Happy Monday. The Senate returned from its holiday recess today and the House is back tomorrow. It’s only the second week of January, but lawmakers are already facing crunch time when it comes to avoiding a partial government shutdown next week, addressing the southern border and delivering aid to Ukraine and Israel. Congressional leaders took one small but crucial step this weekend, finally agreeing on topline discretionary spending levels. Here’s a look at what’s in the deal and what’s next.
Johnson-Schumer Funding Deal Faces Backlash From the Far Right
House Speaker Mike Johnson and Senate Majority Leader Chuck Schumer announced Sunday that they have reached an agreement setting the topline discretionary spending level for the 2024 fiscal year. The announcement reduces the odds of a partial government shutdown in less than two weeks — but does not eliminate the possibility. Key details still need to be ironed out as lawmakers race to craft appropriations bills in the few days remaining before funding deadlines on January 19 and February 2.
What’s in the deal: The agreement’s topline includes $1.59 trillion in discretionary spending, plus a “side deal” agreed to earlier this year that provides an additional $69 billion in spending in non-defense areas. Overall defense spending is set at $886 billion, a small increase from 2023, while non-defense spending including the side deal comes to $773 billion, basically flat year-over-year. Discretionary spending would total $1.66 trillion.
“After many weeks of dialogue and debate, we have secured hard-fought concessions to unlock the FY 24 topline numbers and allow the Appropriations Committee to finally begin negotiating and completing the twelve annual appropriations bills,” Johnson said in a Sunday letter to his Republican colleagues. “The result is real savings to American taxpayers and real reductions in the federal bureaucracy.”
Senate Majority Leader Chuck Schumer and House Democratic Leader Hakeem Jeffries portrayed the deal as a win that would maintain funding for their party’s recent legislative achievements and could avoid a shutdown.
The White House said it also welcomed the agreement. “The bipartisan funding framework congressional leaders have reached moves us one step closer to preventing a needless government shutdown and protecting important national priorities,” President Joe Biden said in a statement. He also said it’s time for Republicans to “do their job, stop threatening to shut down the government, and fulfill their basic responsibility to fund critical domestic and national security priorities, including my supplemental request.”
A familiar number: The topline number essentially preserves the level codified in the Fiscal Responsibility Act, which also suspended the federal debt limit until 2025, ending the debt-ceiling crisis in June.
The new agreement provides about $16 billion in cuts relative to the FRA — a rounding error in the context of the overall package, but a number that Johnson can point to as he tries to sell the agreement to House conservatives, who have lobbied for more dramatic spending reductions. About $6 billion of the cuts come from the recovery of unspent Covid-19 relief funds, with the rest coming from funding that was supposed to go to the IRS, as a $10 billion funding reduction scheduled for 2025 is moved into the current year.
Right wing not pleased: Far-right members of the House have criticized the agreement, which is basically the same as the one that cost former Speaker Kevin McCarthy his job in October.
The House Freedom Caucus called the deal “a total failure” and said it was “totally unacceptable.” Rep. Marjorie Taylor Greene, the outspoken Republican from Georgia, said she is “a NO to the Johnson Schumer budget deal.” The agreement “does nothing to secure the border, stop the invasion, or stop the weaponized government targeting Biden’s political enemies and innocent Americans,” she claimed.
Conservative Republicans are expected to attempt to add policy riders to the appropriations bills in an effort to win victories on issues such as abortion and curtailing “woke” policies in the federal government. That could complicate the effort to pass the bills quickly. Schumer said in his statement that “we have made clear to Speaker Mike Johnson that Democrats will not support including poison pill policy changes in any of the twelve appropriations bills put before the Congress.”
Trouble ahead? To pass the spending deal and avoid conflict over controversial policy issues, the House will likely have to consider the bills under suspension of the rules, which would deny members the ability to add riders, but also raise the requirement for passage to two-thirds — meaning any bill would require substantial support from both parties.
Given the extraordinarily tight timeline, lawmakers may also need to pass another short-term funding extension ahead of the shutdown deadlines — something Johnson has vowed not to do.
However the appropriations bills move through the House, Johnson could find himself in a similar position to McCarthy, who failed as he tried to find a balance between legislation that could actually get through Congress and legislation that would please his conservative base. As things stand, Johnson will need help from Democrats to pass the spending packages, and such a bipartisan approach could anger his fellow conservatives and spark a rebellion of the type that took McCarthy down.
On the other hand, House Republicans may not want to see a repeat of the chaos surrounding the effort to find a new speaker. And there appears to be a growing awareness that divided government means lawmakers have to make compromises. “Are we learning that negotiating with the Democrats in the White House and Senate with a slim majority is hard and you can’t get everything you want, no matter who is in the Speaker’s office?” Rep. Mike Collins, a Republican from Georgia, asked on social media.
The bottom line: An agreement on topline spending is a good sign for a full-year appropriations package and avoiding a government shutdown, but there are likely to be bumps in the road ahead, and a shutdown cannot be ruled out completely.
Bipartisan Border Deal Could Be Unveiled This Week
Senate negotiators who have been working on a bipartisan deal to revamp border policy and deliver additional aid to Ukraine could release the text of an agreement this week.
Republican Sen. James Lankford of Oklahoma, the GOP’s top negotiator in talks with Senate Democrats and the White House, told “Fox News Sunday” that he hopes to be able to release text within days and give time for lawmakers to read the bill — and for the House to suggest tweaks.
“Everyone’s counting on this actually working. But it’s going to have to be an agreement that a Democratic White House and Democratic Senate can also line up with a Republican House and we’re working to thread that needle,” Lankford said. “If we can pass this in the days ahead in the Senate and send it over the House, the House can work to improve it or the House can take a serious look at it and say look, ‘This makes real progress on the border, let’s go get this, bank this and then keep going for more.’”
Chart of the Day: Wages and Inflation
Matt Phillips at Axios highlights a point we had meant to include in Friday’s coverage of the December jobs report: Americans’ wages are now rising faster than inflation, reversal of recent trends that could be important in both pocketbook and political terms.
“From April 2021 to June 2023 — more than two years — inflation was significantly higher than earnings, meaning that workers' standards of living fell sharply,” Phillips writes, adding, “It'll likely take a long stretch of real wage gains before Americans feel better after that inflationary pinch.”
The latest inflation report from the Bureau of Labor Statistics is due out on Thursday.
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Fiscal News Roundup
- Congress Has a Deal to Fund the Government and Not Much Time to Pass It – Washington Post
- Johnson Strikes His First Bipartisan Deal — a $1.7 Trillion Funding Accord – Politico
- Far Right Balks as Congress Begins Push to Enact Spending Deal – New York Times
- Speaker Johnson in Pressure Cooker as Partial Shutdown Deadline Nears – The Hill
- Top GOP Negotiator: Border Deal May Land This Week – Politico
- WSJ Editorial Board Calls on Republicans to Reach a Border Deal – Politico
- Hoping to Govern in 2024, House Republicans Fear a Repeat of Last Year – Washington Post
- House Lawmakers Release Bipartisan Paid Family Leave Plan – Washington Post
- FCC Chairwoman ‘Urgently’ Calls on Congress to Fund Lapsing Internet Subsidies for Millions – CNN
- Yellen Says Extending Trump Tax Cuts Would Worsen Deficit – Bloomberg
- Fed’s Bowman Backs Eventual Rate Cuts If Inflation Falls Further – Bloomberg
- IRS Announces January 29 as Start of 2024 Tax Season – Associated Press
- Biden's New Edge: Allies See Opening in Rising Wages – Axios
- Mitch Landrieu, Biden’s Infrastructure Czar, Steps Down to Join Campaign – Politico
- EPA Unveils $1 Billion for Electric and Low-Emission School Buses – Washington Post
- Treasury Yields Resume Slide Aided by Oil and Inflation Outlook – Bloomberg
- The Reparations Movement Is Having Another Moment – Axios
Views and Analysis
- Congress Gears Up for a Difficult January – Leigh Ann Caldwell and Theodoric Meyer, Washington Post
- Can Biden Convince Americans His Brand of Populism Is Better Than Trump’s? – Joshua Green, Bloomberg
- Joe Biden and a New Era of Prosperity – Binyamin Appelbaum, New York Times
- We Still Need to Talk About Government Debt – Peter Coy, New York Times
- A New Debate Is Raging on an Old Subject: How Fair Is America? – Washington Post Editorial Board
- The Fed Won’t Do Slow and Steady If the Labor Market Wobbles – Conor Sen, Bloomberg
- Democrats Could Score Big by Blocking This Revolver – Julian Scofield, American Prospect
- Top Risks in 2024: U.S. Turmoil, Ungoverned AI, Middle East Conflict – Erica Pandey and Jacob Knutson, Axios