Shutdown drags on as Senate closes escape hatch

IN THIS EDITION

Shutdown will drag into third week as Senate leaves town

Senate version of NDAA clears chamber

The Vault: Crypto is tax writers’ next major project

ICYMI — Hudson on 5G competition and shutdown back pay

Mills to join Maine Senate race. Plus, Emmer’s quarter

THE TOP

Shutdown will drag into third week as Senate leaves town

Happy Friday morning.

It’s Day 10 of the government shutdown. There’s no resolution in sight for this crisis.

For a moment on Thursday, there was a glimmer of hope that the Senate could find a path out of the shutdown. But by the end of the night, senators were heading home for a four-day weekend more entrenched than at any point since the impasse began.

The possibility of a lengthy shutdown is growing more realistic by the day barring some dramatic shift. President Donald Trump may have to be the one to initiate that about face, although he’s been preoccupied with the Israel-Hamas peace deal, immigration and tariff fights, and sending National Guard troops into Democratic-run cities, among other things.

Sen. Ruben Gallego (D-Ariz.) told us on Fly Out Day that he thinks the shutdown will last until at least Nov. 1, when open enrollment begins.

One thing that hasn’t stopped is fundraising, however. The DSCC’s Napa Valley retreat, scheduled for Oct. 13-14, is still on. DSCC Chair Kirsten Gillibrand (D-N.Y.) will still attend.

There’s also a big Senate GOP bash scheduled in Kiawah Island, S.C., starting this evening and running through Sunday. Senate Majority Leader John Thune was supposed to attend, but he’s since pulled out.

Searching for an escape hatch. Senate Republican leaders on Thursday discussed giving Democrats a commitment for a vote on extending the Obamacare enhanced premium tax credits in exchange for their support to reopen the government. These credits expire at the end of the year, threatening the health-care coverage for millions.

There were no formal talks with Democrats about this plan, however. Senators from both parties who’ve been informally huddling on the Obamacare subsidies quickly batted the idea down.

Democrats want to negotiate on the specifics of an Obamacare bill that would get a vote, as well as a guarantee it would clear both chambers. Republicans say they can’t and won’t make such a promise. They demand that Democrats first vote to reopen the government and then negotiations can begin.

Now it’s back to square one.

Senate Democrats blocked the House-passed Nov. 21 funding bill for the seventh time on Thursday night. After passing the annual defense authorization bill — a surprisingly bipartisan move in the middle of the hyper-partisan atmosphere — the Senate left town until Tuesday.

Their departure all but guarantees that 1.3 million active-duty troops won’t get their Oct. 15 paychecks. Organizations advocating for the National Guard, Reserves and enlisted personnel wrote a letter to House and Senate leaders Thursday, urging them to pass a standalone troop pay bill. But it doesn’t appear that effort’s going anywhere, even with a growing number of lawmakers in both chambers calling for it.

Civilian federal employees will start missing paychecks today. The pain of this shutdown is spreading.

And if you thought the two sides couldn’t dig their heels in any further, think again.

Thune moved to prevent additional votes on Democrats’ Oct. 31 funding proposal, which has been getting a vote alongside the House-passed measure. Thune is no longer allowing Senate Minority Leader Chuck Schumer to tee up the Democratic alternative for votes.

Senate Democrats still have one more opportunity to force a vote on their measure. But it has zero chance of becoming law, and Thune is putting his foot down.

Senate dynamics. As we wrote on Thursday, Democrats are pleading with Trump to nudge Thune to cut a deal with them on Obamacare subsidies in order to reopen the government. Thune and Speaker Mike Johnson won’t move off their “Open-the-government-first-and-then-we’ll-talk” stance.

Aside from a White House meeting with the Big Four congressional leaders, Trump has been largely disengaged from the crisis. Now he’s heading to the Middle East. As important as the Gaza ceasefire deal is, it’s also hard to imagine any other American president leaving the country under these circumstances.

“He’s going to have to be involved because the Republicans just listen to him, nobody else,” retiring Sen. Gary Peters (D-Mich.) said of Trump.

Sen. Jeanne Shaheen (D-N.H.), who’s been leading the informal bipartisan talks on an extension of Obamacare subsidies, said Thursday she plans to continue voting against the GOP CR until there’s a formal leadership-level negotiation that includes the White House.

“I am not aware of any official talks going on on the part of anybody. That’s the problem,” Shaheen said. “Until they do that, we’re not gonna make progress.”

Shaheen, who’s also retiring, has been holding out as she seeks assurances on a path forward for a bipartisan Obamacare deal. GOP leaders have repeatedly said they can’t guarantee that such a deal will materialize, and they’ve called on Democrats to stop holding the government “hostage” in the meantime.

“I don’t really know if [Democrats] are in a position to negotiate right now,” said Sen. Markwayne Mullin (R-Okla.), who’s been involved in the informal cross-party talks.

Democrats believe pressure will continue to mount on Republicans to do something about the Obamacare cliff — especially since many of them are already wary of the political ramifications of allowing these subsidies to lapse. It’s true that many Republicans want to see an extension, even if that includes significant reforms and an eventual phase-out.

“There are a lot of Republican members that want an outcome, not just a failed vote for messaging purposes,” retiring Sen. Thom Tillis (R-N.C.) said. “Even President Trump stated that he feels like we need to get a solution. So, it’s not just a minority of members here. It’s over at the White House, too.”

But Tillis added that he doesn’t see a path to end the shutdown that’s contingent on an Obamacare-related vote. That’s simply an acknowledgement of reality.

— Andrew Desiderio, Jake Sherman, John Bresnahan, Max Cohen and Samantha Handler

Join us for a conversation with Rep. Rudy Yakym (R-Ind.) in South Bend, Ind. on Oct. 20 at 9 a.m. ET. Punchbowl News Founder and CEO Anna Palmer will sit down with Yakym to discuss the news of the day and how private capital is investing in America. RSVP!

DEFENSE

Senate version of NDAA clears chamber

The Senate voted to approve its version of the FY2026 defense authorization bill in a flurry of late-night action Thursday, capping off weeks of fits and starts that nearly saw the must-pass legislation sidelined.

Before passing the NDAA on a 77-20 vote, senators amended the bill to repeal two old war power laws. They also adopted a series of amendments to authorize the Coast Guard, boost lawmaker security and target outbound investments.

The herculean push to get the Senate NDAA across the finish line involved weeks of behind-the-scenes negotiations that culminated in a tentative breakthrough deal in recent days. Leading senators worked systematically to quell protests — including one that broke through publicly on Thursday in the hours before votes began on the NDAA.

Sen. Tammy Duckworth (D-Ill.) had threatened to block consideration of the NDAA if she didn’t get a Defense Department briefing on National Guard deployments. Duckworth ultimately secured a commitment from Senate Armed Services Committee Chair Roger Wicker (R-Miss.) to hold a panel hearing on the topic “in the coming weeks,” she said in a statement.

On the floor. As part of the NDAA activity, senators backed an amendment from Sen. Tim Kaine (D-Va.) to repeal the 2002 Iraq War and 1991 Gulf War authorizations for use of military force (AUMFs). The House passed a similar measure alongside its NDAA. Including the provision in both versions increases the chances for a final bill to roll back the authorizations.

Another notable amendment from Sens. John Cornyn (R-Texas) and Catherine Cortez Masto (D-Nev.) targets U.S. investments in China — a perennial issue tied to recent NDAAs that often runs into jurisdictional roadblocks.

In the lead-up to Thursday’s votes, Sen. Maria Cantwell (D-Wash) had threatened to block the outbound investment language. But Cantwell ultimately got assurance that the plan would be tweaked during conference negotiations to address worries raised by Microsoft, Semafor first reported.

Cornyn told reporters Thursday night the Senate would “have to work out some slight differences with the House” once discussions begin, although he declined to elaborate.

Financial corner. The banking world emerged unscathed from Thursday night’s votes. Two amendments were top of mind, and both failed to get enough votes to be included in the final package.

The first, and most controversial, failed spectacularly. Sen. Rand Paul (R-Ky.) pushed for an amendment that would end the Federal Reserve’s practice of paying interest on bank reserves. Only 14 senators voted in favor, though one of them was top Banking Democrat Elizabeth Warren (D-Mass.), who warned this vote was “just the start of a bipartisan fight” to end the practice.

The second fell just short of being included in the Senate NDAA. Warren and Sen. Rick Scott (R-Fla.) pushed an amendment to make inspectors general at the Federal Reserve and Consumer Financial Protection Bureau appointed by the White House. A group of 53 senators backed the change, falling short of a 60-vote threshold.

Don’t miss out on the bigger picture. The NDAA manager’s package contains the ROAD to Housing Act of 2025. That’s a big ol’ bill! But there’s a better chance than not this massive housing reform package from the Senate Banking Committee is struck before final passage. The House has its own housing reform packages in the works.

– Briana Reilly and Brendan Pedersen

PUNCHBOWL NEWS EVENTS

ICYMI — Hudson on 5G competition and shutdown back pay

Rep. Richard Hudson (R-N.C.) participated in a conversation with Punchbowl News Thursday, where he discussed the importance of 5G, spectrum and technological innovation.

Hudson said America is in a competition with China on 5G and 6G. He added that faster broadbands are crucial for winning the artificial intelligence race.

The North Carolina Republican also weighed in on the shutdown and said federal workers should receive their back pay once the government resumes full operations, bucking the White House’s threat to withhold the paychecks of furloughed employees.

You can watch the full recording here.

– Shania Shelton

THE CAMPAIGN

Mills to join Maine Senate race. Plus, Emmer’s quarter

Maine Gov. Janet Mills is telling Democratic senators that she will launch a bid against GOP Sen. Susan Collins, per multiple sources familiar with the conversations.

This is a huge get for Senate Minority Leader Chuck Schumer, who is on a recruiting tear. But Mills will have to contend with a crowded field of Democratic challengers who didn’t wait to jump in while she made up her mind.

Sen. Bernie Sanders (I-Vt.) has endorsed oyster farmer Graham Platner and chided Senate Democrats for continuing to recruit Mills.

Collins is the only GOP senator up for reelection in a state that former Vice President Kamala Harris won in 2024.

Axios first reported that Mills planned to launch her bid next Tuesday.

Scoop: House Majority Whip Tom Emmer will report raising $6 million in the third quarter, bringing his total 2025 fundraising to $22 million. A former NRCC chair, Emmer has posted strong quarterly totals. Team Emmer has brought in $56 million since becoming whip in 2023.

Ad buys. Unrig Our Economy is airing new ads targeting two vulnerable GOP incumbents — Collins and Rep. Juan Ciscomani (R-Ariz.) — over ACA credits, the shutdown and health care costs. The group is putting $260,000 behind the Arizona ads and $180,000 behind the Maine spots.

— John Bresnahan, Andrew Desiderio, Ally Mutnick and Max Cohen

MOMENTS

CLIPS