Happy Tuesday! The Man in Black is now in bronze: The legendary Johnny Cash today became the first professional musician to be honored with a statue in the U.S. Capitol.
Here’s what else is happening.
Johnson Will Rely on Democrats to Avoid a Shutdown
The House is set to vote on a stopgap funding bill Wednesday to avoid a government shutdown on October 1. It will use a procedure that requires a two-thirds majority for passage after conservative Republicans threatened to block a more conventional path.
The legislation, which would avoid a government shutdown at the end of the month and keep federal agencies funded through December 20, is expected to pass anyway, and House Speaker Mike Johnson predicted Tuesday that it will do so “by a wide margin” — but it’s not clear yet how many members of Johnson’s party will oppose it.
Former President Donald Trump had urged Republicans to allow the government to shut down rather than pass a funding bill that does not include the SAVE Act, a GOP measure requiring proof of citizenship from voters in federal elections. The bill heading to the House floor Wednesday excludes the voting legislation after Johnson’s original plan that included it failed in the House last week.
Johnson reportedly pitched his party on the new plan at a meeting Tuesday morning, arguing that Senate Democrats might otherwise jam the House with a bill that includes more spending or other provisions and that a shutdown just weeks before Election Day would hurt the GOP with voters.
“His pitch didn’t do much to move his critics,” Politico reports, meaning that Democrats may have to do much of the heavy lifting to get the plan across the finish line.
Once the funding bill is approved by the House, it will head to the Senate and House lawmakers will head home until after the November elections.
Johnson insisted that when lawmakers return for a lame-duck session, the House will not approve one massive spending package, known as an omnibus, that rolls up the 12 required annual spending bills. Conservatives vehemently oppose such year-end packages as well as smaller groupings of several spending bills known as minibuses. They fear that party leaders will hammer out spending plans with little input from members, and that Democrats will load up such measures with their own priorities.
“We have broken the Christmas omni, and I have no intention of going back to that terrible tradition. So there won’t be a Christmas omnibus,” Johnson said at a news conference. “We don’t want any buses. We’re not going to do any buses, okay?”
That promise could set up some more drama after the elections, with another shutdown deadline just before Christmas and the end of the 118th Congress. “And it would also defy historical precedent,” The Hill’s Emily Brooks notes. “Congress has regularly passed omnibus spending bills after a funding deadline butts up against end-of-year holidays, when members are eager to quickly finish legislative business and return to their families.”
Johnson also sought to pin the blame for the lack of full-year spending plans on the Democratic-controlled Senate and Majority Leader Chuck Schumer. The House has passed five of the 12 full-year funding bills, but Republicans loaded those bills with measures that Democrats oppose, meaning they stand no chance of clearing the Senate. House Republicans also couldn’t overcome internal divisions to pass more of the required annual appropriations bills. The Senate, meanwhile has passed none of the annual bills, though it has advanced all 12 out of committee in bipartisan fashion.
“I’m going to hope, I’m going to plead, I’m going to urge the Senate to do their job,” Johnson told reporters. “This is Chuck Schumer’s fault.”
What’s next: The House vote tomorrow is expected to kick the action over to the Senate, where Schumer will need to work out a time agreement to get the legislation passed before the deadline Monday night — or before the weekend. “Most senators are fine with the ‘clean’ stopgap bill,” Politico’s Ursula Perano reports, adding that Republicans appear ready to go along. “In fact, there’s little desire among members to even work through the weekend — after all, it’s a chamber that cherishes Thursday afternoon flights out of town.”
The bottom line: Lawmakers are itching to head home for the final weeks until the election. There won’t be a government shutdown.
Trump's Tax Cut Wish List Tops $11 Trillion
Former President Donald Trump is piling up the tax cut proposals as he seeks to win votes from the likes of service workers in Nevada and Social Security recipients in Florida, and the price tag of his growing list is soaring, topping $11 trillion at last count.
According to an overview at Bloomberg, that tally includes extending the tax cuts he signed into law in 2017 (at a cost of $4.3 trillion over 10 years), a larger child tax credit ($3 trillion), no taxes on overtime pay ($1.5 trillion), no taxes on Social Security benefits ($1.2 trillion) and a big reduction in the corporate tax rate ($600 billion).
Trump reiterated some elements of his plan Tuesday, when he told supporters in Savannah, Georgia, that he wants to slash taxes for corporations that make products in the U.S., while punishing those that import goods from overseas with high tariffs. He provided no details on how that would work, though, so it’s hard to put a price tag on what the Washington Post’s Jeff Stein called “vague protectionist economic promises.”
Aside from the startling cost of some of his proposals, economists are divided over whether they are good ideas. Stephen Moore, a senior fellow at the Heritage Foundation who advises Trump, told Bloomberg that the Republican nominee is looking for ways to win over working-class voters. “Some of the ideas are good. Some of the ideas are not so good,” Moore said. “On balance, most of the ideas are good.”
But Erica York of the conservative Tax Foundation said that while the proposals may make sense politically, they are less compelling economically. “Principles of sound tax policy, economics — that’s no longer in the driver’s seat,” she told Bloomberg. “Politics is in the driver’s seat. That’s why we’re seeing carve-outs and things that sound good on the campaign trail.”
Moody’s Warns Growing Deficits Could Take a Toll on US Credit Rating
Political polarization could make it more difficult for the next administration in Washington to address the country’s deteriorating fiscal situation, and that may have negative implications for the U.S. credit rating, analysts at Moody’s Ratings warned Tuesday.
Government officials need to agree upon and execute a plan to address the growing budget deficit, rising interest payments and mounting debt, Moody’s said, but political divisions may interfere with their ability to do so. If policymakers fail to take steps to lower the deficit and rein in new borrowing, the “debt dynamics would be increasingly unsustainable and inconsistent with a Aaa rating,” the analysts said, referring to the firm’s highest credit rating, which is currently maintained by the U.S.
In November 2023, Moody’s lowered the outlook for the U.S. from “stable” to “negative,” citing both rising debt costs and the inability of American politicians to successfully address the problem. Now, Moody’s analysts say they are waiting to see how the new administration and the new Congress work together on fiscal issues before making any changes to the nation’s sovereign rating.
“Over the long term, if fiscal policy does not respond to widening deficits, that would put increasing pressure on the triple A rating,” William Foster, one of the Moody’s analysts, told Bloomberg. “Fiscal policy is front and center here ... that’s why it’s important to focus on fiscal policy response now.”
One major issue for the new administration will be the pending expiration of some key provisions of the 2017 Tax Cuts and Jobs Act. “We look at that as a potential lever to improve the fiscal outlook with regard to revenues in particular and will be closely watching that,” the analysts wrote. At the same time, the analysts said they see an extension of the tax cuts as the most likely outcome.
Another important issue is the federal debt limit, which is currently suspended but will come back into effect at the beginning of 2025. The analysts note that “political brinkmanship” has been more pronounced and disruptive under divided government, which they expect to continue after the election, making negotiations and compromise essential. “With around $28 trillion in outstanding federal debt held by the public, persistent large fiscal deficits of over 6% of GDP and net interest payments due on federal debt that will likely exceed $1 trillion (around 3% of GDP) per year, resolving the debt limit to finance fiscal deficits and maintain financial market stability will be critical for the US sovereign,” the analysts write.
The bottom line: The next administration will face serious fiscal challenges in a difficult political environment. “The incoming administration will face a deteriorating U.S. fiscal outlook, as declining debt affordability will gradually weaken U.S. fiscal strength,” the Moody’s analysts write. “In the absence of policy measures that can curb these trends and help limit fiscal deficits, deteriorating fiscal strength will increasingly weigh on the U.S. sovereign credit profile.”
Fiscal News Roundup
- Johnson Turns to Democrats to Prevent Government Shutdown Amid GOP Opposition – Washington Post
- Johnson’s Final Pitch on Spending Stopgap Does Little to Appease Conservative Critics – Politico
- Speaker Johnson Says House Will Not Approve ‘Christmas Omnibus’ – The Hill
- Senate GOP Wants No Part of Spending Showdown in Election Year – The Hill
- Trump Introduces, Without Details, Plan to Cut Corporate Tax Rate for Businesses Who Make Products in U.S. – Washington Post
- Trump Calls for 100% Tariffs on Cars Made in Mexico as Part of US Manufacturing Plan – Associated Press
- McConnell Slaps at Trump’s Tariff Proposals, Warns of Higher Prices – The Hill
- WSJ Editorial Board Whacks Trump’s Newest Economic Proposal – Politico
- White House Working on Plan B to Extend Ukraine Military Aid – Politico
- September Consumer Confidence Falls the Most in Three Years – CNBC
- Over 400 Economists and Ex-Officials Endorse Kamala Harris – CNN
- Congress Forces Biden to Choose Between Chips and Climate – Politico
- Harris to Pitch U.S. Manufacturing Revival in New Economic Speech – Washington Post
- Trump in Pa.: Digressions, Threats and Vows to Be ‘Protector’ of Women – Washington Post
- Biden Climate Chief Says There Isn’t Much Spending GOP Can Claw Back From IRA – Politico
- 22 States Want to Employ 1 Million People in Climate Apprenticeships by 2035 – The Hill
Views and Analysis
- Why Mike Johnson Won’t Get McCarthy’d – Leigh Ann Caldwell and Theodoric Meyer, Washington Post
- Trump Plays the Fear Card on the Economy – and It Seems to Be Working – Stephen Collinson, CNN
- Kamala Harris Has Proposed an ‘Opportunity Economy.’ This Is How to Make It a Reality – Raj Chetty, New York Times
- The Biden Manufacturing Boom That Isn’t – Wall Street Journal Editorial Board
- Repealing the SALT Cap Would Overwhelmingly Benefit Those With High Incomes – Howard Gleckman, Tax Policy Center
- The Washington Post Defends the Trump-Imperiled Civil Service – Timothy Noah, New Republic
- America’s Climate and Economy Are on the Ballot – Ryan Cooper, American Prospect
- Zelensky Is in the U.S. Seeking Aid. Here’s What Ukraine Needs – Max Boot, Washington Post
- This Number Has Shaped Political Debate and Determined the Fate of Presidents – John Lanchester, Washington Post
- The U.S. Has Relied on Cheap, Effective Generic Drugs for 40 Years. Now That Promise Is Under Threat – Leslie Walker and Dan Gorenstein, STAT