Happy Monday and welcome to the final days of August. Today is the 60th anniversary of the 1963 March on Washington and Rev. Martin Luther King Jr.’s “I Have a Dream” speech, delivered on the steps of the Lincoln Memorial. We’ve got a bit more on some current jangling discords of our nation below. Also, Congress is still out, but the White House is set to unveil tomorrow the first 10 prescription drugs slated for Medicare price negotiations. President Joe Biden is also scheduled to speak tomorrow about lowering health care costs.
Here's what else we’re watching.
Republicans Head for Intraparty Clash on Spending Bills
House Republicans pushing for more spending cuts in Congress’s annual spending bills are in for a fight — including pushback from their Senate GOP counterparts. The Hill’s Alexander Bolton reports: “Senate Republicans are signaling that they’re in no mood to back conservative members of the House Freedom Caucus who are demanding major concessions from Democrats in the annual spending bills, raising the odds of a government shutdown this fall.”
Bolton cites Senate sources who say that GOP members there aren’t likely to back Freedom Caucus efforts to cut discretionary spending beyond the levels agreed to as part of the deal to raise the debt limit earlier this year. “Nor will House conservatives get much help from Senate Republican leaders on insisting that ambitious conservative priorities, such as the House-passed Secure the Border Act, be attached to spending legislation,” Bolton adds.
Senate Republicans don’t have any chance to win 60 votes for cuts that go beyond what President Joe Biden and House Speaker Kevin McCarthy agreed to in May — and little appetite for a shutdown. “One of the main goals has been to return to somewhat of a normal appropriations process to avoid a big omnibus at the end,” one Senate Republican aide reportedly told The Hill.
The House Freedom Caucus announced recently that it would oppose a stopgap spending bill unless it includes a number of policy measures. Beyond spending cuts, those include a Republican border bill, changes to end what conservatives call the “weaponization” of the Justice Department and a crackdown on what they see as “woke” Pentagon policies.
A fight over those Freedom Caucus demands, all of which are nonstarters for Democrats, would only delay spending bills, creating a jam toward the end of the year and raising the likelihood of a massive omnibus package or a longer-term stopgap that would automatically include a 1% across-the-board spending cut under the terms of the debt limit deal.
That means that McCarthy faces critical choices as he decides what to include in a House stopgap funding bill and where to look for votes to pass such legislation. “This is now the most important fight he faces as speaker and the choice between kind of the campaigning arm, the House Freedom Caucus arm, and the actual governing arm of keeping a government running,” says Casey Burgat, the director of the Legislative Affairs Program at George Washington University’s Graduate School of Political Management, told U.S. News.
McCarthy will have to decide whether he sticks with his conservative members to push a bill that can’t get through the Senate or whether he turns to House Democrats to help pass a funding bill — and risks a conservative challenge to his speakership.
McCarthy may be in a no-win situation, but Freedom Caucus members may feel like they can’t lose because, as Kaia Hubbard of U.S. News writes, “if the government shuts down and Republicans are blamed, the conservatives won’t be on the chopping block like their colleagues in swing districts.”
The bottom line: There’s been talk recently that the Senate may act first on a short-term spending bill. Still, a government shutdown this year “looks more likely than not,” as Goldman Sachs economist Alec Phillips told clients recently. “Other issues, like aid for Ukraine, funding for Justice Dept. investigations, or border security could hinder progress, and the spotlight that the recent sovereign downgrade shines on the fiscal situation adds to the risks.”
Republican Lawmaker Wants to Defund Trump Prosecutions
A Republican member of the House Appropriations Committee plans to use the upcoming battle over the 2024 budget to push for defunding the ongoing legal prosecutions of former president Donald Trump.
Rep. Andrew Clyde, a former military officer and gun dealer from north Georgia who is a member of both the Republican Study Committee and the House Freedom Caucus, announced Monday that he is working on a pair of amendments that would “prohibit the use of federal funding for the prosecution of any major presidential candidate prior to the upcoming presidential election on November 5th, 2024.”
The first of the proposed amendments to the Commerce, Justice, Science, and Related Agencies appropriations bill — one of the 12 appropriations bills for fiscal year 2024 that Congress will attempt to pass this fall — would prohibit the use of federal funds for federal prosecutions of Trump, while the second would apply to state prosecutions. In a statement, Clyde’s office said the bills would effectively “defund Special Counsel Jack Smith, Manhattan District Attorney Alvin Bragg, and Fulton County District Attorney Fani Willis’ prosecutorial authority.”
Smith has brought two cases against Trump, one pertaining to the retention of classified documents and another relating to the former president’s involvement in an effort to overturn the results of the 2020 election. (On Monday, a federal judge set a trial date of March 4, 2024, in the latter case.) Bragg has brought a case against Trump for his 2016 hush payments to a pornographic film star, Stormy Daniels, while Willis has charged Trump with election interference in Georgia.
Clyde made it clear that he sees those cases as the illegitimate products of corrupt “Deep State” actors. “Americans’ hard-earned tax dollars have no place funding the radical Left’s nefarious election interference efforts,” he said. “Together, Jack Smith, Alvin Bragg, and Fani Willis intentionally brought four sham indictments against the sitting president’s top political opponent, President Donald J. Trump, as the upcoming 2024 presidential election ramps up. These bogus charges are undoubtedly intended to smear and take down President Trump, as well as hinder his ability to campaign effectively.”
Clyde called on his fellow lawmakers to join him in using the budget process to achieve his goals. “It is imperative that Congress use its power of the purse to protect the integrity of our elections, restore Americans’ faith in our government, and dismantle our nation’s two-tiered system of justice,” he said. “I’m fully committed to helping lead this effort, and I call on my House Appropriations colleagues to join me in this righteous fight.”
As The Hill’s Emily Brooks reports, Clyde is not the only Republican lawmaker planning to use the appropriations process to help Trump. Rep. Marjorie Taylor Greene of Georgia has said she plans to introduce a bill defunding Smith’s office, echoing legislation already introduced by Rep. Matt Gaetz of Florida. And Rep. Andy Ogles from Tennessee has introduced a bill that would prohibit Smith from receiving a federal salary.
The bottom line: The push by Republican hardliners to shield Trump from criminal charges is unlikely to succeed given Democratic control of the Senate and the White House, but it highlights the potential for conflict as lawmakers turn to the 2024 budget in September.
Number of the Day: $20 Billion
The 2017 Republican tax law capped the annual deductibility of state and local taxes (SALT) at $10,000, but workarounds enacted by a slew of states since then mean that the cap — intended to help offset the cost of the GOP tax cuts — is raising $10 billion to $15 billion a year less than expected, according to a new analysis by the Urban-Brookings Tax Policy Center. Because the workarounds can reduce a taxpayer’s adjusted gross income, federal revenue losses could total as much as $20 billion a year once those effects are factored into the analysis.
“Many states have enacted laws allowing pass-through businesses to pay taxes at the entity level in lieu of on their owners’ or shareholders’ individual income tax returns,” the Tax Policy Center explained in an email. “The state loses no revenue and the taxpayer gets a bigger SALT deduction on their federal returns.”
FEMA Announces $2.5 Billion More for Climate Resiliency
On the same day that President Biden approved an emergency declaration in Florida as the state prepares for the arrival of Tropical Storm Idalia, the Federal Emergency Management Agency announced it would provide another $2.5 billion to help communities become more resilient in the face of extreme weather caused by climate change.
The money is sourced from the Infrastructure Investment and Jobs Act of 2021, sometimes referred to as the Bipartisan Infrastructure Bill, which authorized approximately $1.2 trillion in spending, about half of which is new money to be spent over five years. The legislation includes about $50 billion dedicated to resiliency programs, which aim to reduce vulnerability to floods, hurricanes, drought, wildfires, extreme heat and other climate-related hazards.
In a statement, FEMA Administrator Deanne Criswell said that extreme weather is becoming more common as global temperatures rise, causing greater damage around the country. “From Hawaii to Maine, communities across the country are experiencing more frequent and intense severe weather events, resulting in devastating impacts to their homes, businesses, and families,” she said. “Though FEMA will always help communities respond and recover to these disasters, it is also paramount to build resilience before disasters strike.”
Spending upfront to enhance resiliency saves money in the long run, Criswell said. “Every dollar that we spend in resilience – like this money right here – saves us $6 in response and recovery costs,” she told CNN. “We want to reduce that complexity of the recoveries, which saves money on the disaster relief fund, because then we don’t have to spend as much to help communities recover from these types of disasters.”
Examples provided by FEMA of projects that will receive funding include: building new electrical hubs in Ko‘olaupoko, Hawaii, to maintain power during severe weather; planting 10,500 trees to reduce extreme heat in Portland, Oregon; bolstering the electrical grid in Jefferson Parish, Louisiana, including strengthening poles and wires to withstand 150 mph winds; and upgrading the Hobart Creek Reservoir Dam in Nevada.
One thing the money won’t be paying for is disaster relief, including the recovery from the horrific wildfires in Maui. Criswell says FEMA will run out of disaster relief funds in the middle of September, and the agency could be several billion dollars in the hole by the end of the fiscal year. The Biden administration has requested another $12 billion as part of a supplemental spending bill, but that money could get caught up in the fight over the 2024 budget, which lawmakers will take up when they return from their summer recess after Labor Day.
Fiscal News Roundup
- Billion-Dollar Drugs’ Makers Set to Face Their First US Price Negotiations – Bloomberg
- McCarthy’s ‘No Win’ Shutdown Scenario – U.S. News
- GOP Tensions Between Senate, House Raise Shutdown Odds – The Hill
- Rep. Clyde Signals Appropriations Fight Over Trump Prosecutions – Roll Call
- An ‘Obscene’ Number of Kids Are Losing Medicaid Coverage – CNN
- Two-Year Treasury Notes Draw Highest Yield Since 2006 at Auction – Bloomberg
- Schools Got $190 Billion in Pandemic Aid, but the Funds Haven’t Reversed Learning Loss – CNN
- Fed Rate Hikes Don’t Just Fight Inflation. They Hurt Economy Over Long-Term, Study Says – USA Today
- How a Whistleblower Says Booz Allen Hamilton Defrauded the Government – Washington Post
- American Airlines Hit With Largest-Ever Tarmac Delay Fine – Bloomberg
Views and Analysis
- Think Child Care Is Hard to Find Now? Wait a Couple of Months – Catherine Rampell, Washinton Post
- The Market Is Dictating How We Raise Our Kids – Kathryn Anne Edwards, Bloomberg
- The Man Training the 2024 GOP Field to Blow up the Federal Government – Dave Weigel, Semafor
- How the ‘Urban Doom Loop’ Could Pose the Next Economic Threat – Rachel Siegel, Washington Post
- State Policymakers Should Understand the Odds Before Subsidizing 'Free Bets' – Richard C. Auxier, Tax Policy Center
- Who’ll Stop the Raid? – Maureen Tkacik, American Prospect
- We Must Keep Marching Toward Dr. King’s Dream – Joe Biden, Washington Post