After 15 ballots the US House finally elected Kevin McCarthy to be the 55^th Speaker. It was the most ballots to determine a Speaker in over 100 years. Why is the Republican disunity of such concern to analysts like me who follow DC?

The vote for Speaker is one of the easiest votes a Member of Congress will cast, which is why it has been accomplished in one vote for 100 years. Leaders, be they Nancy Pelosi or Newt Gingrich, have lined up their majority before the gavel brings a new Congress into session. Why did Kevin McCarthy fail this basic test of leadership?

It appears that some of the most conservative Members of the Republican Conference in the House simply didn’t trust McCarthy. This lack of trust led to the vote holdouts and to demands for rule changes that include an easy course of action to vote the Speaker out of office. A vote to remove the Speaker will be permitted if only one renegade Member asks for the vote, and the irony is that with only a four seat majority such a vote could place Democrats in the driver’s seat as to whether or not the Speaker recall succeeds or fails. This and the other House Rules Republicans have agreed to will be voted on by the House this week.

Another reported agreement that could have big implications is the decision to place several Members of the conservative Freedom Caucus on the House Rules Committee. What is the Rules Committee? Because the House has 435 Members there needs to be a framework for each bill that comes to the House floor. Unlimited debates and unlimited amendments could lead to gridlock. To help move the process along, each bill that comes to the House floor has an agreement which comes from the Rules Committee (the rule) that establishes how long the debate will be and what amendments will be permitted. The Members of the Rules Committee are handpicked by the Speaker and have a strong sense of loyalty to the Speaker. These new Freedom Caucus members of Rules may not share that traditional view and disrupt the flow of legislation in the House.

A future bill that is the focus of growing concern is the legislation later this year to increase the debt ceiling. I will write about the politics of the debt ceiling in coming months, but from my days as a Congressional aide I learned that it is one of the toughest votes a Republican House Member takes. There are reports that McCarthy made promises to his opponents to prevent a simple debt ceiling bill from coming to the House floor. The ultimate power of a Speaker is determining the House schedule.

Can a bill come to the floor against the wishes of the Speaker? Yes.

Here comes some arcane House rules facts. Under House rules it is possible for a bill to come to the House floor for a vote if a majority – 218 – of the Members sign a so-called discharge petition that shortcuts the Committees and the Speaker and sets up a procedure for a House vote on a bill. This rarely happens as the Speaker views signing of a discharge petition as a betrayal of trust in the Speaker. However, it may be possible for a group of moderate, swing district Republicans to work with Democrats in order to prevent a US Government default and get a debt ceiling bill through the House and off to the Senate. Discharge Petition: a term that may become better known and an issue I will be closely following.

FOMC minutes

Last week the Fed released the minutes from the December FOMC meeting where the Committee raised rates by 50bps. After the meeting I wrote that, in my view at his post meeting press conference, the Chair put a 25bps rate increase on the table for the next meeting on 1/31-2/01.

The minutes reiterated the Chair’s mantra that the decisions will be data driven and made meeting by meeting. There was some concern about the impact of higher rates, and I found this part of the minutes interesting as it seemed to indicate that there may have been some support for slower rate of increases in the future:

“A number of participants emphasized that it would be important to clearly communicate that a slowing in the pace of rate increases was not an indication of any weakening of the Committee’s resolve to achieve its price-stability goal or a judgment that inflation was already on a persistent downward path.”

The next meeting is on January 31 and February 1. Obviously, more important data will be coming over the next few weeks.

CPI

Perhaps the most important data point, at least as far as public perception, is the widely publicized CPI Index. The government will release the CPI for December this Thursday. It will be a major data point as the Fed starts to think about the next FOMC rate decision.