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IN THIS EDITION

Congress drops the ball on annual spending bills — again

The Vault: July’s FOMC meeting is all about September

What we learned in Arizona’s primaries

Kaine, Britt pitch child care tax plan

THE TOP

Congress drops the ball on annual spending bills — again

Happy Wednesday morning.

With the Senate about to leave for the August recess, we wanted to take stock of where Congress is on the annual appropriations process.

The short answer? It’s a mess. Again.

The House has only passed five of the 12 FY2025 spending bills. House Republicans have pursued a party-line strategy of pushing for huge spending cuts and culture-war policy riders instead of working with Democrats, the Senate or the White House. That bolstered Speaker Mike Johnson and the House GOP leaders in the short term but led nowhere on the spending front.

The Senate Appropriations Committee will have approved 11 of the 12 funding bills by the time senators skip town tomorrow, all with overwhelming bipartisan support. But none of these bills have been to the floor yet. Senate appropriators also agreed to spend $34 billion more than what was called for under last year’s spending deal, leaving a huge gulf with House Republicans.

When lawmakers return to Washington in September, they’ll have just a handful of legislative days to figure out how to avert a government shutdown at the end of the month. The prevailing view is that both chambers will pass a stopgap running through mid-December, potentially with a disaster relief supplemental riding alongside it. None of this has been ironed out yet, of course.

Despite calls from lawmakers in both parties to fix the appropriations process, not a single individual spending bill has cleared both chambers. If there’s divided government again next year, it could be just as bad — or even worse. And there’s the debt limit to worry about in December, ahead of the Jan. 2 deadline.

Let’s start with the Senate. The top GOP appropriator, Sen. Susan Collins of Maine, told us she wants the end-of-September stopgap to only cover the funding bills that both chambers are unable to pass in September.

“I really think the emphasis needs to be on getting the regular appropriations bills passed rather than on doing a huge CR,” Collins said.

However, it’s highly unlikely that any of the FY2025 spending bills will be conferenced, approved by both chambers and signed into law by Sept. 30.

On top of that, Collins confirmed the lone funding bill that won’t clear the Senate Appropriations panel by the end of this week — the Homeland Security bill — has been delayed while lawmakers evaluate whether the Secret Service needs extra money in light of the attempted assassination of former President Donald Trump.

Of course, the DHS funding bill has always been one of the most politically sensitive of the bunch given the immigration and border security elements. So it was going to be difficult no matter what.

House “charade”: The big complaint we hear from GOP senators is that Senate Majority Leader Chuck Schumer isn’t prioritizing appropriations bills for floor time. But Democrats counter that the Senate’s committee-level process is bipartisan and House Republicans shouldn’t get credit for jamming through partisan bills.

“The charade the House does on appropriations is meaningless. They’re involved in a contest to see how far right they can move the bills,” said Sen. Chris Murphy (D-Conn.), a senior appropriator. “When our bills come out of committee, they are fully baked, bipartisan deals.”

This is true, but it means that all 100 senators don’t have a chance to shape the final product. That can only be done on the floor. Murphy did acknowledge that the entire process is broken and “needs to be rewritten from the ground up,” adding that the current way of doing business is a “giant gift to leadership.”

OK, what’s the point of having a committee process if the bills won’t come to the floor? Senate Minority Whip John Thune, who’s running to succeed Mitch McConnell as GOP leader and is promising an appropriations overhaul, faulted Schumer for this but said the current Senate process is better than the alternative.

Here’s Thune on the Senate’s committee-level process:

While there’s general agreement that a September CR should run until December, what happens after that depends largely on the election outcome.

Some senior lawmakers, such as House Appropriations Committee Chair Tom Cole (R-Okla.), think it would be better to spare the next president and incoming Congress from a shutdown threat early in 2025. Yet it probably won’t be his decision to make.

“The winner of the next election probably makes a decision [and] tells their side ‘I want a deal, I don’t want to have to deal with a government shutdown coming in,’” Cole said. “But if they want to have it kicked into next year so they can deal with it, I think they can make that call.”

— Andrew Desiderio, Jake Sherman and John Bresnahan

The Vault: July’s FOMC meeting is all about September

Another interest rate decision from the Federal Reserve will come and go this afternoon, and economists aren’t expecting a cut.

But more than any other meeting this year, Wall Street believes the first rate cut since early 2020 could be coming in the next meeting, scheduled for September. The Federal Funds Rate is currently at 5.25 – 5.5%.

Rising prices continue to cool, and, even as the labor market continues to surprise, it certainly seems to be slowing from its manic pace in 2023. Weakened consumer spending is another warning sign that policymakers could overshoot a soft landing and stumble into a recession.

So the statement released by the Federal Open Market Committee today and the news conference held afterward by Chair Jay Powell will be — and stop us if you’ve heard this before — sharply scrutinized by investors for signs that the Fed is gearing up for a cut.

Economists appear to have made up their minds for the moment. According to CME Group’s FedWatch tool, none of their survey respondents currently believe the Fed will hold rates steady in September. More than 80% believe the U.S. central bank will cut rates by 25 basis points, and a smaller pool thinks it could cut by 50 bips.

The extent to which that holds will revolve around Powell’s presser. If the Fed chair acknowledges the FOMC Is close to making a move here, September is the obvious choice. If Powell hedges and warns and cautions against hubris ad nauseam, that certainty will fade.

Speaking of the fall: September is the last time the Fed could start cutting rates before the general election in November.

The timing is fraught. Few policymakers actually believe the Fed would make a decision about the timing of a rate cut based on electoral politics — and Powell has been adamant on this point — but that hasn’t stopped Republicans like Rep. Andy Barr (Ky.) from continuing to warn the Fed that a September cut could be perceived as political.

What happens after a rate cut? In economic terms, nothing immediately. But stocks and consumer sentiment could surge with the hope that inflation is quashed, which is a good look for an incumbent vice president like Kamala Harris. In the months following, the price of borrowing will get less expensive, making it easier for consumers to afford mortgages and car payments.

That won’t stop Republicans from attacking the Biden-Harris administration and the inflation of the last three years, which has been a real burden on many, many people. But a rate cut will take the wind out of the sails of those attacks.

— Brendan Pedersen

THE CAMPAIGN

What we learned in Arizona’s primaries

Tuesday was an eventful primary day in Arizona, which will be crucial in the battle for the White House, House and Senate this November. Here’s what we learned:

It’s Lake vs. Gallego in the Senate: Republican Kari Lake advanced to the general election to face Rep. Ruben Gallego (D-Ariz.). Lake easily won her GOP primary against Sheriff Mark Lamb and now faces the much tougher task of victory in a toss-up Senate race. Democrats will paint Lake as an extremist who is still obsessed with her unsuccessful 2022 gubernatorial run. Republicans, for their part, see Gallego’s progressive record in the House as a liability in November.

In a number of competitive House primaries, however, the races are still too close to call.

Arizona’s 1st District Democratic primary: Former state legislator Amish Shah narrowly leads Andrei Cherny and Marlene Galán-Woods with roughly 70% of votes tallied. The Democrats are vying to take on Rep. David Schweikert (R-Ariz.) in November. The district voted for President Joe Biden in 2020 and is a top target for national Democrats.

Arizona’s 8th District Republican primary: Abe Hamadeh leads Blake Masters and Ben Toma by a couple thousand votes with 70% of the vote counted. This is a safe red seat vacated by Rep. Debbie Lesko’s (R-Ariz.) upcoming retirement. Former President Donald Trump played a big role in the primary by initially backing Hamadeh and then endorsing both Masters and Hamadeh. Lesko had endorsed Toma.

Arizona’s 3rd District Democratic primary: Raquel Terán narrowly trails Yassamin Ansari by under four points with nearly 80% of the vote in. Terán was backed by the Congressional Hispanic Caucus BOLD PAC and Sen. Mark Kelly (D-Ariz.) but had to compete against a million-dollar-plus ad buy boosting Ansari from the cryptocurrency-focused Protect Progress PAC.

In other news: Rep. Eli Crane (R-Ariz.) easily won his 2nd District primary in a sixty-point romp. Crane voted to oust former Speaker Kevin McCarthy but looks very likely to return to Congress for a second term.

— Max Cohen

2025 TAX DEBATE

Kaine, Britt pitch child care tax plan

Sens. Tim Kaine (D-Va.) and Katie Britt (R-Ala.) are teaming up for a rare bipartisan proposal on child care.

The core of their new plan centers around expanding tax credits that aid families paying for child care and incentivizing businesses to offer child care for employees. The duo made a strategic choice to hone in on a tax solution, hoping they can convince colleagues to add child care measures to a big tax bill expected next year when the Trump tax cuts expire.

“Knowing that tax discussion is going to be such a big part of 2025, we kind of felt like let’s get this out there and that’ll give us some time to build support,” Kaine said.

Kaine, a longtime advocate for child care measures, said his experience with Democrats’ 2021 Covid relief law showed him the tax code was a good vehicle to try to tackle the issue alongside funding efforts. The 2021 law temporarily expanded the child and dependent care tax credit.

Britt told reporters the pair will work to broaden Hill support for their child care bills, which they believe address a problem felt throughout the country.

“I think people are looking for a solution,” Britt said. She added that Republicans’ position is “not wanting to create another entitlement but create an opportunity. And so I think we have hit the mark on that.”

The tax provisions expiring next year from Republicans’ 2017 law already represent trillions of dollars in tax cuts. So it’ll be a challenge but also a big opportunity to get priorities like child care into the mix.

The details: Kaine and Britt split their proposal into two bills. One is focused on expanding tax credits and deductions for child care-related expenses, including refundability of the child and dependent care credit so that more low-income families can benefit. Read it here.

The other bill would create a grant program meant to help attract and retain child care workers and expand the quality and affordability of care. Read it here.

Plus, on trade: In another bipartisan effort, Sens. Bill Cassidy (R-La.) and Catherine Cortez Masto (D-Nev.) are releasing a discussion draft of their trade facilitation bill today. This builds on a framework that Cassidy put out last month, which was also aimed at streamlining the import and export processes for international trade.

Read the draft bill here. And here’s a one-pager summarizing the text.

— Laura Weiss

… AND THERE’S MORE

The American Action Network, the non-profit designed to boost House Republicans and their policies, has a pair of new ads up in New York boosting Reps. Mike Lawler (R-N.Y.) and Marc Molinaro (R-N.Y.). The ads urge the pair of New Yorkers to support the Red Tape Reduction Act. Here’s the Lawler spot and here’s the Molinaro spot.

— Jake Sherman

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