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February 22, 2024
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Why government funding is in more trouble than you think
Happy Thursday morning.
News: Just one week before a partial government shutdown, House and Senate leaders are still squabbling over high-profile policy riders that Republicans are demanding as part of the FY2024 spending bills.
The dispute centers around abortion, guns and earmarks, among other issues. And it’s slowing down the process of coming to a final deal over the annual spending bills, a full five months into the 2024 fiscal year.
Senior aides in both parties say another short-term continuing resolution will almost certainly be necessary to avoid a partial government shutdown on March 1 and March 8. Needless to say, this will be a problem for Speaker Mike Johnson, who has made opposition to stopgap funding measures the one place he’s willing to express strong opinions.
Lawmakers and aides in both chambers note they’re making “good progress” in the ongoing bicameral talks. It’s also clear that neither side in the negotiations wants or would benefit from a government shutdown. The screaming is often the loudest right before a spending deal gets done, however.
Yet Johnson — under pressure from conservative hardliners — is taking a tough line on these riders, which complicates any agreement to pass the 12 bills.
Freedom Caucus members released a letter on Thursday calling for Johnson to defend House GOP policy provisions. If not, the conservatives warned, a majority of House Republicans will oppose any spending deal. We reported that the Freedom Caucus voiced this threat last week in a private meeting with Johnson.
Top aides to Johnson, Senate Minority Leader Mitch McConnell, Senate Majority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries have been meeting with appropriations staffers as often as twice each day, trying to close out the 12 spending bills ahead of the twin deadlines.
Here’s the overriding political dynamic: House Republicans filled up their 2024 spending bills with red-meat policy provisions on issues ranging from abortion to guns to DEI programs to strict limits on government spending. But the House Republican leadership knew all along that Democrats, who control the Senate and the White House, would nix these riders in any end-year negotiations. House GOP leaders were only able to pass seven of the 12 bills in their chamber.
And now, the dog has caught the car, so to speak.
Democrats complain that House Republicans have yet to come to grips with the reality that many of their policy preferences are going to be tossed aside. Not only will the Senate and President Joe Biden reject them, but with House Democrats likely providing the bulk of the votes to pass the spending bills, there’s no way for Republicans to win this showdown.
“We Democrats are doing everything we can to avoid a shutdown,” Schumer told us in an interview this week. “I am hopeful that, on the Republican side, cooler heads prevail, and that they come to the conclusion that a shutdown is bad for America. Because it’s certainly bad for them.”
More from Schumer:
Party leaders in both chambers understand that time is of the essence. There’s a desire to get the package for the first four spending bills that expire on March 1 released this weekend or Monday in advance of next week’s deadline. In order to do that, an agreement will have to be in place in the next few days. Appropriators will need time to “read out” the package, meaning going through the legislation line-by-line. This takes a day or two.
The House isn’t back in town until next Wednesday, although party leaders expect the chamber to move first on any spending package in order to help sway Senate GOP conservatives. It’s also clear that getting a CR through the Senate by March 1 would be very difficult minus a bipartisan, bicameral deal.
Schumer indicated he hasn’t yet made a decision on whether a CR will be needed.
“I’m not going to get into the internal discussions. My staff is having intense discussions with Speaker Johnson,” Schumer said. “We’ve made it clear how bad a shutdown would hurt America. And we hope that he will be able to buck the extremists in his caucus and do the right thing.”
There are a tremendous number of decisions that the Hill leadership has to make over the next few days.
| → | Does Johnson move a short-term CR if necessary or will he allow the federal government to shut down? |
| → | How will the spending bills be packaged? Only four bills — Agriculture, MilCon-VA, Transportation-HUD and Energy and Water — have to be adopted by the March 1 deadline. The remaining eight bills — which cover three-quarters of annual spending — don’t expire until March 8. |
There’s already discussion of Labor-HHS and Defense being paired together to maximize vote totals, although no decisions have been made. Sources close to the talks describe them as “fluid,” which is par for the course here.
— Jake Sherman, John Bresnahan and Andrew Desiderio
Upcoming event! Punchbowl News founder Anna Palmer and senior congressional reporter Andrew Desiderio will discuss news of the day and AI policy with Sens. Mark Warner (D-Va.) and Todd Young (R-Ind.) on Thursday, Feb. 29, at 9:30 a.m. ET. RSVP here!
James Biden: No smoking gun for Republicans
In a far-from-shocking turn of events, President Joe Biden’s brother James Biden didn’t rat out his brother for high crimes and misdemeanors.
James Biden told House GOP investigators during an hours-long private transcribed interview on Wednesday that Joe Biden wasn’t involved at all in his business dealings.
Democrats hailed the testimony as the latest example of witnesses rebutting House Republican claims that Joe Biden was improperly affected by his family members’ financial interests.
Republicans are trying to connect official actions Biden took in office to his family’s business deals. But the transcribed interview didn’t touch on any acts Joe Biden took in office. Instead, Republicans focused on several deals James Biden made during his brother’s “pre-candidate period.”
Biden’s brother speaks: In his opening statement, James Biden said his brother “has never had any involvement or any direct or indirect financial interest in those activities.”
“I never asked my brother to take any official action on behalf of me, my business associates, or anyone else,” Biden added.
This plainly cuts against the GOP narrative. We asked House Judiciary Committee Chair Jim Jordan (R-Ohio) if he thought James Biden was lying.
“He’s certainly said some things that make you wonder if he’s maybe conveniently forgetting something,” Jordan told us. Rep. Andy Biggs (R-Ariz.) alluded to Biden making “contradictory” statements and told reporters to wait for the transcript release.
In all, there was no smoking gun from James Biden. While Republicans probed the president’s brother on his dealings with Chinese-linked energy companies and a now-bankrupt American healthcare company, Joe Biden wasn’t implicated in any wrongdoing.
Hunter Biden, the president’s son, will appear behind closed doors on Feb. 28. Of course, Biden’s son is facing a litany of federal tax and gun charges as part of a special counsel investigation. There’s a speculation that the younger Biden may assert his Fifth Amendment right not to incriminate himself.
The Democratic view: Rep. Jamie Raskin (D-Md.), the top Democrat on the House Oversight Committee, said Republicans should end their impeachment probe. Raskin pointed to the recent arrest and indictment of an FBI source who allegedly made up a Biden bribery scandal story.
“There’s a quality of just going through the motions here,” Raskin told reporters during a break in the transcribed interview. “It feels to me as if everyone knows the impeachment investigation is over.”
— Max Cohen
Time to jet: IRS cracks down on business planes
The IRS has a new message: Jetting around in a corporate plane? They’re watching.
The agency announced it’s tapping a pot of funding from Democrats’ Inflation Reduction Act to launch new audits of large companies’ jet usage.
“What we believe is happening is there’s not enough effective, ruthless record keeping going on and there is systemic overstating of the business deductions,” IRS Commissioner Danny Werfel told reporters on a call, noting the record-keeping needed for getting it right on business jets is tricky. “That’s what we’re looking to tackle.”
Even though the pot of IRA tax enforcement funding is shrinking, the IRS is undeterred. It’s forging ahead with new efforts to crack down on wealthy people and big corporations who aren’t paying taxes they owe — and looking to prove its boosted budget is worthwhile.
The new jet audits are targeted at two areas where the IRS believes there’s a good chunk of taxpayer money to claw back. The basic premise is executives, shareholders and other high-profile employees of big corporations or partnerships may use business-owned planes for a mix of business and personal travel.
The IRS believes some companies are taking business deductions for the aircraft without thoroughly carving out personal use. Plus, the agency’s hunch is that some executives and other employees aren’t reporting the business-provided travel as income.
The new examinations will start this spring and consist of an initial wave of three to four dozen fresh audits, according to Werfel.
More than 10,000 corporate jets operate in the United States, and their high value means they can represent tens of millions of dollars in tax deductions per plane, Werfel said. He added that given those stakes, the crackdown could bring in a significant amount of revenue.
The agency, which is using analytics to inform its probe, could expand audits depending on what it finds in this initial wave.
Werfel added that the IRS will have more to say in the weeks to come about its enforcement push. The agency is hiring more staff and investing in better analytics and AI to target time and resources.
Plus, pressure for the Smith-Wyden tax deal: The National Association of Manufacturers has been pressing Congress to revive a bigger upfront deduction for companies’ research and development spending. And we’re expecting that to be a highlight today when CEO Jay Timmons gives his speech on the state of U.S. manufacturing.
Timmons is expected to say the 2017 GOP tax laws’ reforms were “rocket fuel” for the manufacturing industry, according to excerpts of his speech shared with us. Plus, he’ll call on lawmakers to restore three business tax breaks in the Smith-Wyden tax package, saying “our entire industry is waiting on the U.S. Senate” to pass the bill.
Meanwhile downtown: The Joint Center for Political and Economic Studies has a new president. “America’s Black Think Tank” will be led by Dedrick Asante-Muhammad, who previously worked for the National Community Reinvestment Coalition.
— Laura Weiss
PRESENTED BY GOLDMAN SACHS 10,000 SMALL BUSINESSES VOICES
Texas small business owner Brent Reaves knows his business could create more jobs, but affordable financing for an expansion has been too hard to find.
DOWNTOWN DOWNLOAD
New hire alert: Ferox Strategies, the government affairs and lobbying shop, has landed a key Hill hire. Michael Taggart, Republican policy director for the House Energy and Commerce Committee, is joining Ferox on Monday. Taggart is the first notable departure after E&C Chair Cathy McMorris Rodgers (R-Wash.) announced her retirement, but he won’t be the last.
Cannabis: Former Rep. Ed Perlmutter (D-Colo.) is now lobbying for the marijuana industry. Perlmutter, who is at Holland and Knight, is lobbying for the National Cannabis Roundtable. Perlmutter will lobby on the Secure and Fair Enforcement Regulation Banking Act.
The Colorado Democrat was the House’s original champion of cannabis banking reform dating back to 2013 when he introduced the Marijuana Businesses Access to Banking Act. Perlmutter announced his retirement in 2022, and the Democratic torch was picked up by Rep. Earl Blumenauer (D-Ore.), who is set to retire after 2024.
— Jake Sherman, Brendan Pedersen and Heather Caygle
AND THERE’S MORE
News: The Congressional Leadership Fund is running an ad boosting state GOP Rep. Derek Merrin in the contentious primary in Ohio’s 9th District.
Merrin is the Speaker Mike Johnson-endorsed candidate to unseat vulnerable Democratic Rep. Marcy Kaptur (Ohio). But to get to Kaptur, Merrin has to first dispatch 2022 nominee J.R. Majewski and former state Rep. Craig Riedel in the primary.
The CLF ad hails Merrin as a “rock-solid conservative” who will fight to finish former President Donald Trump’s border wall. Riedel has also spent heavily on television ads that touch on similar tough-on-the-border rhetoric.
Majewski, for his part, has been endorsed by Ohio GOP leaders including Sen. J.D. Vance (R-Ohio). But NRCC Chair Richard Hudson has said Majewski is unelectable.
Alabama: Rep. Barry Moore (R-Ala.), in a member-on-member primary, is now referring to himself as a “Trump Republican” in ads.
— Max Cohen and Jake Sherman
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