DHS Shutdown Starts Tonight ... and May Not End for a While

Happy Friday! On this date five years ago, President Trump, out of office following his first term and a failed re-election bid, was acquitted by the Senate at his second impeachment trial. He was accused of inciting the January 6, 2021, attack on the U.S. Capitol. The 57 votes to convict Trump fell short of the two-thirds majority needed.

Today, with Trump back in office, the Department of Homeland Security is headed for a shutdown. On the positive side, we did get some good news on inflation. Here's what you should know heading into the long Presidents' Day weekend.

DHS Shutdown Starts Tonight ... and May Not End for a While

Funding is set to lapse tonight for the Department of Homeland Security, marking the third time in five months that at least parts of the federal government are shut down. The fight over immigration enforcement reforms is likely to go on for a while because negotiators remain far apart, the rest of the government is already funded, and the immediate impact of a DHS shutdown is expected to be limited so political pressure to strike a deal is low - oh, and Congress is scheduled to be out for 10 days.

"This 'nyah nyah' is going to go on for a while," Republican Sen. John Kennedy of Louisiana predicted Thursday about the looming DHS shutdown.

Normally, lawmakers facing a shutdown deadline would be scrambling to take last-minute votes or hustling to make their case to TV cameras. Not this time. Both the House and Senate cleared out on Thursday, an acknowledgment that any deal mandating reforms to Immigration and Customs Enforcement remains far away - and that lawmakers have other priorities for the coming few days.

"We are not even going to pretend that we are trying to figure it out," said Republican Sen. Lisa Murkowski, who was reportedly heading to the Munich Security Conference in Germany along with other lawmakers. "It doesn't look great."

Kennedy, as quoted by Politico, suggested that even if a deal is reached quickly by the White House and Democratic leaders, it's not clear that party members would vote for it. "I can't see the Dems voting for anything because they're not going to get pounded for funding ICE," Kennedy said. "And the Republicans on my side are not going to get pounded for hurting ICE."

Democrats are expected to send the White House a counteroffer on immigration enforcement reforms this weekend after they rejected a confidential administration proposal made earlier this week as wholly insufficient.

Key Inflation Measure Drops to 5-Year Low

The Consumer Price Index rose 0.2% on a monthly basis and 2.4% on an annual basis in January, the Bureau of Labor Statistics reported Friday, beating expectations and raising hopes that inflationary pressure may be easing in the U.S. economy.

A big drop in the cost of gasoline and some other energy sources helped keep a lid on the inflation index. Gas prices dropped 3.2% in January and were down 7.5% from a year earlier. Used car prices dropped by the largest amount in two years, falling 1.8% on the month and 2% on the year.

A measure of core inflation, which ignores volatile food and fuel prices to give a better sense of the underlying trend, came in at 0.3% on a monthly basis and 2.5% on an annual basis, meeting expectations. It was the lowest reading for annual core CPI since March 2021.

Encouraging report: Many economists were worried that January would show a sharper uptick in prices, as retailers revamped their price schedules for the new year and some tariff-related costs were passed onto consumers. That could still happen, but January's data offers hope that the pricing effects will be relatively modest.

"On balance, we found today's report to be encouraging," economists at Wells Fargo said in a research note, per Bloomberg. "Tariff-induced price hikes probably have not fully worked their way through the data, but we are closer to the end than the beginning of this source of higher prices."

A bit less optimistically, Subadra Rajappa, head of U.S. research at investment bank Société Générale, said that the tariffs would likely show up in the inflation data later in the year. "I think everyone believes that tariffs are going to have a transitory effect on inflation, but the question of when those tariff effects fade is going to be more of a second-half-of-the-year story than a first-half-of-the-year story," he said, per The Wall Street Journal.

RSM Chief Economist Joseph Bruseulas warned that some of the details in the report provide less comfort, including "notable turn-of-the-year price increases in goods sensitive to tariffs and services." Brusuelas said inflation in some key sectors is still running over 3%, which "partially accounts for the simmering discontent among the American public on pricing and affordability."

Taking credit: The White House celebrated the latest data, saying it proves the president's policies are working. "This combined formula of tax cuts, of deregulation, of lowering inflation, unleashing American energy - all of the president's actions combine to make a stronger economy [and put] more money in the pockets of the American people," White House spokesperson Anna Kelly told Newsmax.

Many consumers, however, report that they are still struggling to pay their bills as prices remain significantly higher than they were before the pandemic. That dissatisfaction is signaled loud and clear in Trump's dismal approval ratings on the economy.

"Donald Trump promised to lower costs 'on day one,'" Sen. Elizabeth Warren said in a statement, channeling that consumer discontent. "But one year into his second term, food continues to get more expensive, utility costs are soaring, and housing prices are rising. Trump is making life less affordable for American families - and instead of fixing the economic pain he's caused, he says this is the Trump economy, and he is 'very proud' of it."

Trump Administration Says It Is Releasing Gateway Project Funds

The Trump administration said Friday that it will release $205 million in frozen funding for the Gateway Tunnel project to build new commuter rail links between New York and New Jersey, but a Department of Justice lawyer reportedly told a court that it may take a few more days for the full amount to be delivered.

Work on the $16 billion tunnel project has been halted since last Friday, with about 1,000 workers affected, after the Trump administration halted congressionally approved funding for the project last fall and the line of credit that had been used to continue work reportedly ran out. In an ongoing court battle over the funding, a federal appeals court on Thursday declined to overturn a judge's order requiring the administration to resume disbursements for the project.

"Donald Trump must follow the law, restore the rest of the funding, and let us get back to work," New York Gov. Kathy Hochul, a Democrat, wrote on social media.

The Trump administration continues to pursue its appeal, and the states are reportedly due back in court on February 23.

Number of the Day: $40 Million

The Trump administration has likely spent more than $40 million to deport about 300 immigrants to countries other than their own, according to a new report by Democrats on the Senate Foreign Relations Committee.

The administration has expanded use of so-called third country deportations as it looks to carry out President Trump's mass deportation goals.

"Through a growing web of bilateral arrangements, the United States is convincing foreign governments to take in people with no connection to their country, largely through financial payments or pressure," the Democratic report says. "In some cases, the Administration is sending migrants thousands of miles only for them to later be returned to their home country at additional taxpayer expense. ... In practice, third country deportations have produced little measurable benefit while imposing significant financial and diplomatic costs on the United States."

The report says that the United States has sent at least $32.3 million to five foreign governments in deals to have those countries accept nationals from other countries. It adds that the administration has spent at least $7.2 million on flights to move migrants to 10 or more countries and $307,000 to house deportees on a U.S. military base in Djibouti.

The report says that, as of last month, more than 80% of migrants sent to third countries that were paid by the United States to take them in have returned to their country of origin or are in the process of doing so.

"Through its third country deportation deals, the Trump Administration is putting millions of taxpayer dollars into the hands of foreign governments, while turning a blind eye to the human costs and potentially undermining our diplomatic relationships," Sen. Jeanne Shaheen, the top Democrat on the Foreign Relations Committee, said in a statement. "For an Administration that claims to be reigning in fraud, waste and abuse, this policy is the epitome of all three."

The Associated Press notes that the State Department, which oversees negotiations for the agreements with third countries, had defended the practice as part of the president's effort to end illegal immigration.

Quote of the Day

"The international order based on rights and rules is currently being destroyed. ... This order, as flawed as it has been even in its heyday, no longer exists in that form."

• Chancellor Friedrich Merz of Germany, speaking Friday at the Munich Security Conference.

Merz delivered his speech in German, but switched to English toward the end, presumably to directly address the Trump administration. "In the era of great power rivalry, even the United States will not be powerful enough to go it alone," Merz said. "Dear friends, being a part of NATO is not only Europe's competitive advantage. It is also the United States' competitive advantage."

Chart of the Day: The Love Tax

The tariffs President Trump has slapped on all kinds of imports from trading partners around the world are driving up prices on goods favored by would-be romantics on Valentine's Day. According to data provided by the Cato Institute's Scott Lincicome and published by The Washington Post, staples such as lingerie and chocolates cost more this year, making it that much more difficult to assemble an impressive basket of gifts.

Fiscal News Roundup

• What to Know About the Homeland Security Shutdown Starting This Weekend – Associated Press
• Lawmakers Resign Themselves to Lengthy DHS Shutdown – Politico
• White House Seeks to Tighten Control Over HHS Priorities With Personnel Shakeup – CNN
• Some Republicans Are Increasingly Anxious Over Trump's Signature Policy – Politico
• Frozen Gateway Tunnel Funds Will Be Released Next Week, Trump Administration Tells New York, New Jersey – CBS News
• Inflation Measure Falls to Nearly Five-Year Low as Gas Prices Fall and Housing Costs Cool – Associated Press
• Solid Inflation, Jobs Reports Boost Trump as His Polling on Economy Sinks – Politico
• Donald Trump Plans to Roll Back Tariffs on Metal and Aluminum Goods – Financial Times
• Appropriators Call for Watchdog Review of HUD HQ Move – Politico
• Bessent Pushes Senate on Fed Confirmation Amid Backlash Over Criminal Inquiry – New York Times
• ICE Is Gearing Up to Build "Mega" Jails – New Republic
• Kennedy Allies Target States to Overturn Vaccine Mandates for Schoolchildren – New York Times
• Mamdani Reverses Campaign Promise to Expand Rental Assistance – New York Times
• Trump Promised RFK Jr. Would 'Restore Faith in American Health Care.' A Year in, Trust Has Plummeted – CNN
• A Pilot Fired Over Kristi Noem's Missing Blanket and the Constant Chaos Inside DHS – Wall Street Journal
• Amtrak Is Revamping Its Run-Down Fleet. Check Out the New Trains – New York Times

Views and Analysis

• Congress Jets Off as D.H.S. Shuts Down – Carl Hulse, New York Times
• The DHS Shutdown Is On. Don't Expect It to End Anytime Soon – Ed Kilgore, New York
• The Love Tax – Washington Post Editorial Board
• ICE Is Strangling the Minneapolis Economy – Ryan Cooper, American Prospect
• It Is Decision Time for NATO – Michael B.G. Froman, New York Times
• Meet the YOLO Republicans: Lawmakers With Nothing to Lose Are Threatening Trump's Grip on Congress – Meredith Lee Hill, Politico
• Sen. Mitch McConnell on What the West Must Do Now – Sen. Mitch McConnell (R-KY), Politico
• Can TrumpRx Help You Save Money on Drugs? Here's What Experts Say – Megan Cerullo, CBS News
• A 3% Rule for Budget Deficits Would Be a Good Start – Bloomberg Editorial Board
• Black Unemployment and America's Double Tax – Stacey Vanek Smith and Max Chafkin, Bloomberg
• A Look at False Claims Made by the Trump Administration as It Revokes a Key Scientific Finding – Melissa Goldin, New York Times