House Conservatives Deal a New Blow to Johnson

Plus: The deficit tops $1 trillion in six months ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ [The Fisc](   By Yuval Rosenberg and Michael Rainey Good evening. We’re a bit unsettled at the moment by news of a coming ["cicadapocalypse,"]( but we’re not letting that distract us from the day’s political and fiscal developments. Read on for more on Speaker Mike Johnson’s troubles, the deficit and inflation. Speaker Mike Johnson said that ousting him would result in House chaos. (Sipa USA) House Conservatives Deal a New Blow to Speaker Johnson The far-right revolt against Speaker Mike Johnson got dialed up a notch Wednesday as a group of 19 House Republicans defeated a procedural vote on a bill to reauthorize the controversial Section 702 of the Foreign Intelligence Surveillance Act (FISA), dealing another blow to GOP leadership. The bill that was blocked, the Reforming Intelligence and Securing America Act, would reauthorize for five years the warrantless surveillance of foreigners’ communications while also imposing some reforms ahead of an April 19 deadline. Critics have long raised privacy and civil liberty concerns, warning that Americans’ communications can be intercepted and searched under the program. Some House Republicans demanded that the FBI be required to obtain warrants before searching for information on U.S. citizens, and former President Donald Trump had posted a call on social media for members of his party to "KILL FISA." Johnson had struggled to build support for the reauthorization bill as Republicans were deeply divided, but he went ahead with a rule vote Wednesday, essentially daring his members to vote against it. They did, tanking the vote by a 193-to-228 margin. The failed vote also derailed a leadership plan to bring up an amendment adding the warrant requirement that many on the right demanded. It marked the fourth time in Johnson’s 168-day tenure as speaker that the House has handed him an embarrassing defeat of this sort. Before this Congress, a rule vote hadn’t failed in two decades. In this Republican-controlled House, it has happened seven times since last year, including three under former Speaker Kevin McCarthy, derailing Republican leadership’s agenda. The vote comes as Johnson faces a threat from Georgia Republican Rep. Marjorie Taylor Greene, who is pushing to oust the speaker less than six months after he won the job. Johnson met with Greene on Wednesday, but the Georgia firebrand stuck by her threat afterward. "There’s two issues that are coming up that are extremely important: FISA and Ukraine," Greene told reporters. She warned Johnson against funding "the deep state" via the FISA bill before reiterating her opposition to aiding Ukraine. "The funding of Ukraine must end," she said. "We are not responsible for a war in Ukraine. We are responsible for the war on our border, and I made that clear to Speaker Johnson." Johnson told reporters earlier in the day that he has always considered Greene a friend and that he and she are both conservatives and don’t disagree on philosophy but do differ sometimes on strategy. He defended his decision to avoid a government shutdown by passing spending bills that conservatives despised and said Greene’s pending motion to oust him wouldn’t help the Republican Party. "It would be chaos in the House," he said about her threat before their meeting. Numerous Republicans have made clear they also disagree with Greene’s push to remove Johnson, who has also indicated that he plans to bring a Ukraine aid bill to a floor vote, though the details of that plan remain unclear. "It’s an impossible job. The lord Jesus himself could not manage this conference," Texas Republican Rep. Troy Nehls told reporters Tuesday about the speaker’s job, defending Johnson. Greene insisted, though, that the feedback she received on a [five-page letter]( criticizing Johnson was positive and that she has support for her push to remove Johnson. One unnamed rank-and-file Republican told [The Washington Post]( recently that the "silent majority" in the GOP conference is moving away from the speaker. What’s next: The pressure is building on Johnson, who must now scramble to figure out how to address the FISA surveillance tool before it expires in nine days and must lay out a plan for delivering assistance to Ukraine. Johnson and Trump are planning a joint news conference on Friday that is purportedly about "election integrity" but may also shed some light on the speaker’s future. Deficit Tops $1 Trillion Over First 6 Months of 2024 Fiscal Year The federal budget deficit totaled $1.06 trillion in the first six months of the current fiscal year, the Treasury Department reported Wednesday. Receipts rose to a record $2.18 trillion, an increase of 7% compared to the same period a year ago, while outlays grew 3% to $3.25 trillion. Corporate tax revenues, which increased by 32%, played a major role in the growth of receipts. On the spending side, interest payments shot up 36% to $522 billion. Spending on defense also rose, by 6% to $410 billion, as did outlays for Social Security, which rose 8% to $741 billion. Sticky Inflation Clouds Picture of US Economy A leading measure of inflation was higher than expected in March, as the consumer price index rose by 3.5% on a year-over-year basis. The March report from the Labor Department, released Wednesday, marked the third month in a row that inflation topped exceeded expectations, fueling concerns that pricing pressure in the U.S. economy is getting sticky and could remain a problem longer than analysts had hoped. On a monthly basis, prices rose 0.4% in March, higher than expectations of a 0.3% increase. The core inflation measure, which leaves out volatile food and fuel prices, rose 0.4% on a monthly basis and 3.8% on an annual basis, with the annual number matching the February results but defying expectations for a decline of a tenth of a point. Major contributors to the rise in the price index were vehicle insurance, up 22.2% year over year; vehicle repair, up 11.6%; rent, up 5.9%; and restaurants, up 4.9%. What the experts are saying: "Houston, we have a problem," KPMG chief economist Diane Swonk [said]( on social media. "Inflation is getting sticky and accelerating in the service sector. Insurance and medical cost major drivers of inflation. This where we worried that there is more room to run on prices." Swonk said the outlook for a rate cut by the Federal Reserve this summer is darkening. "Even September looks a stretch today," she added. David Kelly, chief global strategist at JPMorgan Asset Management, agreed that rate cuts are looking less likely for summer. "The sound you heard there was the door slamming on a June rate cut. That’s gone," he said on [Bloomberg television](. Analysts pared back their estimates for the number of rate cuts this year, with economists at Goldman Sachs and UBS reducing their projections from three rate cuts in 2024 to two. Futures traders sharply reduced their expectations, as well, with the CME FedWatch Tool showing a better than 80% probability that rates will stay the same at the Fed meeting in June, up from 43% just yesterday. Former Treasury Secretary Lawrence Summers, a noted inflation hawk who has called for much tighter monetary conditions, said the Fed may even have to consider raising rates again given the persistence of inflation. "You have to take seriously the possibility that the next rate move will be upwards rather than downwards," Summers [told Bloomberg]( adding that the odds of the central bank doing so are no more than 25%. Other economists were a bit more sanguine. Moody’s chief economist Mark Zandi [said]( that while the report was "a bummer" that would likely push the Fed to delay a rate cut, "Inflation continues to moderate, and the only thing keeping it from the Fed’s target is shelter costs, which will recede." Zandi added that the big surprise in the report was the cost of vehicle insurance and repair, driven in part by the soaring cost of new cars. "The good news is vehicle prices have rolled over, which will soon take the steam out of insurance and maintenance cost," he added. Adam Posen of the Peterson Institute for International Economics said that while it looks like disinflation has "stalled," this is "not a reason for panic as so many rightly note." Economist Julia Pollack of ZipRecruiter noted that the inflation picture varies across consumer categories. "Housing and car insurance are the main drivers of today’s high core inflation print. Energy prices are the main driver of the increase in the overall CPI," she [wrote](. "Outside of those categories, the prices of goods and services are relatively stable, and some are even falling." Some economists questioned the idea that sticky inflation should spur the Fed to delay interest rate cuts. Lindsay Owens of the Groundwork Collaborative, a liberal think tank, said that some of the leading sources of inflation are largely immune to the Fed’s influence, since interest rates have little effect on the cost of car insurance or auto repair, for example. "None of these things are remotely in the realm of things that are impacted through demand destruction," Owens [told]( The Washington Post. "I think if anything, this was not good news for those of us who want to see rate cuts sooner, but I think that’s unfortunate and misguided." The bottom line: Inflation has fallen dramatically since its pandemic-era peak, but it’s showing signs that it’s in no hurry to return to the Fed’s target of 2%. In the wake of Wednesday's CPI report, analysts now think rate cuts are off the table until later in the year, and the Fed will require clearer evidence that inflationary stickiness is finally coming to an end before committing to lower interest rates in 2024. Quote of the Day "I think the president is out there too much talking about bridges. He does two or three events a week where he’s cutting a ribbon on a bridge. And here’s a bridge. Like I tell you, if you go into the grocery store, you go to the grocery store and, you know, eggs and milk are expensive, the fact that there’s a f---ing bridge is not [inaudible]." – Former White House Chief of Staff Ron Klain, arguing that President Biden is focusing too much on infrastructure and too little on inflation in his re-election campaign. Klain’s remarks, reported by [Politico]( were made at an event Tuesday night. Klain reportedly called Biden’s efforts to build infrastructure "a positive thing," but argued to Politico that the president should be framing the election as a debate about the future centered around family budgets, lower costs and higher incomes. The bridges also don’t generate much media coverage. "Like it’s a bridge, and how interesting is the bridge?" Klain said. "It’s a little interesting but it’s not a lot interesting." --------------------------------------------------------------- Send your feedback to yrosenberg@thefiscaltimes.com. And please encourage your friends to [sign up here]( for their own copy of this newsletter. --------------------------------------------------------------- Fiscal News Roundup - [Conservatives Deal Another Blow to Speaker Johnson, Defeating FISA Rule After Trump Push]( – CNN - [House Republicans Are in Chaos Again as Conservatives Derail a Key Surveillance Bill]( – NBC News - [Mike Johnson, Marjorie Taylor Greene Speakership Standoff Continues After Meeting]( – ABC News - [US Budget Gap Hits $1.07 Trillion in First Half of Fiscal Year]( – Bloomberg - [General Warns House on Ukraine: ‘The Side That Can’t Shoot Back Loses’]( – Washington Post - [Inflation Keeps Coming in Hot, Likely Delaying Interest Rate Cuts]( – Washington Post - [Stubborn Inflation Rains on Biden’s Good-News Parade]( – Politico - [Traders See Fed Waiting Until After Summer to Cut as Yields Soar]( – Bloomberg - [Biden Is Spending $1 Trillion to Fight Climate Change. Voters Don’t Care.]( – Wall Street Journal - [McCarthy Says He’s Not Speaker Because ‘One Person’ in Congress Wanted to Avoid Ethics Complaint]( – The Hill - [How Ohio’s GOP Governor Sells Public Health: Don’t Call It That]( – Washington Post Views and Analysis - [As Speaker, Johnson Advances What He Once Opposed, Enraging the Right]( – Catie Edmondson, New York Times - [Mike Johnson’s Reign of Chaos Could Soon Be Coming to an End]( – Ellie Quinlan Houghtaling, New Republic - [Fed Faces a Big Risk, But It’s Not the One Many Think]( – Mohamed A. El-Erian, Bloomberg - [Inflation Is Becoming a Political Nightmare for the Fed]( – Jonathan Levin, Bloomberg - [Inflation Isn’t the Real Problem for the U.S. Economy. The Housing Shortage Is]( – Ben Harris, Los Angeles Times - [TSMC Chips Deal Promotes the Logic of Biden’s Industrial Policy]( – David Dayen, American Prospect Copyright © 2024 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website or through Facebook. The Fiscal Times, 399 Park Avenue, 14th Floor, New York, NY 10022, United States Want to change how you receive these emails? [Update your preferences]( or [unsubscribe](