McCarthy runs into a wall of corn
A fight over ethanol is putting House Speaker Kevin McCarthy in the unhappy position of accepting revisions to his debt ceiling bill — or offering future promises to members who privately don’t trust him.
Why it matters: A bloc of at least eight corn belt Republicans are a hard “no” on the bill unless it’s revised to remove cuts to ethanol tax credits, Axios has learned.
- It only takes five GOP “no” votes to tank the bill.
- The group includes all four Iowa House Republicans, plus at least four more members from the corn belt, Axios has learned.
- McCarthy is meeting with this group on Tuesday evening — after the House Rules Committee is scheduled to take up the bill, as first reported by Punchbowl News.
Zoom in: The House whip team is worried letting the corn bloc get its way invites demands from other groups.
- Leadership has pushed back on the Midwestern Republicans, saying they voted against the tax credits when they voted against the Inflation Reduction Act.
Between the lines: McCarthy could try to woo members with future IOUs, as speakers have done in the past.
- Midwestern Republicans feel their concerns are being unheard or brushed off by McCarthy, according to multiple senior GOP sources.
- But McCarthy has a better long-term relationship with them than he does with the House Freedom Caucus, giving him an opening for future promises.
- McCarthy's office didn't reply to an Axios request for comment.
The bottom line: Bond markets and global economists are showing signs of growing fear about debt default, as Axios Macro reported on Tuesday.
- McCarthy's debt ceiling bill would raise the limit by $1.5 trillion in exchange for an array of spending cuts. Failure to raise the limit by the time Treasury exhausts its "extraordinary measures" — coming as soon as June — would trigger a default on U.S. sovereign debt.
- Thanks to high interest rates, "a shock to U.S. Treasury bonds could escalate into a wave of corporate and sovereign defaults," International Monetary Fund economist Filippo Gori wrote Monday.