House GOP Pushes Plan to Fund Government Until After Election Day

Happy Friday! With much of the northern United States suffering from hazardous air quality because of Canadian wildfires, President Trump today threatened to impose additional tariffs to make Canada pay for what he described as poor forest maintenance. "The cost is incalculable!" Trump wrote in a social media post. "This is Willful Negligence, and becoming a yearly occurrence, costing the United States Billions of Dollars, which cost of this pollution must of necessity be added to the TARIFFS Canada is currently paying." Canadian Prime Minister Mark Carney suggested that the United States also has a responsibility to fight climate change, which scientists say is a factor in worsening wildfires.

Here's what else we're watching.

House GOP Pushes Plan to Fund Government Until After Election Day

House Republican leaders kicked off a government funding fight on Friday - or at least dared Democrats to start one. The GOP leaders released the text of a bill that would extend federal funding until December 4 and avert the threat of an election-season government shutdown when current funding expires at the end of September.

Speaker Mike Johnson told reporters that he plans a floor vote on the stopgap funding measure next week.

After partisan funding fights resulted in two record-long shutdowns in the current fiscal year, the annual appropriations process for 2027 has been bogged down by partisan differences over defense and non-defense spending levels. The House Appropriations Committee has advanced all 12 annual spending bills, and the full House has passed three of those bills. But action in the Senate has stalled as Republicans and Democrats clash over the Trump administration's push for a massive boost taking defense funding to $1.5 trillion and Democratic demands for non-defense spending.

House Republicans say that their bill does not include any "poison pills" and would simply preempt a partisan fight and prevent another painful shutdown. The text does not include the SAVE America Act, the partisan election overhaul that is President Trump's top legislative priority. At the same time, the bill does not include any of the immigration-enforcement reforms that Democrats have demanded before they will provide funding for Immigration and Customs Enforcement.

"The September deadline isn't changing, but how Congress plans for it can," Republican Rep. Tom Cole, the chairman of the House Appropriations Committee, said in a statement. "This bill takes partisan politics and posturing off the table, denying anyone the opportunity to manufacture leverage from the calendar before elections."

Some Republicans have predicted for months that Democrats will want a shutdown as they wait to see if they can win control of one or both chambers of Congress in the midterm elections and thereby gain more leverage over 2027 spending decisions.

"Let's see who actually does want to shut the government down and inflict pain on the American people, which would be a bad thing," Republican House Majority Leader Steve Scalise said.

What's next: With an August recess looming, lawmakers have little time left in session before the new fiscal year starts on October 1. It's not clear yet how a fall funding fight might play out given the competing priorities and agendas of Republicans, Democrats and Trump.

But Johnson may be lining up another play if the stopgap bill fails.

"An early defeat on a continuing resolution would give Johnson a pretext to shoehorn a spending stopgap bill into a September reconciliation package," Kate Santaliz and Hans Nichols report at Axios. They suggest that pairing a short-term spending bill with the GOP's $95 billion reconciliation package would both make it harder for House Republicans to vote against the legislation and "present the Senate with a take-it-or-leave-it choice: accept the House reconciliation bill or share the blame for a government shutdown."

Consumer Sentiment Rises, but There Are Dark Clouds on the Horizon

Buoyed by lower gas prices, U.S. consumer sentiment rose to a five-month high in early July, according to a popular survey from the University of Michigan.

The preliminary reading of the Index of Consumer Sentiment rose nearly 10% to 54.4, up from 49.5 in June.

"This month's rise in sentiment was pervasive across the population, seen across groups by age, income, wealth, and political party," survey director Joanne Hsu said. "Particularly strong increases were seen among consumers without a bachelor's degree."

The retail sales numbers may reflect some of that buoyancy. Retail sales rose 0.2% in June, notching a fifth straight month of growth, the Commerce Department reported Thursday. The declining price of gas in June actually lowered the growth figure, as sales at gas stations fell; excluding fuel, retail sales rose a solid 0.7%.

Still, prices remain painfully high for many consumers, and sentiment is 12% lower than a year ago. With gas prices rising again following the flare-up of fighting between the United States and Iran, the improvement in sentiment may be difficult to sustain, Hsu said. The survey interviews were conducted between June 23 and July 13, with 70% of them completed before the war reignited, and the final sentiment reading that will be released at the end of the month may reflect more frustrations associated with rising gas prices.

Outlook worsening: A separate survey from CNBC suggests that Americans are unhappy with the economy under President Trump and expect conditions to worsen in the future.

"Despite a booming stock market and improving inflation numbers, the public is as depressed about the economy as it has been since the years just after the pandemic and increasingly concerned about the cost of everyday goods," CNBC's Steve Liesman wrote Friday.

The CNBC All-America Economic Survey, which included 1,000 registered voters nationwide, found that 61% of respondents said they are pessimistic about the economy and the economic outlook. That's the worst result since late 2023, when the U.S. economy was climbing out of Covid-era instability. Just 25% of respondents said they were optimistic about the economy and the outlook.

Micah Roberts, a Republican pollster who worked on the survey, said the results don't bode well for the GOP this fall. "More voters expect things to get worse by a 41/29% margin, leaving the electorate in a distinctly sour mood heading into the midterm election cycle," he said.

Significant numbers of people said they were cutting back on purchases due to high prices. About two-thirds said they were buying fewer nonessentials, such as entertainment and dining out, and nearly half said they were skimping on essentials, including food and medical care.

The results varied considerably by income. Sixty percent of those with incomes under $30,000 a year said they were cutting back, compared to just 35% of those with incomes over $100,000.

"People are still paying a lot more for stuff than they were a year and a half ago, two years ago, and that's recent enough in memory that it still hurts and it still drives a lot of anger,″ Jay Campbell, the Democratic pollster for the survey, said. "When gas prices drop 50 cents for a month, that's just not enough to make up the difference."

Trump approval suffers: Trump's approval rating remained underwater in the survey, with 59% of respondents saying they disapprove of his overall performance and 60% saying they disapprove of his performance on the economy. Survey respondents also expressed disapproval of Trump's handling of the Iran war (63% disapproval) and inflation (68% disapproval).

Those low marks don't necessarily mean that Democrats are poised to sweep the midterm elections. Campbell said the data points to a modest four-point advantage for Democrats, but not an overwhelming wave in November, at least not at this point in the cycle.

The bottom line: Americans welcome relief from high prices at the gas pump, but inflation and the overall condition of the economy remain serious concerns for voters heading into the fall.

Quote of the Day: The Fed's Inflation Fight

"To effectively set monetary policy, I need to think about not just where the economy was, or where it is today, but also consider where things are heading in the next six or 12 months.

"That's why I have conversations with business and community leaders on the ground to learn about what the data may not yet be showing.

"What I'm hearing from those conversations is that inflation isn't coming from only one source-it's broad based. ... For the first time in my tenure, I'm hearing from businesses who say they think we need to take action to curb inflation, and from consumers who can't make ends meet about a growing sense of despair."

• Beth Hammack, president of the Federal Reserve Bank of Cleveland, in a LinkedIn post detailing the inflationary pressures business executives and consumers are describing to her. "Business leaders point to energy costs and supply chain disruptions as factors but also cite pressures from insurance and the AI data center build up," Hammack notes. She writes that the job market is around the level she sees as maximum employment, but inflation remains too high.

"Persistently high inflation is the bigger concern," Hammack writes, indicating an emphasis on reining in price increases via interest rate hikes.

Diane Swonk, chief economist at KPMG, says that the Fed's policymakers are clearly leaning toward rate hikes later this year. "The core ranks of hawks within the Fed leadership is growing and hardening their position on rate hikes," Swonk writes in a LinkedIn post of her own. "The persistence of inflation outside of the oil shock is the reason. The ranks of those who worry the Fed went too far in cuts in late 2025 is rising - they are looking to take some of that back."

News

• House GOP Releases Bill to Fund Government Until After the Midterm Elections – Politico
• Mike Johnson's Government Funding Gambit – Axios
• US, Iran Step Up Attacks as Fears Grow of Return to Full War – Bloomberg
• Trump Doubles Down on US Election Attacks in His Primetime Speech – Associated Press
• Trump Calls for Revocation of ABC, NBC Licenses Over Speech Snub – Politico
• Trump Threatens More Tariffs Over Canadian Wildfire Smoke – Axios
• Epstein Victims Blast Trump Attorney General Nominee Todd Blanche After Meeting – CNBC
• Consumer Sentiment Surges Due to Lower Gas Prices – CNN
• Economic Outlook Is Worsening and Trump Is Getting Blamed, Survey Finds – CNBC
• Top Treasury Tax Official Ousted After Clashes With White House Over IRS Audits – Wall Street Journal
• White House Faces Stiff Pushback on Subjecting Grants to Political Review – New York Times
• HHS Research Agency Ends Funding for Dozens of Health Studies – Roll Call
• Insurers Hedge on Trump-Backed Pledge To Improve Denials Process – KFF Health News
• Sen. Warren Says Trump's CFPB Overhaul Has Cost Americans $26.5 Billion – CNBC
• States Rush to Fill Graduate Loan Gap Opened by GOP Budget Bill – New York Times
• Billionaires Who Tried to Dodge California Asset Tax May Not Be in the Clear – New York

Views and Analysis

• How Sky-High Deficits Threaten the Bond Market – Greg Ip, Wall Street Journal
• Cooler Inflation May Not Be Enough to Stave Off Fed Rate Increases – Colby Smith, New York Times
• Americans Are Spending, and Not Just on Necessities – Talmon Joseph Smith and Ben Casselman, New York Times
• America's Trillion-Dollar Failure – Rep. Ro Khanna (D-CA), Foreign Affairs
• The Iran War Is a Gift. Just Not for the United States – Fareed Zakaria, Washington Post
• Trump Is Finding Out About Forever War – Jonah Shepp, New York
• Ask Senate Candidates About Social Security – George F. Will, Washington Post
• I've Spent Years Studying Economic Data. These Americans Taught Me What 'Affordability' Really Means – Phil Mattingly, CNN
• Top Defense Official Could Reap Windfall From DOD Settlement – Zachary Groz, American Prospect
• Erica Schwartz's Confirmation Hearing Shows Her Impossible Task at CDC – Washington Post Editorial Board
• The Supreme Court's Most Brazen Attack on Congress Yet – Simon Lazarus, New Republic
• An Elegy for Human Dignity: Why Vancenomics Won't Serve America – Aidan Grogan, The Hill
• Can New York City Tax Itself Out of Traffic? – Cole Kellison and Adam Hoffer, Tax Foundation