I spoke the GRID‘s Matt Zeitlin about the chaotic start to the 118th Congress and what it says about the looming debt limit fight.

The speakership fight was a “stark confirmation of what we already knew — that the results of the election have empowered and emboldened hard-liners within the conference and weakened the hand of leadership,” Liam Donovan, a Republican lobbyist, told Grid. It’s not clear that “any speakership” — McCarthy or otherwise — could survive putting forward a debt ceiling increase that Democrats could live with. “The challenge over the next six to eight months will be finding some sort of mutually acceptable fig leaf that would avoid a downgrade or default scenario.”

…

But since past debt ceiling standoffs have been resolved without a breach, it’s possible that either the White House or the House may be more comfortable holding to their position in the expectation that the other side would cave. Similarly, it’s possible that the financial markets may not start reacting to the possibility of a debt ceiling breach until much later in the process, providing little outside pressure to reach a deal. “I think the X factor here is whether the mess on display wakes up [Wall] Street. They have underreacted in the past assuming it would all work out, which in turn emboldens guys who insist it’s all Chicken Little stuff. They’ll probably have to feel some pain to do what’s necessary,” Donovan said.

…

Read the full piece here.

I spoke to Semafor about the hard-won agreement between leadership and House conservatives that enabled Kevin McCarthy to narrowly garner the votes to become Speaker.

POWERFUL COMMITTEE ASSIGNMENTS

The most important tool in leadership’s arsenal is deciding which bills come to the floor and under what circumstances.

But in order to secure the speakership, McCarthy is said to have promised the House Freedom Caucus three seats on the all-important House Rules Committee, which makes those decisions, as well as what amendments can be offered and how long debates go on.

If true, that should be enough for them to veto plans by leadership unless Democrats step in.

“That’s the real juice here,” Liam Donovan, a Republican lobbyist and former National Republican Senatorial Committee staffer, told Semafor.

Read the full piece here.

I spoke to Grace Segers of The New Republic for her piece on early dysfunction within the nascent GOP House majority and what it portends for this Congress.

Republican strategist Liam Donovan identified the Republican strife as “more of a reflection of underlying dynamics than a driver of them,” noting that “it’s not as though recent GOP majorities were well-oiled machines even with higher morale and a bigger cushion.” (See: Boehner, John.) The true tests of the functionality of a Republican majority, Donovan said, would be the must-pass items like funding the government and the debt limit. Indeed, the vast majority of House Republicans voted against an omnibus spending bill that skated through the Senate on a bipartisan basis just last month. If McCarthy can’t wrangle his conference to vote for him as speaker in one round, he may struggle to address basic housekeeping issues like avoiding a government shutdown and preventing the government from defaulting on its debts.

Read the full piece here.

I spoke to Jonathan Nicholson of the Huffington Post about the looming debt limit crisis awaiting the incoming House majority in the 118th Congress, and why this time is more fraught than ever.

“Instinctually pugilistic, prone to brinkmanship, and harder to corral” was how Liam Donovan, a principal with the lobbying firm Bracewell LLP, described the incoming class of House Republicans. “And with [former President Donald] Trump himself using the debt limit as a favorite sign of establishment fecklessness, this dynamic will only be magnified.”

The Republicans’ narrow five-seat margin over Democrats in the House means party leaders will be under intense scrutiny when the issue comes to a head, as “one false step” could lead to their ouster, Donovan said.

“But the real risk is that too often, Wall Street thinks this is all Capitol Hill kayfabe, and doesn’t react to the sort of legislative chicken that really should make them nervous,” he said.

In turn, Donovan said, this gives lawmakers a false sense of security, even as potential default draws nearer. “Absent some acute pain being felt in the markets or a selfless act from leadership, I don’t know how you’ll see the next showdown resolve.”

Read the full piece here.

I texted with Semafor Washington editor Jordan Weissman in the wake of the failed effort to include Joe Manchin’s permitting proposal in the annual defense authorization bill. What started out as a question of permitting’s immediate prospects quickly turned to its future as the NDAA text was released late last night without the Manchin language. The exchange was included as part of Semafor’s daily Principals newsletter written by Steve Clemons.

One good text … with Liam Donovan

Read the full issue here.