Trump Admin Cuts Off $10 Billion in Funds for 5 Democrat-Led States

Happy Tuesday! President Trump met with House Republicans today at the recently renamed Kennedy Center as part of GOP lawmakers' annual policy retreat, where they discussed their legislative agenda for the coming second session of the 119th Congress. Democrats, meanwhile, marked the fifth anniversary of the January 6, 2021, riot at the Capitol, in which Trump supporters stormed the halls of Congress to stop certification of President Joe Biden's election win.

Here's your evening update.

Trump Urges Republicans to Own the Healthcare Issue in Midterms Push

President Trump on Tuesday encouraged House Republicans to step up their sales pitch to voters, promoting their achievements over the last year. He also urged them to try to take ownership of an issue that has long been an area of Democratic strength: "On healthcare, it's never been our issue," Trump said. "It should be our issue."

As part of that push, Trump called for Republicans to be flexible on what's known as the Hyde Amendment, a long-standing ban on federal dollars being used to pay for abortions. GOP demands around that issue have been an obstacle to renewing the Obamacare subsidies. "You have to be a little flexible on Hyde," Trump said. "You know that. You gotta be a little flexible. You got to work something. You got to use ingenuity. You got to work."

Senate Majority Leader John Thune reportedly acknowledged Tuesday that the Hyde Amendment issue is "probably the most challenging part" of reaching a deal on a healthcare bill. And conservative Republicans were quick to push back on Trump's suggestion.

Trump works his 'weave': In meandering remarks that stretched for nearly 90 minutes, Trump tried to rally Republicans ahead of the midterm elections later this year but offered little in the way of new policies for them to pursue. He touted the raid he authorized to capture Venezuelan dictator Nicolás Maduro, defended his immigration and tariff policies, attacked Democrats and the news media, decried "men playing in women's sports," again tried to revise the history of the January 6 insurrection and repeated false claims that the 2020 election was rigged. And that was just the first half of the speech.

"You guys gotta get elected, because if you don't get elected, we have a country that's going to go to hell, so we can't play games," Trump said, later warning that if Republicans lose, Democrats would "find a reason to impeach me."

Trump urged Republicans to focus their pitch to voters on his efforts to lower prescription drug costs via a policy that demands manufacturers offer the United States "most favored nation" pricing linked to the lower prices paid by similar countries.

Trump told GOP lawmakers that they should be able to win the elections based on that and the successes of his first year in office. "You have so much ammunition. All you have to do is sell it," he said.

Trump acknowledged that he had found the healthcare issue "not of tremendous interest," but said he knows how important it is and insisted that he has learned a lot about it. He reiterated his push for Affordable Care Act reforms that would send funding directly to consumers instead of insurance companies.

What's next: Trump said he will be meeting with insurance companies soon to press them to lower costs. The House, meanwhile, is set to vote on extending the expired insurance subsidies this week, and Thune told reporters that there's "potentially a path forward" to a bipartisan Senate deal on the Affordable Care Act subsidies.

A group of Republican and Democratic senators continues to discuss a possible deal that would renew the lapsed ACA subsidies for two years and introduce new reforms, including income limits and minimum premium payments. That plan reportedly would also involve a phase-in of cost-sharing reductions, and Republicans are reportedly demanding an expansion of health savings accounts as part of the agreement. "Ultimately, if there's a deal to be made, it's getting made very soon or not at all," Republican Sen. Bernie Moreno, a key negotiator, told reporters Monday.

Numbers of the Day: 218 and 213

Longtime Republican Rep. Don LaMalfa of Northern California died on Tuesday at the age of 65. "He voted with me 100% of the time," Trump told House Republicans at their annual policy retreat. "With Doug, I never had to call."

LaMalfa's death narrows House Republicans' already-slim majority, leaving the GOP with 218 seats to Democrats' 213.

Trump Admin Cuts Off $10 Billion in Funds for 5 Democrat-Led States

The Trump administration is freezing billions of dollars in federal funding for child care, other social services and food assistance in a handful of states run by Democrats, due to concerns about possible fraud.

The Department of Health and Human Services said it is holding back about $10 billion from the Child Care Development Fund, the Temporary Assistance for Needy Families program and the Social Services Block Grant program. The funding was originally intended for California, Colorado, Illinois, Minnesota and New York.

The total includes at least $7.3 billion in the TANF program for low-income households, $2.4 billion in the child care program, and about $870 million in social service block grants, according to the New York Post.

"For too long, Democrat-led states and governors have been complicit in allowing massive amounts of fraud to occur under their watch," an HHS spokesperson told CNN.

The freeze comes soon after the Trump administration announced that it had blocked funding for child care programs in Minnesota amid allegations of significant fraud. However, it was not clear in the states other than Minnesota why the money was being frozen, and no formal notifications or explanations appear to have been provided by the Trump administration.

"This is yet another politically motivated action by the Trump Administration that confuses families and leaves states with more questions than answers," a spokesperson for the Illinois Department of Human Services told CNN.

New York Gov. Kathy Hochul said she would contest the funding freeze, if and when the state receives notification. "We'll fight this with every fiber of our being because our kids should not be political pawns in a fight that Donald Trump seems to have with blue-state governors," she said.

Democratic Sen. Kirsten Gillibrand portrayed the freeze as an act of political revenge. "To use the power of the government to harm the neediest Americans is immoral and indefensible," Gillibrand said on social media. "This has nothing to do with fraud and everything to do with political retribution that punishes poor children in need of assistance."

Trump Delays Tariffs on Furniture, Cuts Penalties on Pasta

Sharp increases in tariffs on upholstered furniture, kitchen cabinets and bathroom vanities that were scheduled to take effect on January 1 have been delayed for one year, President Trump announced in a proclamation last week.

The White House cited "productive negotiations with trade partners" as a cause of the delay. The proclamation leaves a 25% tariff imposed in September on the specific goods in place.

The White House also announced that it is slashing the anti-dumping tariffs the administration had proposed for Italian dried pasta. The U.S. Department of Commerce had threatened to impose tariffs of more than 90% in retaliation for alleged dumping by Italian pasta manufacturers, but the Italian Ministry of Foreign Affairs said last week that the import duties on individual manufacturers were expected to be between 2% and 14%, pending a final determination in March.

Why the tariffs haven't hurt too much: The reduction in the threatened tariffs highlights a point made recently by economists who have found that Trump's tariffs have been less damaging than expected because they've been smaller than originally advertised.

A new working paper by the economists Gita Gopinath of Harvard University and Brent Neiman of the University of Chicago finds that the average effective tariff rate at the end of September was 14.1% - about half of what was originally announced, and down from a peak of 32.8% in April. Multiple exemptions from the tariffs and repeated delays in their implementation explain most of the difference.

"The actual tariffs are much lower than what were announced, and that is one of the reasons why the effects have not been as big as feared," Gopinath told The New York Times.

Gopinath also confirmed what the vast majority of economists have long maintained about the tariffs: they are paid by Americans, with the burden falling heavily on manufacturers who rely on foreign inputs.

"The logic was if foreign firms wished to sell to the mightiest consumer market in the world, they would have to pay a price," Gopinath said. "In reality, the price has been borne by U.S. firms, and not by foreign firms."

Fiscal News Roundup

• Trump Tries to Rally House GOP as the Party's Majority Narrows but Meanders Along the Way – Associated Press
• Trump Tells GOP It's Time to 'Own' Health Care While Urging 'Flexibility' on Abortion Restrictions – Politico
• Conservatives Balk at Trump's Calls to Be 'Flexible' on Abortion Coverage in Health Care Talks – Politico
• Trump to House Republicans: If We Don't Win Midterms, I'll Get Impeached – Reuters
• Congress Has Four Weeks to Dodge Another Shutdown – Washington Post
• ACA Subsidy Cliff May Mean 'Astronomical Tax Bills' for Many, CFP Says – CNBC
• Trump Administration Freezes Billions in Social Services Funding to Five Democratic States – CNN
• Dems Use Venezuela to Hammer Affordability Issues at Home – Politico
• Fed's Miran Says More Than Full Point of Cuts Needed in 2026 – Bloomberg
• Do Tariffs Cause Inflation? New Studies Offer Surprising Answer – Wall Street Journal
• Nvidia CEO Says He's 'Perfectly Fine' With Billionaires Tax – Bloomberg
• Justice Dept. Drops Claim That Venezuela's 'Cartel de los Soles' Is an Actual Group – New York Times
• Trump Weighs Using U.S. Military to Acquire Greenland: White House – CNBC
• On 5th Anniversary of the Jan. 6 Capitol Insurrection, Trump Looks to Shift the Blame – Politico
• This Jan. 6 Plaque Was Made to Honor Law Enforcement. It's Nowhere to Be Found at the Capitol – Associated Press

Views and Analysis

• The GOP Is Kidding Itself About the Economy – David M. Drucker, Bloomberg
• Tariffs "Funded" Everything in 2025-Will the Fantasy Continue in 2026? – Scott Lincicome and Alfredo Carrillo Obregon, CATO Institute
• Americans Are Living in the Worst of All Tax Worlds – Allison Schrager, Bloomberg
• Millions Are Starting Off the New Year With a Heftier Health Insurance Bill – Ali Velshi, MS Now
• The Fed's Six Big Challenges in 2026 – Bill Dudley, Bloomberg
• Helping Americans Break Free From Government Dependency – Sen. Jon Husted (R-OH), The Hill
• 10 Health Stories That Could Define 2026 – Leana S. Wen, Washington Post
• Jamie Raskin: Jan. 6 Never Ended – Rep. Jamie Raskin (D-MD), New York Times
• Disgust Over Jan. 6 Is No Longer Bipartisan – New York Times Editorial Board
• Snatching Maduro From Venezuela Was Illegal - and Damaging – Noah Feldman, Bloomberg
• The Trump Revolution Is Going Much Further Than We Realize – Thomas B. Edsall, New York Times