Johnson Defies Hardliners, Pushes Ahead With Foreign Aid Plan

Happy Wednesday! The Senate today started and quickly ended its impeachment trial of Homeland Security Secretary Alejandro Mayorkas, with Democrats voting to dismiss both articles of impeachment, ruling them unconstitutional. On the House side of the Capitol, Speaker Mike Johnson took the next steps on a long-delayed foreign aid plan, inviting the wrath of far-right Republicans who may soon look to oust him.

Here’s what you should know.

Johnson Advances Foreign Aid Plan, Angering Hardliners and Risking His Job

House Speaker Mike Johnson plowed ahead Wednesday with a slightly modified plan to deliver aid to Ukraine, Israel and Indo-Pacific allies. In doing so, he further infuriated far-right hardliners in his own party, adding momentum to a push by some Republicans to oust him from the speakership less than six months after he won it.

Johnson and House Republican leaders unveiled the text of bills that would provide a total of $95.3 billion in foreign aid, setting up a planned series of Saturday evening votes. The legislation would provide nearly $61 billion for Ukraine, $26.4 billion for Israel and about $8 billion for Taiwan and other partners in the Indo-Pacific. Just over $23 billion of the Ukraine funding will be used to replenish U.S. weapons, stocks, and facilities.

Those aid bills will be accompanied by a fourth containing several Republican priorities, including provisions potentially requiring the sale of TikTok and directing seized Russian assets to be used for Ukraine as well as sanctions and other measures related to Russia, China and Iran.

The foreign aid components of the plan largely mirror a package passed by the Senate in February, though the new plan reportedly structures some $9.5 billion in direct aid to Ukraine as a repayable loan — albeit one that can ultimately be forgiven by the president. The plan also includes over $9 billion in humanitarian aid for Gaza, the West Bank, Ukraine and other places, in accordance with Democratic demands. (You can find additional details about the aid bills in this summary from the House Appropriations Committee.)

The four bills are set to be considered under the same rule in the House and then packaged together to be sent to the Senate. A fifth bill will include what Johnson described as the “core components” of an earlier border security measure passed by House Republicans — but that bill will be considered under a separate rule and will not be packaged with the rest.

What it all means: The package overall, and Johnson’s plan to pass it, represent a significant win for President Joe Biden, who has long urged Johnson to allow a vote on the Senate-passed plan. “The House must pass the package this week, and the Senate should quickly follow,” the president said in a statement. “I will sign this into law immediately to send a message to the world: We stand with our friends, and we won’t let Iran or Russia succeed.”

The plan is also tremendously risky for Johnson, leaving the fate of the package in some doubt while also putting his job in certain peril. The House Freedom Caucus had warned earlier in the week against using Iran’s attack on Israel as an excuse to push through Ukraine aid without offsetting cuts or border security provisions. And the border bill Johnson is lumping in with the foreign aid package has done little to mollify his conservative critics, many of whom have insisted that the U.S. border crisis must be resolved before Ukraine gets more funding.

Republicans spent hours Tuesday night trying to devise a plan that would enable them to bring the aid package to the floor without having to rely on Democrats. They failed to do so. Now Democratic votes will be needed to advance and pass the aid bills — and, potentially, to help Johnson keep his job, if he wants it. That would undoubtedly leave him in a weakened position, making it even harder to manage his unruly conference.

The Freedom Caucus posted Wednesday that Johnson “is surrendering the last opportunity we have to combat the border crisis.” Rep. Chip Roy of Texas, a member of the Freedom Caucus, called the border part of Johnson’s plan “a watered-down dangerous cover vote” and said he would oppose it. And Rep. Matt Gaetz of Florida, who led the push to oust former Speaker Kevin McCarthy but has been supportive of Johnson, also came out against the foreign aid plan.

“We met for hours last night and proposed different paths for the speaker that would have avoided the abject surrender represented by his strategic choice here,” Gaetz told CNN. “There’s no other way to describe it. It’s surrender. It’s disappointing. I won’t support it.”

The bottom line: Military leaders and top lawmakers on the House Intelligence Committee have made clear the urgent need to provide aid to Ukraine. Johnson is moving to do that, but it could cost him dearly and throw the House back into chaos.

Supply-Siders Pitch Trump on a Flat Tax

A group of conservative advisers long associated with Republican economic policies are reportedly encouraging former President Donald Trump to embrace the idea of a flat income tax.

Bloomberg’s Stephanie Lai, Amanda Gordon and Enda Curran report that a group including Steve Forbes, Larry Kudlow, Stephen Moore and Arthur Laffer is lobbying Trump on a proposal to institute a federal tax rate of 17% on all incomes, should he regain the White House in the fall. Forbes, who embraced a flat tax when he ran for the Republican presidential nomination in 1996 and 2000, said Monday that the proposal would include significant exemptions, with a family of four shielding their first $54,000 from the tax.

Trump has not spoken publicly about the flat tax, which, as Bloomberg notes, would generally benefit the rich, who otherwise face rising tax rates as their incomes increase. But the leading Republican candidate has promised more tax cuts on the campaign trail, without providing any details.

No SALT relief: The same advisers have also reportedly lobbied Trump to oppose lifting the current cap on the state and local tax (SALT) deduction, which was imposed by the Republicans’ 2017 tax law to provide additional revenues and partially offset the steep costs of that legislation. Removing that limit has become an important goal for lawmakers on both sides of the aisle from high-tax states on the coasts.

Laffer, the author of the famous “curve” that bears his name and that helped clear the way for the tax cuts of the Reagan era, explained his position on the issue to Bloomberg: “It makes no sense to subsidize New York state’s high tax rates,” he said. “I’m against any type of state and local deductions on the federal level.”

Moore, who advised Trump on tax policy in 2016, agreed. “That benefits just very, very rich people in very blue states,” he said. “I would even get rid of the up to $10,000,” he added, referring to the current cap on the deduction.

Why it matters: Many of the tax cuts for individuals that were part of the 2017 tax law expire in 2025, and should Trump return to office, the long-held conservative dream of a flat tax could be in play as lawmakers hammer out the nation’s fiscal policies next year.

Number of the Day: $38 Trillion

Global warming is expected to weigh on income growth around the world over the next few decades, as rising heat levels damage crops and hamper labor output. According to a new analysis from Germany’s Potsdam Institute for Climate Impact Research, total aggregate income will be $38 trillion less by 2049 than it would have been without global warming.

“Our analysis shows that climate change will cause massive economic damages within the next 25 years in almost all countries around the world, also in highly-developed ones such as Germany and the U.S., with a projected median income reduction of 11% each and France with 13%,” said Leonie Wenz, a climate scientist and economist who co-wrote the analysis, per the Associated Press.

Incomes will be higher than they are now, the researchers note, but they will not be as high as they would otherwise have been in the absence of surging heat. Regions closer to the equator, including the American southwest and southern Europe, will be particularly hard hit. At the other end of the spectrum, some areas near the Arctic, including northern Canada, Russia and Sweden, will benefit economically as warming enables economic activity in regions formerly too cold to exploit.

Fiscal News Roundup

• House’s Ukraine, Israel Aid Package Gains Biden’s Support as Speaker Johnson Fights to Keep His Job – Associated Press
• Defying Hardliners, Speaker Johnson Presses Ahead on Ukraine, Israel Plan – Bloomberg
• Speaker Johnson Moves on Foreign Aid, Possibly Triggering Vote to Oust Him – Washington Post
• Foreign Aid Supplemental Unveiled in House; Biden Supports – Roll Call
• Pentagon Leaders Press Congress for Ukraine Funding, Saying Battlefield Situation Is Dire – Associated Press
• Revolt Against Johnson Opens Up Fresh Talk Over House GOP Leadership’s Future – CNN
• Senate Votes to Dismiss Impeachment Charges Against Mayorkas – Washington Post
• Trump Rails Against Wind Energy in Fundraising Pitch to Oil Executives – Washington Post
• Powell’s US Rates Warning Means Headaches for Rest of the World – Bloomberg
• German Finance Minister Criticizes Inflation Reduction Act, White House Responds – Semafor

Views and Analysis

• Threats Against US Speaker Play Into Democrats’ Hands, Some Republicans Worry – Joseph Zeballos-Roig, Semafor
• What Went Wrong With US Inflation – Molly Smith and Steve Matthews, Bloomberg
• Guns-and-Butter Fiscal Policy Will Keep Rates High – Edward Harrison, Bloomberg
• What Would the Economy Look Like Under a Second Biden Term? – Peter Coy, New York Times
• Our Uniquely American Drug Shortages – David Dayen, American Prospect