Morning Report — A government funding fiasco 

In today’s issue:  

• Trump, Musk ax Johnson’s stopgap
• Committee will release Gaetz’s ethics report
• Fed cuts rates by a quarter point
• EU allies brainstorm Ukraine aid

A lot can change in 24 hours.

That was Wednesday’s lesson for Speaker Mike Johnson (R-La.), who had on Tuesday night unveiled a sprawling, 1,500-page stopgap bill to fund the government ahead of a Friday deadline.

Barely 24 hours later, Johnson is pivoting to plan B, axing his original plan in favor of a slimmed-down, “clean” funding patch.

What happened?

House conservatives had always taken issue with Johnson’s original measure, which included more than $100 billion in additional funding for, among other things, disaster aid and the farm bill reauthorization. The spending hawks balked at what they considered an overstuffed package. But with Democratic and moderate Republican support, Johnson and his leadership team saw a shot at bringing the legislation up for an immediate floor vote on Wednesday, bypassing the Rules Committee with a two-thirds majority in the lower chamber.

Then Elon Musk chimed in. The tech billionaire Trump loyalist, who’s leading a cost-cutting project under the incoming president, came out against the stopgap on social media, writing on social platform X that any lawmaker “who votes for this outrageous spending bill deserves to be voted out in 2 years!”

Hours later, President-elect Trump and Vice President-elect Vance joined Musk in his criticism. In a joint statement, Trump and Vance slammed the bipartisan bill and called for a “streamlined” spending stopgap combined with an increase in the debt ceiling — effectively torpedoing the measure.

“Increasing the debt ceiling is not great but we’d rather do it on Biden’s watch. If Democrats won’t cooperate on the debt ceiling now, what makes anyone think they would do it in June during our administration?” the two said in a statement. “Let’s have this debate now. And we should pass a streamlined spending bill that doesn’t give [Senate Majority Leader] Chuck Schumer [D-N.Y.] and the Democrats everything they want.”

Trump then called for any Republican lawmaker who backs the funding patch without including an increase to the debt limit to face a primary challenge.

Sen. Susan Collins (R-Maine) — the top GOP appropriator — said Wednesday evening she was taken aback by Trump’s demand that the stopgap legislation be used to increase the debt ceiling, an issue that was not expected to be dealt with until the summer. 

“I don’t know his rationale,” she said.

So, what happens now?

Johnson called off votes in the House early Wednesday evening, heading back to the drawing board.

Democrats’ pushback was fierce. House Minority Leader Hakeem Jeffries (D-N.Y.) suggested Wednesday that his party will oppose any federal spending bill that strays from the original measure, accusing GOP leaders of reneging on the agreement and risking a shutdown. Jeffries invoked the growing conservative outcry over the negotiated bill and warned Republicans that they will “own” the economic and political fallout if a shutdown occurs. 

“An agreement is an agreement,” Jeffries told reporters. “House Republicans have been ordered to shut down the government and hurt everyday Americans all across this country. House Republicans will now own any harm that is visited upon the American people that results from a government shutdown or worse.”

The White House on Wednesday also blasted Trump and Republicans for sinking the deal, saying in a statement that “Republicans need to stop playing politics with this bipartisan agreement or they will hurt hardworking Americans and create instability across the country.”

Johnson is expected to put forward a draft for a clean spending agreement today, but its future in the House and Senate remains unclear. If lawmakers can’t reach an agreement by Friday at midnight, they will trigger a shutdown.

▪ The Hill: Musk’s aggressive push against a stopgap measure to prevent a government shutdown received mixed reactions from House Republicans, even though it ended with a measure of success.

▪ NOTUS: Musk is trying to force Congress into doing what he wants.

▪ The Hill: The Senate is plowing forward with consideration of the Social Security Fairness Act, clearing its first procedural hurdle on what supporters hope is a path to passage later this week.

Looking toward the new year, Johnson’s spending hurdles don’t bode well for his quest to retain the gavel in January. Rep. Thomas Massie (R-Ky.) on Wednesday became the first Republican to publicly say he won’t back Johnson’s bid. In the new Congress, Johnson’s House majority will become even thinner — meaning one GOP vote against him could be enough to end his Speakership.

That’s tough math for Johnson, especially with a Republican conference proving time and again that they are willing to challenge leadership and threaten to oust them.

This time around, Johnson’s potential defectors are not limited to the usual hard-line conservative antagonists. Rep. Greg Steube (R-Fla.) told The Hill’s Emily Brooks and Mychael Schnell he is undecided on his support for Johnson, before tearing into the Speaker’s leadership — especially on government funding matters.

“He committed to the conference a year ago that we weren’t gonna govern by [stopgap bills] anymore and we’ve done five,” Steube said. “And 43 days after we get a mandate from the American people, we’re gonna work with Democrats to do stuff, when a Republican Senate comes in in two weeks?”

SMART TAKE FROM THE HILL'S BOB CUSACK:

“You guys are tough, but fair.”

That’s something I have repeatedly heard from both sides of the aisle over my 20 plus years at The Hill. It’s the best compliment an editor can receive.

This is my last take for Morning Report, as I am leaving The Hill for a new challenge. When I am asked what’s the best thing about what I do, I always respond, “The people.” I will miss working with the amazing journalists at The Hill. 

The job has been incredibly rewarding, though it has evolved over time. It has been astounding to see how the media has changed since I joined the publication as a health care reporter in 2003.

The Hill back then was scrappy, and it remains that way today. But our growth has been explosive.

Why? There are many reasons. We know who we are. We hire smart, team players who row in the same direction. We don’t play “gotcha.” And, most importantly, as nonpartisan referees, we are tough but fair.

Thank you for reading The Hill and The Hill’s Morning Report. While I will be moving on, I will continue to be an avid reader, and hope you will, too. 

3 THINGS TO KNOW TODAY:

▪ A majority of Americans oppose Trump’s plans to use the military to deport millions of undocumented immigrants, to instruct the Justice Department to investigate his political rivals and to pardon rioters charged with breaking into the Capitol on Jan. 6, 2021, according to a nationwide Washington Post-University of Maryland poll.

▪ California Gov. Gavin Newsom (D) issued an emergency proclamation on Wednesday in response to growing concerns over bird flu cases in the state and across the country.

▪ The Justice Department is examining the special counsel team that investigated Trump. The internal review is a standard response to prosecutorial misconduct complaints and does not suggest the department believes wrongdoing occurred.

LEADING THE DAY 

© The Associated Press | J. Scott Applewhite

ETHICS: After reports that the House Ethics Committee voted to release its report about his conduct, former Rep. Matt Gaetz (R-Fla.) is defending what he says is “embarrassing, though not criminal” past behavior and taking shots at the panel. The committee plans to make its findings public after the House is done voting for the year, which could be as soon as later this week.

The House Ethics Committee began its investigation into Gaetz in 2021, examining allegations of sexual misconduct and illicit drug use. The panel for weeks has been debating whether to release its report into Gaetz. The question of releasing the findings catapulted into the spotlight after Trump selected Gaetz to be attorney general and Gaetz immediately resigned from Congress. Gaetz subsequently dropped out of the running, putting the report into limbo.

▪ Politico: Trump’s transition is happening over private emails. Federal officials are nervous.

▪ The New York Times analysis: The wrath of Trump: House Republicans map a case against former Rep. Liz Cheney (R-Wyo.), a member of the House Jan. 6, panel.

▪ Politico: At least a dozen senators are pushing to see the FBI’s background check on Pete Hegseth, Trump’s embattled pick for Pentagon chief 

▪ The Hill: Reproductive health advocates expect Trump to reinstate a rule that weakened the country's sole federally funded family-planning program during his first term once he returns to office.

▪ The Hill: States and municipalities are preparing to take the lead on climate action in a second Trump term as they brace for an administration likely to be less climate-focused and sometimes antagonistic to their efforts.

THE SUPREME COURT announced it will take up whether a law that could ban TikTok nationwide violates the First Amendment, setting the stage for a fast-paced, high-stakes battle over free speech. In an order issued Wednesday, the court said it will hold oral arguments Jan. 10 regarding the video sharing platform’s bid to invalidate the law requiring it to divest from its Chinese parent company or face a ban. 

The move comes after TikTok filed an emergency application asking the justices to delay their Jan. 19 divest-or-ban deadline. Previously, a federal appeals court ruled the government’s national security concerns justified the “significant” impacts of a potential ban and superseded any free speech concerns.

WHERE AND WHEN

• Morning Report’s Alexis Simendinger returns after the holidays.
  
• The House will meet at 9 a.m. The Senate will meet at 10 a.m. 
  
• The president will receive the President’s Daily Brief at 10 a.m. At 4:40 p.m., he and first lady Jill Biden will return to the White House from Delaware.
  
• Vice President Harris will travel to Los Angeles.
  
• Secretary of State Antony Blinken is in New York, where he will participate in  United Nations Security Council sessions on artificial intelligence and Sudan.

ZOOM IN

© The Associated Press | Mark Schiefelbein

The Federal Reserve cut interest rates by a quarter percentage point Wednesday, in line with market expectations, even as inflation has reaccelerated over the past two months. Since starting them in September, Fed officials have been trying to find the right tempo for rate cuts, and Wednesday’s cut — the third in a row — shows them pressing ahead with their strategy despite some underlying strength in labor and price data.

The Fed has made “a great deal of progress” in getting price hikes back to a more normal pace, but Americans are still feeling the aftermath of inflation spikes, Chair Jerome Powell said Wednesday.

“There’s tremendous pain in that burst of inflation that was very global — this was everywhere in all advanced economies at the same time,” Powell said. “Now, inflation itself is way down, but people are still feeling high prices.”

While inflation has fallen sharply since hitting a four-decade high in 2022, progress on prices has slowed in recent months. The annual inflation rate in November was 2.7 percent — a slight increase from the month before. Fed officials say they are determined to further reduce inflation, while acknowledging it's been a lengthy and exhausting battle. Officials now think it will be 2027 before inflation falls to the Fed's 2 percent target.

▪ The Wall Street Journal: The Dow fell by 1,123 points Wednesday after the Fed indicated in a policy statement that it is forecasting just two interest rate cuts in 2025, not the previously projected four.

▪ The New York Times: The economy is finally stable. Is that about to change?

ELSEWHERE

© The Associated Press | Efrem Lukatsky

UKRAINE: European countries are discussing sending troops to Ukraine in the event of a ceasefire or peace deal, as Trump has made clear he will not put American boots on the ground to guarantee security, Reuters reports. The talks, driven by French President Emmanuel Macron, are in early stages.

Meanwhile, NATO Secretary-General Mark Rutte hosted Ukrainian President Volodymyr Zelensky and several other European leaders in Brussels to discuss the deteriorating situation in the war with Russia. Zelensky on Wednesday conceded the military doesn’t have the strength to retake all the territory Russia has occupied since 2014, but that doesn’t mean Kyiv is about to recognize its Moscow-controlled lands as belonging to Russia.  

“Legally, we cannot give up our territories,” Zelensky said when asked how much Kyiv is prepared to compromise to end the war. “This is prohibited by the constitution. But let’s not use such big words. Russia actually controls part of our territory today.”

The Atlantic: Weary Ukrainian soldiers and citizens express fatalistic optimism while preparing for the loss of U.S. military support.

SYRIA: The United Nations special envoy to Syria gave one of his first signs of optimism about Syria’s new government as the de facto leaders, the rebel group Hay’at Tahrir al-Sham, work to attain international legitimacy. Geir Pedersen said he hopes the new government will adopt a new constitution allowing for inclusive government and that there will be “free and fair elections when that time comes.”

Russia is withdrawing advanced air-defense systems and other sophisticated arms from bases in Syria and shifting them to Libya, The Wall Street Journal reports, as Moscow scrambles to preserve a military presence in the Middle East.

▪ NBC News: Mass graves uncovered in Syria in the days since Assad was overthrown are exposing evidence of some of the worst abuses since the Nazis.

▪ NPR: Turkey looks set to play an outsize role in shaping the new Syria after Assad.

ISRAEL: The U.S. and Arab mediators are working to finalize an agreement between Israel and Hamas to halt the 14-month-old war in Gaza. A Palestinian official close to the negotiations told Reuters on Wednesday that mediators had narrowed gaps on most of the agreement's clauses, but that Israel introduced conditions that Hamas rejected.

▪ NBC News: Palestinian families are suing the State Department over U.S. support for Israel's military campaign in Gaza.

▪ The Guardian: Israel’s restriction of Gaza’s water supply to levels below minimum needs amounts to an act of genocide and extermination as a crime against humanity, Human Rights Watch alleged.

▪ CNN: Israel’s military launched deadly strikes on Houthi targets in Yemen early Thursday, just hours after the Iran-backed militant group’s latest attack on Israel.

OPINION 

■ Good riddance to the 118th Congress, by The Wall Street Journal editorial board.

■ The risks of declaring fealty to Trump, by Eugene Robinson, columnist, The Washington Post.

THE CLOSER

© The Associated Press | Jose Luis Magana

Take Our Morning Report Quiz

And finally … It’s Thursday, which means it’s time for this week’s Morning Report Quiz! Inspired by the upcoming holidays, we’re eager for some smart guesses about festive traditions in the nation’s capital.

Be sure to email your responses to kkarisch@thehill.com — please add “Quiz” to your subject line. Winners who submit correct answers will enjoy some richly deserved newsletter fame on Friday.

When was the first National Christmas Tree decorated in the northeast quadrant of the Ellipse?

1. 1964
2. 1923
3. 1888
4. 1972

Which president hosted the first official White House Hanukkah celebration?

1. Gerald Ford
2. Francis Delano Roosevelt
3. George W. Bush
4. Bill Clinton

Which first lady began the tradition of selecting a theme for the official White House Christmas tree in the Blue Room?

1. Mamie Eisenhower 
2. Dolley Madison
3. Jackie Kennedy Onassis 
4. Nancy Reagan

Which Smithsonian institution in D.C. offers visitors a light-up display during the holidays?

1. The National Portrait Gallery
2. The National History Museum
3. The Air and Space Museum
4. The National Zoo

Stay Engaged 

We want to hear from you! Email: Alexis Simendinger (asimendinger@thehill.com) and Kristina Karisch (kkarisch@thehill.com). Follow us on social platform X: (@asimendinger and @kristinakarisch) and suggest this newsletter to friends!