At this time last week, most observers of Washington politics believed that a shutdown of federal government operations was all but inevitable, having been inundated with media reports warning of a looming fiscal crisis. The current fiscal year was set to expire at midnight on Saturday, Sept. 30, unless a temporary stopgap measure known as a continuing resolution (CR) was passed by the House of Representatives and the Senate and signed by President Joe Biden. Speaker of the House Kevin McCarthy had failed to win over a small cadre of far-right conservatives to support versions of a CR that would have funded several Republican priorities such as increased funding for border security.
With only a five-seat margin in the House, McCarthy could not pass a CR without turning to Democrats. For their part, Democrats for weeks had demanded a so-called “clean” CR – one without extraneous policy provisions that would maintain current funding levels for a period of time. As the Senate appeared to coalesce on a funding measure with higher spending levels, House Democrats shifted their preference toward the Senate version. A far-right faction within the House Republican conference, led by Rep. Matt Gaetz (R-FL), had threatened to strip McCarthy of his speaker’s gavel if he relied on Democrats to pass a CR. The conventional wisdom was that McCarthy would not risk his position and a fiscal stalemate would result.
Then last Saturday, in a surprise move, McCarthy did what nobody expected: he bucked the far-right faction that had refused to support any temporary funding measures that a majority of Republicans would support, and put a clean CR on the House floor that would keep the government opened for an additional 45 days, through Nov. 17, giving the House appropriations committees additional time to come up with their own individual funding measures. Democrats initially tried to derail the effort, preferring the Senate version which contained, among other things, funding for Ukraine military assistance, but were ultimately hard-pressed to oppose a CR they had demanded, not wanting to be blamed for causing a government shutdown.
The 45-day funding patch passed the House with a huge bipartisan vote, 335-91, with more than 200 Democrats voting in favor and 90 Republicans voting against the measure. The Senate passed the measure and Biden signed the bill, averting for now a government shutdown. Afterwards, McCarthy was unapologetic, saying he had been “the adult in the room” and did what was necessary to prevent a shutdown.
And it cost him his job.
On Monday, Gaetz, who was well-known to have a personal animus toward McCarthy, filed a “motion to vacate” the speaker’s chair, a procedural motion that would require the House to vote on keeping McCarthy as speaker. The motion is privileged and must be afforded a floor vote within two days. The great majority of the Republican House conference supported McCarthy, but with only a slim margin in the majority, a handful of defectors would depose him unless some Democrats crossed the aisle and voted to keep him as speaker. But McCarthy had angered Democrats, who felt that he had reneged on his earlier debt agreement with Biden and allowed a House impeachment inquiry to proceed against the president in order to placate far-right members of his party. They would do nothing to help McCarthy.
On Tuesday, McCarthy became the first speaker in the history of the United States to be removed from his office when eight Republicans, led by Gaetz, and all 208 Democrats present in the House voted to support the motion to vacate. The final vote was 216- 210.
What happens now? The House has adjourned until next week. Until a new speaker is chosen by the House of Representatives, all legislative activity ceases. McCarthy has said he will not run again for the job. A few names of possible replacements have been mentioned. These include Majority Leader Steve Scalise (R-LA), the Republican Whip Tom Emmer (R-MN), and Judiciary Chairman Jim Jordan (R-OH), who have the support of the conservative wing of the party, and a number of other names that would appeal to more moderate members. No one is seen as a clear consensus replacement.
A delay could disrupt what Congress can do for the rest of the year. The CR that cost McCarthy his job lasts only through Nov. 17, meaning that appropriation bills have to be completed and passed by both the House and the Senate and signed by Biden before then. The objections of the hard-line conservatives to any spending legislation that could garner Democratic support remain, and anyone who assumes the speakership will probably do so because they made concessions to them on appropriations legislation.
Apart from spending measure, an already very challenging outlook for tax legislation becomes even more difficult. NAIOP has several very important tax priorities that we are fighting to get included in an end-of-year tax bill that could arise, including tax incentives for adaptive reuse of underutilized commercial buildings, an extension of bonus depreciation, legislation to delay taxes on debt restructurings, and extension of certain dates in the opportunity zones program.
Many who voted to remove McCarthy complain that they could not trust him, accusing him of going back on promises. Perhaps the next speaker will be able to manage the Republican conference more effectively, if only through a honeymoon period. But in such an evenly divided Congress, concessions and compromises often need to be made to get legislation enacted, and compromise is often seen as betrayal by factions in both parties. Leadership in the House over the next few months will certainly not be easy.
