Yahoo Finance How Kevin McCarthy’s ouster could scramble 3 key Washington economic debates
Issues of keen focus to the business community could be upended if either of the frontrunners to replace Kevin McCarthy takes the gavel.
House Republicans have spent months trying to put their stamp on areas of interest to the business community, from energy to cryptocurrency markets to "ESG" investing.
All that ground to a halt Tuesday with the sudden ouster of House Speaker Kevin McCarthy and could be scrambled even further in the days ahead depending on which candidate ultimately takes the gavel.
House Majority Leader Steve Scalise and Judiciary Committee Chair Jim Jordan are the two frontrunners for the post at the head of a fluid race that might not be decided for weeks. Other figures like Rep. Kevin Hern (R-Okla.) are also likely to be in the mix.
But in the case of the two frontrunners, either Scalise or Jordan would mark a break from the style and policy preferences of McCarthy and his team — likely making compromise on these issues even less likely in what has already been a markedly unproductive time in Washington.
As the political world awaits a Republican meeting next Tuesday to begin discussions of the next speaker, here’s a rundown of how three issues of importance to the business community might fare when the dust settles.
Energy: Dwindling chances of bipartisanship
Cutting some of the red tape around energy projects had been a priority under McCarthy and was one of the few areas of policy success.
Tucked into this spring’s debt ceiling deal were measures to address permitting reform, elating energy companies and groups like the Business Roundtable. The deal made changes to the National Environmental Policy Act, a 1970 law that allows the federal government to analyze environmental impacts of proposed projects.
The deal was seen as a win-win for both fossil fuel companies as well as clean energy companies looking to embark on new projects. But observers say deals of that shape could be less likely under either probable replacement for McCarthy.
If there is space for future energy deals, "the compromises will be on different things," says Philip Rossetti of the R Street Institute in Washington. He notes that McCarthy was focused on "ripe middle-ground ideas like permitting reform" and that any further GOP proposals — particularly under a possible Speaker Scalise — would likely be more aligned with a traditional GOP approach of focusing primarily on oil and gas concerns.
Scalise represents an area of coastal Louisiana where many offshore oil drillers operate and has long had extremely close ties with the industry. In his letter announcing a run for speaker, he repeatedly touted his energy record, including his shepherding of H.R. 1, the Lower Energy Costs Act, to passage in the House.
But H.R. 1 has been ignored by the Senate Democrats and a search for bipartisan compromise on the issue would almost surely need to include both fossil fuels and clean energy provisions. Scalise’s rhetoric could make that a nonstarter, with the lawmaker often avoiding even acknowledging climate change.
"We had hot summers 150 years ago," Scalise said on Fox Business a few months back, adding a charge that climate proponents "just want to control your life."
But regardless of who wins, climate proponents are set to be wary. "We know one thing and that’s that Republicans are moving to a more extreme position on energy," said Alex Witt of the group Climate Power in an interview this week. She added the GOP approach is unpopular with voters and could be a political liability for Republicans in the coming election.
Jim Jordan’s record on the subject, meanwhile, is sparser though he has slammed Democratic climate efforts in various speeches over the years.
Most of his energy has been instead focused on issues like border security and oversight of the Biden administration. He has already signaled in interviews that those would be his priorities as speaker over further energy negotiations on issues like permitting reform or reforming the Inflation Reduction Act’s clean energy tax subsidies.
But Rossetti adds hopefully that Jordan "could be a bit of a blank slate; sometimes it's a lot harder for a politician to actually move forward on issues where they kind of have an established position where they have to walk away from it."
A war on 'woke investing' that is likely to continue
The House Republican relationship with the world of investing could also further change under a new Speaker.
July was "ESG month" in the House with lawmakers promoting a mix of bills aimed at rolling back the yearslong trend of investors and companies making environmental, social, and corporate governance (ESG) principles part of their decision-making mix.
Those efforts largely remain outstanding with Scalise and Jordan having been champions of different aspects of the effort.
Scalise has focused in particular on an ongoing GOP fight against a Department of Labor rule that allows ESG investing to be considered in retirement plans. The measure passed both the House and Senate but was the subject of President Biden’s first veto in office.
Meanwhile, Jordan has focused more on participating in attention-grabbing ESG hearings and helped launch an investigation into BlackRock (BLK), Vanguard, and others over their ESG practices.
The policy efforts are likely to continue under either candidate, with little chances of being considered in the Senate, says Jennifer J. Schulp of the Cato Institute. But she notes the temperature around the issue could be turned up.
"We might get a little bit more hot rhetoric if either one of them becomes speaker," she says.
Cryptocurrency: The fate of two bills in the balance
Cryptocurrency is a third issue being shaken by the leadership changes. Neither Scalise nor Jordan have been overly involved in crypto, but two other players in the runoff have close ties there.
Rep. Patrick McHenry (R-N.C.) is currently overseeing the House as speaker pro tempore. When the House elects a permanent speaker, he is expected to return to the House Financial Services Committee as chair where he will exercise outsized sway over the issue. Another crypto-focused lawmaker is Majority Whip Tom Emmer (R-Minn.) who could move up in House leadership ranks if Scalise is promoted to Speaker.
Both have championed two ongoing cryptocurrency efforts — one bill focused on crypto’s market structure and another focused on stablecoins — and the two lawmakers' increased clout in the House GOP caucus could potentially help to push those efforts along.
But sizable gaps remain between the parties as well as between the House and Senate on the two bills, with the leadership changeover in the House likely to imperil the ongoing negotiations. The potential for weeks of lost time to speaker votes — as well as other issues like a possible government shutdown in November looming — means ever scarcer time for the complicated crypto issues to be ironed out.
McHenry had been one of Speaker McCarthy’s closest allies and "the conventional wisdom was that McHenry and McCarthy had a deal that [a crypto bill] was going to get to the floor," Schulp says.
But now, like much else in Washington, that is all up in the air.
Ben Werschkul is Washington correspondent for Yahoo Finance.
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