Biden’s Pick for Labor Secretary Faces Skeptical Senate

Happy Friday! According to tradition, it was on this day in 753 B.C. that Romulus and Remus founded Rome. But remember: it wasn’t built in a day.

Quick Hits: Today’s Top Stories

• A letter sent to Congress Tuesday reportedly claims an Internal Revenue Service criminal supervisory agent is seeking whistleblower protections for information suggesting the Biden administration is mishandling the criminal investigation of Hunter Biden. The president’s son is under investigation over taxes and allegations he made a false statement about a gun purchase—and the Washington Post reported Thursday investigators have concluded they have enough evidence to indict.
• The Defense Department said Thursday it will deploy “additional capabilities” near Sudan—reportedly in Djibouti—to prepare for a potential evacuation of roughly 70 U.S. Embassy employees in the country, where two generals are vying for control. As of Thursday afternoon, a State Department spokesperson said all embassy personnel were accounted for and unharmed.
• India’s population is set to surpass that of China later this year, according to United Nations projections released Wednesday, which will make it the world’s most populous country.
• Special Inspector General for Afghan Reconstruction John Sopko, an Obama appointee, told the House Oversight Committee Wednesday that the Taliban may have siphoned away some of the more than $8 billion in U.S. aid sent to help the Afghan people since the 2021 U.S. withdrawal from Afghanistan. He accused the State Department, Pentagon, and USAID of stonewalling his oversight efforts—though inspectors general directly overseeing all three agencies said they’ve had sufficient access to information. USAID spokeswoman Jessica Jennings said the agency has responded to “hundreds of questions” from Sopko’s office, while the State Department noted reconstruction activities—Sopko’s primary jurisdiction—ceased after the withdrawal.
• A senior United Nations official said this week that the international organization will hold a meeting to consider recognizing the Taliban government in Afghanistan. In remarks at Princeton University’s  School of Public and International Affairs on Monday, Deputy UN Secretary General Amina Mohammad expressed hope that the meeting, which will include UN Secretary General Antonio Guterres, will include “baby steps to put us back on the pathway to recognition.”
• Florida’s Board of Education on Wednesday approved an expansion of the state’s “Parental Rights in Education” law—after a procedural notice period, limits on public school instruction about sexual orientation and gender identity will now apply to grades K-12, not just through third grade. (The rule includes an exception for reproductive health classes.) . On Thursday, Florida Gov. Ron DeSantis signed a bill lowering the necessary threshold for a death penalty sentence—after a defendant is unanimously found guilty—to an 8-4 jury vote, the lowest such threshold in the country. “Once a defendant in a capital case is found guilty by a unanimous jury, one juror should not be able to veto a capital sentence,” DeSantis said, referencing the 9-3 jury vote last fall that spared the Parkland mass shooter a death sentence.
• The National Association of Realtors reported Tuesday the median existing-home sales price in the U.S. was $375,700 in March—down 0.9 percent year-over-year, the largest annual price drop since January 2012. Sales of previously-owned homes decreased 2.4 percent from February and were down 22 percent year-over-year.
• The Department of Labor reported Thursday that initial jobless claims—a proxy for layoffs—rose by 5,000 week-over-week to a seasonally-adjusted 245,000 claims last week, potentially a sign the economy is starting to cool as the Federal Reserve raises interest rates to tamp down demand and reduce inflation.

Sour on Su

In what other context besides a Senate confirmation hearing would a job candidate bring their kids to sit behind them while the hiring panel impugns their honor and work history for a few hours? Acting Labor Secretary Julie Su endured her grueling bring-your-daughter-to-work day Thursday, answering lawmakers’ questions in hopes of winning enough votes to drop the “acting” from her title. 

It may not be enough to get her the job. Republicans in yesterday’s Senate Health, Education, Labor and Pensions (HELP) Committee meeting knocked Su’s union-friendly history, as well as her tenure as California’s labor secretary—which included billions in COVID-19 aid fraud on her watch and controversial employment law changes for gig workers. Democrats pushed back during the hearing, but a handful have raised similar concerns—and in a 51-49 Senate, a few defections could easily sink Su’s nomination.

When previous Labor Secretary Marty Walsh left for icier pastures in March, Su—his deputy—stepped into his role on an acting basis. An attorney who won widespread praise for representing 72 trafficked Thai garment workers enduring forced labor in the U.S., she co-founded Sweatshop Watch in the mid-90s to improve conditions for garment workers. Before being confirmed as Walsh’s deputy in 2021, she was California labor commissioner from 2011 to 2018 and served as secretary of the state’s Labor and Workforce Development Agency beginning in 2019. Announcing his intent to nominate Su several weeks ago, President Joe Biden described her resume in glowing terms: “Over several decades, Julie has led the largest state labor department in the nation, cracked down on wage theft, fought to protect trafficked workers, increased the minimum wage, created good-paying, high-quality jobs, and established and enforced workplace safety standards.”

But while the White House has touted a dazzling list of achievements, Republicans have focused on a string of liabilities—starting with billions in fraudulent COVID-19 aid disbursed in California during Su’s tenure. In 2021, Su acknowledged that, of $114 billion in unemployment insurance the state had paid since the onset of the pandemic, at least $11.4 billion—and as much as $31 billion—went to fraud. A state audit in 2021 concluded the department “did not take substantive action to bolster its fraud detection efforts for its [unemployment insurance] program until months into the pandemic” and “does not monitor or assess its numerous fraud prevention and detection tools to determine whether they are successful.” Democrats defending Su noted that several GOP-led states had even higher fraud rates in their COVID-19 aid payouts.

Republican lawmakers also pointed to her role implementing California’s Assembly Bill 5, which forced many businesses to treat gig and contract workers as full-time employees. Critics of the law—which was later scaled back via ballot measure—argued it would destroy the business model of companies like Uber and eliminate the jobs of independent contractors by incentivizing companies to fire them rather than pony up for health insurance and other benefits. 

While Su isn’t responsible for what laws California passes, groups like the Owner-Operator Independent Drivers Association—which represents truckers—argue her department’s implementation was unnecessarily opaque and haphazard, forcing independent contractor truckers to rework their businesses or leave the state. “We are especially concerned with her nomination at a time when the Department of Labor is working on an updated worker classification rule,” the group wrote in a letter opposing her nomination. “There is the potential for this rule to make some improvements to worker classification at the federal level, but if Ms. Su is confirmed to lead the Department, we fear that we will see a repeat of what’s happened in California.”

Finally, Republicans painted Su as hostile to business owners. “During your last two years at the department, the public calendar shows that you had a standing meeting with unions on a regular basis, but until six weeks ago, you had not met with any business associations,” said Utah Sen. Mitt Romney. “I guess it’s really hard to understand … how we can have any confidence that you’d be seen as an unbiased, neutral arbiter.” Louisiana Sen. Bill Cassidy, the Republican ranking member of the panel, also questioned her labor negotiation chops, arguing she lacks the trust Walsh—who received a bipartisan 68-29 confirmation vote—built with businesses. “With 150 labor contracts expiring this year, the potential of replacing him with someone who has a history of bias and no direct experience handling labor disputes should be concerning,” Cassidy said. A coalition of 32 business groups—including the National Restaurant Association, International Franchise Association, and National Retail Federation—wrote a letter raising similar questions. 

Opposition to Su’s nomination from business groups echoes their campaign against David Weil, tapped in 2021 to head the Labor Department’s Wage and Hour Division before his nomination died on the floor. But labor unions have come out more strongly on Su’s behalf than they did for Weil. AFL-CIO, the nation’s largest union, has endorsed Su and is planning a “six-figure” ad buy with other unions in West Virginia and Arizona, the home states of potential Democratic opponents Sens. Joe Manchin and Kyrsten Sinema.

“The debate over Ms. Su really has nothing to do with her qualifications,” Sen. Bernie Sanders—chair of the HELP Committee—said yesterday. “This debate really has everything to do with the fact that she is a champion of the working class in this country.” 

Debt Deal or No Deal

It’s a beautiful time of year: Spring is in the air, and lawmakers in Washington are pretending to be deeply invested in federal spending and the national debt as they ramp up for their recurring standoff over the debt ceiling.

The impasse entered a new phase this week, with House Speaker Kevin McCarthy unveiling a much-anticipated bill on Wednesday that would raise the debt limit and avoid a financial crisis later this summer—but only in exchange for aggressive spending cuts. Whether the proposal has enough Republican support to pass the House is not yet clear, but if it does, the pressure on President Joe Biden and congressional Democrats to come to the table will increase.

For a refresher on the debt ceiling and how we’ve ended up here, check out some old TMDs—or this Dispatch explainer from Wednesday:

The debt ceiling does not actually restrict future spending—just the Treasury’s ability to pay for past expenditures. Congress can always approve new spending regardless of how close the national debt is to the ceiling, but the Treasury will be unable to pay those future bills (or any others) if doing so would cause the government’s debt to surpass its set maximum.

This has created a rather strange procedure. Congress first votes for spending. Then, months or years later, its members decide if they are going to raise the debt ceiling to let the Treasury pay for that spending—essentially voting whether to pay their bills. Unsurprisingly, Congress always votes to raise the debt ceiling, though often not without significant commotion.

We’re entering that “significant commotion” period now. We hit the current ceiling of $31.4 trillion back in January, and the Treasury Department has been relying on “extraordinary measures”—accounting workarounds that adjust government investments to free up additional borrowing space—ever since. But those tools only work for so long.

Treasury Secretary Janet Yellen has projected for months those “extraordinary measures” would run out in June. Earlier this week, analysts at Goldman Sachs joined her. “While the data are still very preliminary, weak tax collections so far in April suggest an increased probability that the debt limit deadline will be reached in the first half of June,” they wrote, moving up their previous August estimate. 

That gives House Republicans and the White House less than two months to hammer out a compromise. McCarthy’s Limit, Save, Grow Act would raise the debt ceiling by $1.5 trillion or suspend it until March 2024—whichever comes first—in exchange for a cap on discretionary spending for next year at fiscal year 2022 levels, and a limit on spending growth of no more than 1 percent per year. McCarthy claims the legislation would save the government $4.5 trillion over the next decade, but non-partisan analysts have yet to release their evaluation. “These spending limits are not draconian, they’re responsible,” McCarthy said in a floor speech on Wednesday. 

Unsurprisingly, the White House opposes the bill, arguing the speaker’s proposal would “take a hatchet” to some of the administration’s favorite programs. Student debt forgiveness, tax incentives for renewable energy, electric vehicles, and other green investments included in the Inflation Reduction Act would all be cut. The bill would also cancel $80 billion in new funding for the Internal Revenue Service, claw back remaining unspent COVID relief funds, and institute work requirements for Medicaid and expand them for food stamps—measures strongly opposed by Democratic lawmakers. Biden had harsh words for the proposal: “It’s not about fiscal discipline, it’s about cutting benefits for folks they don’t seem to care much about.”

The big question is whether McCarthy can muster enough support to pass the bill in the House. Initial reactions from conservatives on the Hill were largely positive—including members who held up McCarthy’s speakership bid in January. “I generally approve of the framework,” said Rep. Chip Roy of Texas, a deficit hawk and member of the House Freedom Caucus. “There’s always more for me but you’ve got to work within the realm of what we can do and accomplish.” Rep. Matt Gaetz, another Freedom Caucus member, told the Dispatch Politics team he wants to see stronger work requirements added to the proposal but he’s “sure there’s a deal we can get to.”

McCarthy may see the most trouble from more centrist Republicans nervous about supporting the spending cuts. Reps. Nancy Mace of South Carolina and Tony Gonzales of Texas—both members who represent competitive districts—expressed reservations about supporting the proposal. Democratic operatives have signaled they’re ready and waiting to use support for cuts as messaging fodder in 2024.

Just five defections could sink the bill, and more than a dozen House Republicans have never voted for a debt ceiling increase. Nonetheless, McCarthy wants a vote on the bill next week. “We’re going to work through it, but yeah, we’re going to get there,” he said. “I never give up. We’ll get them.”

But actually implementing the proposal isn’t the goal—the bill won’t get past Democrats in the Senate. McCarthy’s gambit is in effect an opening bid. After all, debt ceiling fights are typically more like a game of chicken than a substantive policy debate. If McCarthy can get the bill through the House, he hopes he’ll be able to negotiate with Democrats from a stronger position. 

Biden has maintained a hard line, refusing to negotiate spending cuts under the threat of default. After negotiations on the debt ceiling in 2011 resulted in the first U.S. credit downgrade in history, then-President Barack Obama and Vice President Biden vowed never again to negotiate while a potential default is on the table. Senate Majority Leader Chuck Schumer has backed Biden’s approach, calling for a “clean” debt limit bill first and independent negotiations on spending. But the prospect of default and McCarthy’s proposal has made some Congressional Democrats nervous. 

“I respect the White House position,” Rep. Dean Phillips of Minnesota told Axios. “But not in perpetuity. Because negotiation, that’s what this whole institution is about.” Sen. Joe Manchin also knocked Biden’s no-negotiation stance. “It has been more than 78 days since President Biden last met with Speaker McCarthy,” he said. “We are long past time for our elected leaders to sit down and discuss how to solve this impending debt ceiling crisis.”

Meanwhile, some House Republicans are already preparing for the next phase of negotiations. As reported this week in Uphill, members of the bipartisan Problem Solvers Caucus have been working on a compromise plan more palatable for Democrats. “If these negotiations fail, we want to have a landing spot where we can still have a compromise and make progress for the country,” Republican Rep. Don Bacon of Nebraska told The Dispatch. 

Bacon has expressed support for the McCarthy plan but knows it’s unlikely to pass. “We’re going to work on getting a debt ceiling plan passed out of the House here in two weeks,” he said. “But we also know that’s just the beginning of negotiations, that’s not the end.”

Worth Your Time

• The solution to polarized party politics is stronger political parties, Gerald Seib argues in the Wall Street Journal. “The power of the two national party organizations has declined so dramatically that they sometimes appear to be bystanders to a political system in which they were once central actors,” he writes. “The decline of party organizations has opened the way for the rise of more extreme voices and, crucially, turned much of the financing of campaigns over to less-accountable players. The extremes of left and right have been strengthened in the process, and the center hollowed out. Paradoxical as it may sound, the decline of the parties has led to more ferocious partisanship.” Seib proposes two potential fixes: “The first would be to reverse the reforms of McCain-Feingold that stopped parties from raising large amounts of money and spending it on programs to build the party and indirectly help campaigns. Second, the law could be changed to significantly lift current limits on so-called ‘coordinated spending.’ Coordinated expenditures are funds a party committee pays for goods or services needed by a campaign, without giving money directly to the candidate. The big question is whether the two parties could come together to agree on changes.”

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Toeing the Company Line

• Calling all Houstonians! Join Steve, Sarah, and Jonah at Hotel ZaZa in Houston at 6 p.m. on June 13, where they’ll have a one-hour discussion sandwiched between a meet and greet and post-chat happy hour. Each guest will get two drink tickets on us. For registration and additional information, click here!  
• In the newsletters: Nick argues (🔒) Republicans who prefer DeSantis to Trump are scapegoating the media for DeSantis’ struggles to avoid blaming Republican voters.
• On the podcasts: Jonah talks to AEI’s Christine Rosen about transgender issues and the Republican primaries, and Sarah, Jonah, and Steve discuss the debt-ceiling drama, the Fox News settlement, presidential politics, and … controversial QR codes?. 
• On the site today: Mike Warren, in his Dispatch debut, reports on Ron DeSantis’ unusually muted rollout of his state’s new six-week abortion ban, David M. Drucker scoops new details about former Vice President Mike Pence’s likely presidential campaign and a new GOP poll showing DeSantis outperforming Trump in a head-to-head against Biden in Michigan, and Jonathan Schanzer and Mark Dubowitz discuss Jordan’s increasingly belligerent rhetoric toward Israel.

Let Us Know

Do you consider McCarthy’s bill to be a serious proposal? Is President Biden making a mistake in refusing to negotiate thus far?