The Hill’s Morning Report — Shutdown fallout — economic distress

by Jonathan Easley and Alexis Simendinger - 01/17/19 6:30 AM ET

Welcome to The Hill’s Morning Report, and happy Thursday! Our newsletter gets you up to speed on the most important developments in politics and policy, plus trends to watch, co-created by Jonathan Easley and Alexis Simendinger. (CLICK HERE to subscribe!) On Twitter, you can find us at @joneasley and @asimendinger.

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The longest government shutdown in history is nearly one month old, dragging the U.S. economy, the federal workforce and even the annual State of the Union address into the unknown.

It is earnings season on Wall Street, where CEOs are being battered by questions from analysts about the impact of the government’s funding impasse. In many cases, they don’t have answers, having never navigated a shutdown of this length.

Shutdown pain is seen and felt at the nation’s airports, as Transportation Security Administration agents miss work and lines grow longer. Airline CEOs complain that fewer bookings from federal workers and contractors harm their bottom lines.

On Wednesday, President Trump signed a bill guaranteeing back pay for federal workers, but thousands who are furloughed are missing paychecks in the interim. An analysis by The New York Times found that a typical federal worker has missed $5,000 in pay so far. Bloomberg News reports that federal workers are pulling money out of their retirement funds to make ends meet.

According to the White House’s own estimates, the shutdown is reducing quarterly economic growth by 0.13 percentage points a week. That would bring the total damage to nearly half a percentage point, which is substantial, considering the economy grew at 2.2 percent in this quarter last year.

What if the government is shut for the entire first quarter?

This quote from Ian Shepherdson, founder and chief U.S. economist for Pantheon Macroeconomics, went viral after it was referenced by JPMorgan CEO Jamie Dimon.

“Add it all up and you get close to zero [percent economic growth] if the shutdown lasts through the end of March.” – Shepherdson on CNBC

There are no substantive negotiations going on.

On Wednesday, Speaker Nancy Pelosi (D-Calif.) asked Trump to reschedule the planned State of the Union address on Jan. 29 because of the shutdown. Pelosi said the address should be put off because the Secret Service is the lead agency for security and has not been funded.

Department of Homeland Security Secretary Kirstjen Nielsen fired back.

But the state of the address remains up in the air. Trump would undoubtedly like to have a televised hour at the bully pulpit during a shutdown. Democrats would prefer to deny him that.

The Hill: Pelosi pulls State of the Union surprise on Trump.

The Associated Press: GOP dismiss suggestion that State of the Union be postponed.

Meanwhile, Trump on Wednesday hosted a bipartisan group of lawmakers from the Problem Solvers Caucus to discuss a way forward. There were no breakthroughs. Many lawmakers want to reopen the government and negotiate the wall money after that. Trump has dismissed that idea.

“Today I joined a dozen of my colleagues from both sides of the aisle for a meeting with President Trump regarding the ongoing government shutdown. The conversation was collegial, and the message delivered by both Republicans and Democrats was clear: It is time to end this shutdown. Only then can we begin the important work of securing our borders and ports and reforming our broken immigration system.” – Rep. Dean Phillips (D-Minn.)

Similar efforts by centrists and possible dealmakers have fizzled.

The Hill: Centrist efforts to convince Trump to end shutdown falter.

The Associated Press: Who blinks first will matter in Trump, Dem wall fight.

Polls

Morning Consult/Politico: Shutdown blame grows in Trump’s direction

Pew Research: Supporters and opponents of a border wall say shutdown concessions are unacceptable.

More from the shutdown … 9,000 federal employees in Washington, D.C. area file unemployment claims (Government Executive) … States scramble to fill the void left by shutdown (The Hill) … Lawmakers concerned that taxpayers will face problems as tax filing season approaches (The Hill).

LEADING THE DAY

ADMINISTRATION & WHITE HOUSE: The Senate’s two days of confirmation hearings for Attorney General nominee William Barr ended on Wednesday with lingering Democratic skepticism about his approach to special counsel Robert Mueller‘s probe, among other issues.

No GOP senators on the committee expressed reservations about Trump’s choice to lead the Justice Department and Barr was widely expected to clear the panel and eventually the full Senate (NBC News).

Judiciary Committee senior Democrat Dianne Feinstein of California said her vote hinges on whether Barr will make public Mueller’s report to the department. The nominee has pledged transparency, but hedged about what the public will learn when the special counsel’s investigation is finally completed (The Hill).

“I am going to make as much information available as I can, consistent with the rules and regulations that are part of the special counsel regulations.” — Barr’s testimony Jan. 15.

Wednesday’s witnesses spoke to support and oppose the nominee, who previously served as attorney general under former President George H.W. Bush. The committee has not set a date for a vote. Senators can submit additional questions in writing until Jan. 22.

Last night, Trump attorney Rudy Giuliani presented the president’s detractors with some head-turning new material as they contemplate Barr’s nomination and pursue investigations tied to Russia.

“I never said there was no collusion between the campaign. Or between people in the campaign.” — Giuliani to CNN’s Chris Cuomo

> Deputy Attorney General Rod Rosenstein is expected to step down when there is a new attorney general. If confirmed, Barr is expected to select a deputy he trusts and with whom he’s worked before. Former Justice Department colleagues who fit that description are undergoing new scrutiny among interested observers (The Hill).

EPA: Democratic senators blasted Andrew Wheeler, the president’s nominee to lead the Environmental Protection Agency as administrator, during his confirmation hearing on Wednesday (The Hill). They faulted him for unwinding former President Obama’s energy and environmental policies, arguing that Wheeler is an unbending champion for fossil fuels.

Pentagon: Trump today will deliver to the Defense Department the Missile Defense Review findings completed in October, Bloomberg reported. The Hill’s Ellen Mitchell previews what’s expected HERE.

State Department: Secretary of State Mike Pompeo and North Korean official Kim Yong Chol are expected to meet Friday in Washington to discuss the particulars of a second summit between Trump and Kim Jong Un (The Guardian). The president, who is expected to see Chol, who carries a letter from Kim, could announce details of another summit as early as Friday (The Washington Post).

China: U.S. federal prosecutors are pursuing a criminal case against China’s Huawei Technologies Co. for alleged theft of trade secrets from U.S. business partners (The Wall Street Journal).

Trump hotel lease in Washington: “Serious shortcomings” marred the General Services Administration’s handling of Trump’s lease of a government-owned building that houses his namesake hotel in the nation’s capital, according to a U.S. government watchdog report released on Wednesday (Reuters).

Mick Mulvaney: The new acting White House chief of staff expresses little interest in managing staff relationships or West Wing access to Trump. “You’re all adults,” he told senior staff members (The New York Times).

President’s health: It’s been one year since Trump’s first physical exam as president. He was gently advised then by former White House physician Dr. Ronny Jackson to trim down and eat better, exercise more and lower his bad cholesterol, plus get a colonoscopy this year. It’s unclear if the president will undergo another annual exam that could offer America a progress report on what Jackson described in 2018 as the president’s “excellent” health.

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CONGRESS: Apart from the endless shutdown, House Democrats had other business this week, including parceling out plum committee assignments within the conference. Pelosi, famous for dispensing both vinegar and honey, found ways to punish a few Democrats who bucked her successful bid for the gavel while rewarding others who began as critics and wound up as supporters (The Hill).

New York freshman Rep. Alexandria Ocasio-Cortez, a democratic socialist with an enormous social media following, now has a seat on the powerful House Financial Services Committee, overseeing banks, lenders and financial markets. Needless to say, the financial sector is nervous, as are some Democratic colleagues who maintain closer ties to Wall Street (The Hill).

House and Senate Democrats on Wednesday proposed to more than double the federal minimum wage to $15 an hour. The push from the left will not result in new law but showcased a popular liberal plank within the Democrats’ evolving agenda (The Hill).

On Wednesday, the GOP-controlled Senate rejected an effort to strengthen Congress’s hand when it comes to Trump’s authority over U.S. sanctions on Russia (The Hill). Eleven Republicans joined Democrats in a vote to enforce sanctions against the corporate empire of an influential ally of Russian President Vladimir Putin, but the effort fell three votes short of the 60-vote threshold required to advance the measure (The New York Times).

Also in the Senate, a little-known program that regulates how manufacturers guard against potential terror attacks is on the verge of expiring, but is in limbo after the House reauthorized it but a key senator, Homeland Security Committee Chairman Ron Johnson (R-Wis.) refuses to take it up (The Hill).

Rep. Steve King (R-Iowa) has been pilloried, urged to resign and officially punished by GOP colleagues for his objectionable comments about white supremacy. Now it’s Democrats’ turn to grapple with next steps when it comes to King and the politically incendiary terrain of race (The Hill).

IN FOCUS/SHARP TAKES

POLITICS: Max Greenwood and Amie Parnes have spotted an interesting trend: Democratic presidential hopefuls, who are facing a long and crowded primary, are increasingly eschewing grand campaign announcements for quick entrances on television and online.

The Hill: Not your ‘grandfather’s’ campaign. Dems look to stand out in crowded race.

So far we’ve seen everything from Sen. Elizabeth Warren (D-Mass.) at home drinking a beer on a Twitter video to Sen. Kirsten Gillibrand’s (D-N.Y.) big reveal on “The Late Show with Stephen Colbert.”

This week brings new buzz around Rep. Seth Moulton (D-Mass.), who is travelling to New Hampshire early next month to give a speech (The Boston Globe).

Former Housing and Urban Development Secretary Julián Castro is already in the first-in-the-nation primary state. On Wednesday, he gave a speech calling for “tuition free” public colleges and apprenticeship programs he says will make the U.S. workforce more competitive (The Hill).

Meanwhile, it’s been a rough week for former Rep. Beto O’Rourke (D-Texas), who was criticized for an interview he gave The Washington Post, in which he seemed to come up empty on key questions about immigration and national security. He also questioned the relevance of the U.S. Constitution.

CNN: This interview raised the question whether Beto buzz is overblown.

O’Rourke has not declared his intentions for 2020, but on Wednesday he began a trip that will take him from the Southwest into the heartland. O’Rourke is blogging on Medium about his experiences and musing about his state of mind.

“Have been stuck lately. In and out of a funk. My last day of work was January 2nd. It’s been more than twenty years since I was last not working. Maybe if I get moving, on the road, meet people, learn about what’s going on where they live, have some adventure, go where I don’t know and I’m not known, it’ll clear my head, reset, I’ll think new thoughts, break out of the loops I’ve been stuck in.”

In other political news … Trump on Wednesday night announced dozens of nominations and appointments to administration positions, including former elected officials such as Darrell Issa and James Gilmore, former White House deputy chief of staff Rick Dearborn to help steer Amtrak, donors from his 2016 campaign and former Republican National Committee figures (The Hill). Check out the complete list HERE.

The Morning Report is created by journalists Jonathan Easley jeasley@digital-staging.thehill.com & Alexis Simendinger asimendinger@digital-staging.thehill.com. Suggestions? Tips? We want to hear from you! Share The Hill’s reporting and newsletters, and encourage others to SUBSCRIBE!

OPINION

Time for a shutdown reality check, by Adam Brandon, FreedomWorks president and opinion contributor, The Hill. https://bit.ly/2MlGtIl

Shameful conservatives take joy in the pain of federal workers, by Democratic strategist and CNN political analyst Maria Cardona, opinion contributor, The Hill. https://bit.ly/2AP5SFo

WHERE AND WHEN

The House meets at 9 a.m.

The Senate convenes at 4 p.m. and resumes consideration of the motion to proceed to a bill to prohibit taxpayer funded abortions.

The president presents the Missile Defense Review at the Pentagon at 11 a.m. He’ll receive his daily intelligence briefing at 1:45 p.m.

Vice President Pence joins the president for the Missile Defense Review event in Virginia this morning, and at 4 p.m. leads a roundtable discussion with pro-life advocates at the White House.

The Labor Department’s report on U.S. weekly jobless claims will be released at 8:30 a.m., and an increase in applications for unemployment benefits is expected. The government’s scheduled report on U.S. housing starts for December will not be published because of the shutdown.

ELSEWHERE

> Syria: Four U.S. troops are among at least 15 people killed in a blast in northern Syria claimed by the Islamic State in Iraq and Syria (Reuters). The United States began withdrawing from Syria early this month after Trump declared ISIS had been defeated (The New York Times with video showing the moment of a restaurant blast). The carnage in Syria raised new questions about the Trump administration’s troop withdrawal policy there (The Washington Post).

> Brexit: British Prime Minister Theresa May survived a no-confidence vote in Parliament on Wednesday and renewed talks with members to try to find a Brexit compromise (BBC). The European Union pleaded with the U.K. on Wednesday to calm its differences to carry on with a divorce deal (The Associated Press).

> Iran: France condemned a failed Iranian satellite launch that it said used technology applicable to long-range missiles and urged Tehran to stop all ballistic tests which are not in line with United Nations resolutions (Reuters).

> Gender pay chasm: Citigroup Inc. on Wednesday said its female employees globally earn 29 percent less than its male employees, an “unadjusted” gender pay differential it claims it wants to fix. The bank says it seeks “100 percent parity” (Bloomberg).

THE CLOSER

And finally … It’s Thursday, which means it’s time for this week’s Morning Report Quiz! Inspired by Benjamin Franklin’s birthday, we’re eager for some smart guesses about the Founding Fathers.

Email your responses to jeasley@digital-staging.thehill.com or asimendinger@digital-staging.thehill.com, and please add “Quiz” to subject lines. Winners who submit correct answers will enjoy some richly deserved newsletter fame on Friday.

Which of these Founding Fathers did not sign the Constitution?