McCarthy’s scramble for House speakership

Transcript

NIALA: Good morning! Welcome to Axios Today.

It’s Tuesday, January 3rd. Happy New Year!

I’m Niala Boodhoo.

Here’s what we’re covering today: the economic outlook for 2023. Plus, new state laws around wages and recreational marijuana. But first, the scramble for the speakership… that is today’s One Big Thing.

NIALA: This morning in Washington, the new Republican-led House convenes to vote for a speaker. And representative Kevin McCarthy has been trying to secure the votes from fellow lawmakers, but it's been an uphill climb. Here's Florida Representative-elect Anna Paulina Luna speaking in a podcast interview with host Steve Bannon this weekend.

ANNA PAULINA LUNA: I think right now a lot of people are not happy about the options. I've gotten a lot of emails from people telling me that they don't want me to vote for Kevin McCarthy.

NIALA: Axios’ Political Reporter Alayna Treene is here with the big picture. Hi Alayna.

ALAYNA: Hi, Niala.

NIALA: I think the big question everyone wants to know is, does House Republican leader Kevin McCarthy have what he needs to secure Speaker of the House?

ALAYNA: It's unclear. I mean, logically, no, he doesn't. If you look at the numbers of people particularly following that Sunday night conference call he had with fellow Republicans. And, so it's gonna be very difficult for him to pull this off today. I think the thing that I'm watching for and what I know a lot of people are telling me just in my conversations is that a lot of people are less worried about the first ballot.

I don't think many people are not expecting him to win the vote on the first ballot. It's more about paying attention to the second ballot or potentially the third ballot if it goes that far, and seeing if any of those members eventually cave and vote for McCarthy. At that point, once they've had their say, once they've showed that they tried to oppose him initially, and there's no other option but to vote for him. That's what a lot of people who are pro-McCarthy are hoping will happen. But again, as of now, no one really knows exactly what will happen today or whether McCarthy can pull this off or not.

NIALA: Why are representatives saying they don't want to vote for McCarthy?

ALAYNA: A lot of these people feel that McCarthy hasn't been a true conservative ally for them. They worry that he's not going be as hardline on issues as they want him to be. And many people see McCarthy as still part of the establishment, even though he's been loyal to Donald Trump and has become very close with many far right conservatives, people like Jim Jordan, people like Marjorie Taylor Greene, both of whom are planning to vote for him today and have been staunch allies of him. But he's still seen as a member kind of the old guard and the establishment. And there are people who really don't like that about him.

NIALA: Can you remind us of the procedure of what happens on the first day of Congress convening?

ALAYNA: You have to have the speaker votes first, that happens before any of the new members of the 118th Congress are sworn in. This is really historic. I mean, we're potentially going to see for the first time in more than a century, very likely potential speaker not win on the first ballot. We haven't seen it gone to multiple ballots in over 100 years.

NIALA: If that happened, who are the alternatives?

ALAYNA: Well, the most talked about alternative is McCarthy's second in command, Steve Scalise, very well liked by many Republican lawmakers. It could be Scalise who becomes the leading candidate, and as of now, that's the most likely we're going to see other people probably throw their names into the ring if McCarthy is unable to get the 218 votes.

NIALA: Alayna, what is this fight for leadership of 118th Congress say about the House of Representatives and the Republican Party right now?

ALAYNA: It shows that there's still a Civil War happening within the party, and they're trying to find their identity in a post-Trump world. And I do think that this vote is emblematic of what we can expect of future votes on the floor where they're gonna have a lot of difficulty getting things done.

NIALA: Axios’ Alayna Treene. Thanks Alayna.

ALAYNA: Thank you, Niala.

New state laws on wages and on marijuana.

NIALA: Following the November midterms, new state laws have begun kicking in across the country.

That includes raises for minimum wage workers in 23 states and the District of Columbia. – from an extra 23 cents an hour in Michigan to an additional $1.50/an hour in Nebraska.

And Washington state now has the highest minimum wage in the country – at $15.74 – that’s more than double the federal rate of $7.25 an hour, which hasn’t changed since 2009.

It’s also a big moment for marijuana and other drug legislation.

New York and Rhode Island began allowing the recreational sale of marijuana for those 21 and up last month. Connecticut is following suit on January 10th, as is Maryland on July 1st. And Missouri will see recreational sales start in the next few months.

Now, nearly half of US states have legalized recreational use of marijuana – 21 states, and Washington D.C.

Colorado is taking things a step further this week – and is decriminalizing psilocybin or magic mushrooms, and other psychedelic drugs for people over 21.

In a moment – what to watch in the economic year ahead.

[AD SPOT]

The economic outlook for 2023

NIALA: Welcome back to Axios Today. I'm Niala Boodhoo.

2022 was, of course, a bumpy economic year with inflation spikes, interest rate hikes and recession fears. Axios’ Chief Economic Correspondent Neil Irwin is here for a look at what 2023 might bring. Hi, Neil. Happy New Year.

NEIL IRWIN: Hi Niala, you too.

NIALA: First, what are we expecting to see in terms of inflation as we head into this January?

NEIL: Most signs are that inflation is going to fade as 2023 progresses and that we've seen the worst of it. Energy prices have stabilized and are coming down, lots of goods prices are coming down or stabilized. You know, if that trend continues, then, then we will be in a very different position on inflation in the second half of ‘23 than we have been throughout 2022. That said, forecasts haven't been worth a whole lot on inflation the last couple of years, but as of where things stand right now, the trends are, are in a benign direction.

NIALA: And so what does that mean for what we might see from the Fed?

NEIL: Well, basically the faster inflation comes down, the more the Fed has permission in a sense to back off their rate increases and the Fed rate increases. They've caused the stock market to drop a lot, they've caused the housing market to crater a lot. So anything that they can do to back off those rate increases. Is something that is going to help the economy and make things feel better, but they're not gonna really do that until they see clear and compelling evidence that the war on inflation is won, that inflation is coming down and is going to stay lower.

NIALA: Of course, we're also watching to see if we are headed towards a recession. If we are headed in that direction, what do you think it might look like?

NEIL: Yeah, I mean, that's the, that's the trillion dollar question. The possibility this becomes a recession a lot of forecasters would say more likely than not. The question is, everything about this economic cycle has been weird. And, we had the supply disruptions, we've had the Ukraine War, we've had all of these competing forces shaping prices, wages, you know, might this look like a different kind of downturn or different type of recession in the past could, for example, we see inflation come down the, the economy come to a more stable place without a huge rise in unemployment without the kind of mass job losses that we normally see in a recession. I think there are good reasons to think that this will be a different type of economic cycle than we've seen in the past. Everything about this last couple of years has been unusual, and that might continue to be the case in 2023.

NIALA: As we think about global forces in 2023, I'm thinking in particular of the Covid situation in China right now that could have complications for trade for the U.S. What are you watching for on that front?

NEIL: Yeah, I think this is one of the, the huge looming stories of ‘23, on the one hand, if the Chinese economy is, you know, really cranking up production, again, that's good for supply constraints, that's good for global supply. On the other hand, that also means more demand for oil, for copper, for other types of commodities. So that could cause more inflation. So it kind of cuts both ways in terms of less inflation, less supply streams, more inflation, cause there's more demand. And how it all cuts out is really hard to predict.

NIALA: Neil, before the holidays, you asked readers of your daily Macro newsletter to submit their predictions for the 2023 economy, and you got more than 800 responses. Was there a theme or what did that say to you?

NEIL: Axios Macro readers were quite optimistic about the year ahead. Certainly compared to the doom and gloom you hear from Wall Street forecasters. The median respondent expected the unemployment rate to rise to 4.4%. That's up from 3.7 last month. But that's really not the kind of number that, that is a, is a huge, full blown recession. That's kind of a mild soft patch in the economy. The median respondent 50% odds of recession next year. I thought people might think that a recession's baked in and already a sure thing. Instead, people saw it as a coin flip. And, if Americans think that things are really going off the rails, they're gonna pull back on spending, they're gonna not make, uh, major investments. Those are the things that can make a recession worse or make the economy worse. As long as most people view the world, kind of like Axios Macro readers did in our survey, things are gonna be okay. People are gonna keep buying houses, buying cars, doing things they need to, keep the economy chugging.

NIALA: Axios’ Neil Irwin writes the Axios Macro Newsletter. Today's edition is gonna dive deeper into some of the things we just discussed. You can sign up at Axios dot com. Thanks, Neil.

NEIL: Thanks, Niala.

NIALA: And that’s it for us today. We hope to hear from you this year, with feedback and story ideas…you can text me directly at (202) 918-4893.

I’m Niala Boodhoo - thanks for listening - stay safe and we’ll see you back here tomorrow morning.