and other operating expenses. Read more.

REP. ADAM SCHIFF asked ELON MUSK to outline steps being taken to stop election misinformation on X, formerly known as Twitter, following reports the social media platform’s election integrity team has been laid off. Read more.

TAX PROFESSIONALS across the political spectrum are sounding the alarm about how a foreign income tax case on the Supreme Court’s docket could upend large swaths of the tax code, reshape Congress’s ability to amend that code, and limit how Congress can raise revenue.

• Justices will hear Moore v. US this fall, which challenges the “transition tax” on unrealized foreign earnings brought back to the US, enacted in the Republicans’ 2017 tax overhaul.
• Former GOP staffers, lawmakers, practitioners, and the Joint Committee on Taxation fear that the Supreme Court will have a tough time narrowing its ruling enough to prevent more lawsuits challenging other parts of the code. Read more.

To contact the reporter on this story: Kayla Sharpe at ksharpe@bloombergindustry.com

To contact the editors responsible for this story: Jeannie Baumann at jbaumann@bloombergindustry.com; Brandon Lee at blee@bgov.com