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What McConnell’s border play means

Senate wants its say on the Smith-Wyden tax deal

Biden admin leans into economic message

Kildee backs Slotkin in Michigan Senate race

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What McConnell’s border play means

Happy Thursday morning.

Senate Minority Leader Mitch McConnell did four extraordinary things Wednesday afternoon, all of which we scooped in our PM edition Wednesday night.

1) In a private Senate Republican meeting on Ukraine, McConnell said effectively that time and the political will to pass a bipartisan immigration and border security compromise are quickly running out — and may have actually run out already.

McConnell told GOP senators that before border security talks began, immigration policy united Republicans and Ukraine aid divided them. “Politics on this have changed,” McConnell said of solving the crisis at the U.S.-Mexico border. That’s because former President Donald Trump wants to run his 2024 campaign focusing on immigration.

“We don’t want to do anything to undermine him,” McConnell said of Trump, a one-time collaborator turned nemesis.

This is a big about-face for McConnell, who earlier this week said Congress needs to pass the border security bill and unlock billions of dollars in new Ukraine aid.

On the floor Wednesday, McConnell asserted that supporting Ukraine was a matter of “cold hard American interest.” But the Kentucky Republican made his own cold political calculation later in the day that the scheme he had been relentlessly pushing for weeks was in jeopardy and a new approach was needed.

2) In effectively backing away from the border-security-for-Ukraine construct that Hill Republicans clung to for the last few months, McConnell is acknowledging Trump’s continued stranglehold on the GOP. He referred to Trump as “the nominee” during the closed-door session.

McConnell also read aloud a quote from Trump, laying the former president’s problems with the tentative border security package.

McConnell and Trump have a terrible relationship, going back to the post-2020 election period when the Kentucky Republican acknowledged Joe Biden’s victory. Trump has attacked McConnell’s wife — former Trump Transportation Secretary Elaine Chao — in stunningly racist terms.

McConnell, though, wants to win the Senate back this November, and that can’t happen without Trump if he’s the GOP nominee. McConnell is one of the best vote counters in Senate history, and he clearly saw which way the debate was heading.

3) McConnell is leaving the prospect of another aid package for Kyiv in an uncertain place. Democratic and GOP lawmakers and leadership aides believe that there’s still majority support for more Ukraine money among lawmakers. But how does Congress pass it?

The border-for-Ukraine construct always made sense in theory. But when lawmakers got down to details, the fault lines among Hill Republicans became glaringly obvious. These inter-Republican clashes once again laid bare how the GOP prefers to use the border crisis as a political talking point instead of solving the underlying problem. The White House and Hill Democrats will pound home that message every day for the rest of the election cycle.

4) McConnell has now shifted some of the blame for this episode to Trump. Trump was bashing the tentative deal even before it was formally released. He’s called Speaker Mike Johnson and GOP senators repeatedly to pressure them to oppose it. Right-wing media slammed it on Trump’s behalf.

Yet if Trump doesn’t want this deal, what does he want beyond simply shutting the border, building a wall and launching a quixotic campaign to deport millions of people? There’s no way that’s all going to happen. And what should happen on the border while Trump is running his White House campaign?

Democrats will get to say they made huge concessions on parole and asylum during these talks, and Trump tanked it. That’s a much better space politically than they were in just before these Senate talks began.

What’s next: The question now is where does the Senate go from here?

The multi-prong efforts by Sens. Chris Murphy (D-Conn.), James Lankford (R-Okla.) and Kyrsten Sinema (I-Ariz.) to craft legislation to solve the border crisis are probably over. It’s hard to see a deal coming together now, although nothing is final yet.

Sinema — who has been adept at stitching together bipartisan coalitions the last few years — was quietly sounding out some Republicans on where they stood on the border package, according to senators and aides. That may not matter at this point.

McConnell and Senate Majority Leader Chuck Schumer will have to discuss the new legislative outlook, and that hasn’t happened yet as far as we can tell. Democrats didn’t have any comment on Wednesday night regarding McConnell’s comments.

Schumer and the White House have some big decisions ahead of them too. Will Schumer try to move an aid package for Ukraine, Taiwan and Israel as one big package? Will he move them separately? Can Ukraine money be attached to any of the FY2024 spending bills? Can any of these get 60 votes in the Senate, either together or on their own?

Johnson and his bare-bones-219-House Republican majority aren’t going to solve the border crisis, that seems clear. Johnson continues to call on Biden to take executive action to stem illegal border crossing while also pushing H.R. 2, the House GOP’s hardline border security bill. No Democrats back that bill.

Perhaps a more apt question is what will Johnson do if the Senate does pass a foreign aid bill? Johnson could face a threat to his hold on the speaker’s chair if he tries to move Ukraine aid on its own. He already flubbed in linking Israel aid to IRS spending cuts. That measure has been hung up in the Senate for months.

— Jake Sherman and John Bresnahan

February Events! Join Punchbowl News founders Anna Palmer and Jake Sherman on Friday, Feb. 9 at 9 a.m. ET for an interview in Cincinnati, Ohio. They’ll discuss the news of the day and challenges facing small business owners with Sen. J.D. Vance (R-Ohio). RSVP here.

Senate wants its say on the Smith-Wyden tax deal

The Senate is looking to pump the brakes on the bicameral, bipartisan bill that tax writers unveiled earlier this month.

Senate Republicans — and even one key Democrat — told us they want to hold a committee markup on the bill. That would slow down the nearly $80 billion package.

Backers of the deal want to get it done quickly and believe they need it to pass in February to avoid trouble during tax filing season. A markup could slow the process down or kill it altogether.

The top Republican on the Senate Finance Committee, Idaho Sen. Mike Crapo, has been in no rush to embrace the compromise. Crapo pointed to issues with the child tax credit expansion as a hangup.

Senate Minority Whip John Thune, a member of the panel, said he wanted a markup to try to change some of the child tax credit provisions due to concerns about keeping it tied to earnings and work.

Sen. John Cornyn (R-Texas), another member of the powerful panel, said this is why he wants a markup: “I want to get back to legislating. We can’t just have a deal between two people and then just say ‘Take it or leave it.’”

Chipping away at the child tax credit expansion would almost certainly rankle Democrats. They have made it clear that extending it for low-income families is their overwhelming priority. And the cost is meant to balance roughly with business tax benefits.

Also likely to come up, the Joint Committee on Taxation is out with its macroeconomic analysis, which found the bill wouldn’t have a significant impact on labor supply.

On the Dem side: Sen. Elizabeth Warren (D-Mass.), who sits on the Finance panel, wants a markup too. Warren’s remarks might be the most striking and represent the partisan divisions a committee vote could exacerbate:

Keep in mind, this hasn’t totally gotten real in the Senate yet. Senators are watching what the House does, and backers are optimistic that a big vote there could shift the Senate’s mood. There’s also plenty of outside pressure from the business community.

The House Republican leadership is engaged in a vigorous and seemingly endless debate over whether to take up the package next week.

Some in the GOP leadership want to move quickly, using the fast-track suspension process to get it through the chamber. New York Republicans, however, are banging on Speaker Mike Johnson to allow them to amend the bill to modestly roll back the limit on state and local tax deductions.

Senate Finance Committee Chair Ron Wyden (D-Ore.) said he’s watching “two big ifs” — if Johnson gives it a vote and the tally.

“If those two ifs are realized — if it comes up, if it gets a big vote — this does not become a traditional political Ds and Rs kind of debate,” Wyden said.

At least that’s what Wyden hopes.

— Jake Sherman and Laura Weiss

YELLIN’ ABOUT YELLEN

Biden admin leans into economic message

Is the American economy about to turn the corner — or, has it already? With a general election on the line, the Biden administration is done waiting to find out.

Treasury Secretary Janet Yellen is in Chicago today, where she’s scheduled to deliver what the administration is calling a “major” address on the economy and President Joe Biden’s domestic agenda.

Is this a victory lap? It’s probably too early in 2024 to say. But it sure sounds like the Biden administration is willing to reembrace the state of the economy after seeking some distance late last year.

“Though some forecasters thought a recession last year was inevitable, President Biden and I did not,” Yellen will say in prepared remarks. “Instead of contracting, the economy has continued to grow, driven by American workers and President Biden’s economic strategy. It now produces far more goods and services than it did before the pandemic.”

Congressional Democrats have been pretty bullish that voters would eventually come around on the Biden economy. Judging by the latest consumer sentiment data, they might be on the verge of being right.

“As I’m traveling around Virginia, a common thing I hear is, ‘You know, I’m doing pretty well,’ or ‘My business is doing pretty well, but I’m worried about three months from now,’” Sen. Tim Kaine (D-Va.) told us. He blames that on the pandemic-era pessimism. “Covid was so tough on people — they didn’t want to let their hopes get up,” the Virginia Democrat said.

But “I think people are now seeing, ‘OK, this is more than just a flash in the pan,’” Kaine added.

Still, the backdrop of this speech is complicated. Inflation is better but still not great. The housing sector is pricey but getting cheaper. Wages have been beating inflation since summer 2023 — but only after two solid years of inflation winning that duel.

Biden and Yellen, however, are banking on the political long game. Building bridges, fixing roads and laying broadband takes time. Just hopefully, in their view, not too much time.

One thing worth flagging: Expect Yellen to even take a shot or two at former President Donald Trump’s administration. Case and point:

— Brendan Pedersen

2024

Kildee backs Slotkin in Michigan Senate race

News: Rep. Dan Kildee (D-Mich.) is endorsing Rep. Elissa Slotkin’s (D-Mich.) Senate bid, the latest sign that Democrats are coalescing behind Slotkin as their replacement for retiring Sen. Debbie Stabenow (D-Mich.).

Kildee is the third member of the Michigan delegation to endorse Slotkin, joining Democratic Reps. Haley Stevens and Hillary Scholten.

While Kildee is retiring at the end of this term, he has pledged to remain involved in Michigan politics. Like Slotkin, Kildee is a Frontliner and has beat back GOP challengers in recent cycles.

“For the last five years I’ve seen Elissa Slotkin be one of the most effective and hardworking legislators in Congress,” Kildee said in his endorsement statement. “Elissa Slotkin is the best person to represent Michigan in the U.S. Senate.”

Slotkin is considered the frontrunner in the Democratic primary race. On the GOP side, the contest is far more crowded. The NRSC is backing former Rep. Mike Rogers (R-Mich.) in a field that also includes former Rep. Peter Meijer (R-Mich.), businessman Sandy Pensler and former Detroit Police Chief James Craig.

— Max Cohen

… AND THERE’S MORE

Former Rep. Devin Nunes (R-Calif.) still has $12.3 million in his campaign account. That’s a pretty massive number for a man not running for any office. Nunes’ campaign earned more than $1 million last quarter on investing that money, according to a recently filed FEC report.

Kit Bond Strategies, the firm led by former Sen. Kit Bond (R-Mo.), has signed up to lobby for Greater St. Louis Inc., an economic development agency. They will lobby for transportation and infrastructure funding.

— Jake Sherman

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