Morning Report — How will Congress avert a shutdown now?

Speaker Mike Johnson’s (R-La.) funding gamble didn’t pay off.

A diverse group of House Republicans on Wednesday torpedoed Johnson’s proposal for a six-month government funding bill, dealing an embarrassing blow to the GOP leader and derailing his strategy to avoid a shutdown on Sept. 30. 

Fourteen Republicans, including Armed Services Committee Chairman Mike Rogers (Ala.) and Senate hopeful Rep. Jim Banks (Ind.), voted against the plan — which paired a stopgap bill with a measure that would require proof of citizenship to vote. The final tally came to 202-220, with two lawmakers (Republican Reps. Marjorie Taylor Greene of Georgia and Thomas Massie of Kentucky) voting present. Three vulnerable Democrats (Reps. Don Davis of North Carolina, Jared Golden of Maine and Marie Gluesenkamp Perez of Washington) crossed the aisle to back the measure.

THE VOTE’S OUTCOME was not a surprise: Johnson pulled a vote on the measure last week as he faced widespread opposition. Nonetheless, he’s now in a bind: There is no clear path to avoiding a shutdown, and he’s in danger of disappointing former President Trump and the House GOP’s right flank. The failed vote is also threatening Johnson’s own future as GOP leader in the next Congress.

Senate Majority Leader Chuck Schumer (D-N.Y.) has urged his House GOP counterparts to proceed in a bipartisan manner.

“I hope that once the Speaker’s [stopgap] fails he moves on to a strategy that will actually work: bipartisan cooperation,” Schumer said on the Senate floor Wednesday. “It’s the only thing that has kept the government open every time we have faced a funding deadline. It’s going to be the only thing that works this time too.”

WHAT’S NEXT? Lawmakers are not close to completing work on the dozen annual appropriations bills that will fund federal agencies during the next fiscal year, so a stopgap of some length is crucial. Johnson’s bill would never have passed the Senate, where Democrats voiced opposition to the timeline and inclusion of the Safeguard American Voter Eligibility (SAVE) Act, a Trump priority. Publicly and privately, lawmakers on both sides of the aisle see the impasse ending with a “clean” three-month spending bill, which would set up another showdown after the November elections but before lawmakers break for holiday recess in December.

Rep. Chuck Fleischmann (Tenn.), a senior Republican appropriator, told Politico that Congress needs backup plans, and he would support a December stopgap.

“There always needs to be a plan B and a plan C because we don’t want to shut the government down,” he said. “We have another chamber we’ve got to satisfy as well.”

Johnson told senior Republicans in a private meeting on Wednesday that he had a Plan B for if his vote failed, but wouldn’t elaborate on what it was, Axios reports. 

DEBT AND TAXES: Trump and Vice President Harris are offering a flurry of ideas on spending and taxes that are fueling concerns on Capitol Hill that there’s no end in sight for huge yearly deficits. Trump has proposed $8 trillion in tax cuts over the next decade, which he would offset with only $900 billion from reversing Biden-era energy tax breaks and $4 trillion in new tariffs. Harris, meanwhile, has called for raising taxes on the wealthy, but she’s also pushing expensive ideas, such as $25,000 down payments for first-time homebuyers. The Hill’s Alexander Bolton reports the exploding costs of both candidates’ policy platforms have experts predicting $1-trillion annual deficits well into the future. 

CBS News: Paul Whelan, imprisoned by Russia in 2018 and released seven weeks ago as part of one of the largest prisoner swaps since the Cold War, briefed members of Congress Tuesday about ways to help the next Americans freed after detentions abroad.

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LEADING THE DAY

ECONOMY

The Federal Reserve announced a muscular half-point cut in its benchmark interest rate Wednesday, lowering the cost of borrowing for the first time in more than four years while sharply pivoting from battling inflation to bolstering the labor market.

The new federal funds rate is 4.75 percent to 5 percent. The central bank also said it expects further rate cuts at its final two meetings of the year.

Fed governors, concluding that inflation has ebbed and the economy has cooled, are now focused on the labor market; unemployment is at a low 4.2 percent amid some signs that hiring may be at a standstill in some sectors.

CHAIR JEROME POWELL said the overall economy is “in good shape” and he patted the Fed on the back for being “very patient,” adding, “I think that patience has really paid dividends.” 

He waved off near-term fears of recession and said the Fed’s 50-basis-point cut was “timely.” Powell told reporters the Fed has “growing confidence” it will achieve its goal of 2 percent inflation, creating the opening to “recalibrate” policy with a focus on workers and jobs. The time to support the labor market with monetary policy is “when it’s strong,” he said. The data, he added, says “this is still a strong labor market.”

REACTIONS: Financial markets responded enthusiastically Wednesday, while vice presidential candidate Sen. JD Vance (R-Ohio) blamed Harris for high-priced housing and loan rates that lock many Americans out of affordable real estate purchases. Mortgage interest rates, he said during a North Carolina rally, “have gone up [to] about 6 percent, thanks to Kamala Harris’s policy.”

The vice president in a statement said that while the Fed action was “welcome news for Americans who have borne the brunt of high prices,” she remains focused on lowering consumer costs. “I know prices are still too high for many middle class and working families, and my top priority as president will be to lower the costs of everyday needs like health care, housing and groceries,” Harris wrote.

Speaking in New York late Wednesday, Trump said of the Fed, “To cut it by that much, assuming they’re not just playing politics, the economy would be very bad.” 

Trump is a Powell critic who has expressed skepticism about the central bank’s interest rate decision making. He recently said he believes presidents “should have a say” in how interest rates are decided, adding that his business experience qualifies him, if elected, to advise the independent Fed. The general notion of presidential input to central bank decisions was rejected by Powell during his news conference.

NPR: Here are four ways the Federal Reserve’s big rate cut could change the housing market.

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ZOOM IN

POLITICS & CAMPAIGNS

The International Brotherhood of Teamsters will not issue an endorsement in the presidential election for the first time since 1996, and for only the third time since 1960. Teamsters General President Sean O’Brien said Wednesday that “neither major candidate was able to make serious commitments to our union to ensure the interests of working people are always put before Big Business.”

The Teamsters endorsed President Biden during the 2020 election, and the union has consistently supported Democratic presidential nominees in recent election cycles. The union waited to announce its decision longer than other unions and labor organizations, which typically endorsed Biden and then Harris. O’Brien said his members’ input would be a “significant” part of the endorsement process, and recent polling shows they clearly support Trump in the presidential race.

STATISTICAL TIE: Harris and Trump are locked in tight contests in seven battleground states as the race for the White House enters the homestretch, according to new polling from Emerson College Polling and The Hill. Trump edged out Harris in Arizona (49 percent to 48 percent); Georgia (50 percent to 47 percent); Pennsylvania (48 percent to 47 percent); and Wisconsin (49 percent to 48 percent.) Harris led Trump in Michigan (49 percent to 47 percent) and North Carolina (49 percent to 48 percent). Both candidates were tied at 48 percent in Nevada. But because the polling in each state fell within the margin of error, the two candidates are statistically tied.  

Trump’s favorability rating has risen by 5 points in the past month, according to a new Gallup survey. But despite the fluctuation in favorability, the poll suggests both White House candidates are underwater.

IMMIGRATION: Meanwhile, more than half of all Americans, including a quarter of Democrats, support the mass deportation of immigrants who are living in the country illegally, a new poll found. The Scripps News/Ipsos survey’s findings come as Trump and his allies have intensely focused on immigration in the 2024 election cycle. About 54 percent of respondents — 86 percent of Republicans, 58 percent of independents and 25 percent of Democrats — said they “strongly” or “somewhat” support a wide-scale effort to deport millions of immigrants.

MEDIA STRATEGY: Democrats who were once satisfied with Harris’s low-key media strategy, now want to see the vice president ramp up her appearances. While questions build around Harris’s lack of discussion on her policy proposals, Democrats say she needs to do more to talk about her plans. “More more more,” Van Jones said during a CNN interview this week. The New York Times reports that Harris is about to change her media strategy, “promising a series of appearances across an array of media venues, including local and national outlets, podcasts, radio stations and daytime talk shows.”

Trump is leaning on prominent surrogates to help soften his image and broaden his appeal to women. Former Rep. Tulsi Gabbard (Hawaii) moderated a town hall in Wisconsin last month where she spoke of her own fertility struggles, teeing Trump up to discuss his proposal for the government to cover the cost of in vitro fertilization (IVF) treatments. And Arkansas Gov. Sarah Huckabee Sanders (R) used her GOP convention speaking slot to describe Trump as a boss who cared about working moms.

The former president told Fox News during an interview Wednesday that he regrets not “going after” the ABC News debate moderators Sept. 10 in Philadelphia. He joked about Sunday’s apparent assassination attempt in Florida: “I always said golf is a very dangerous game.” 

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ELSEWHERE

INTERNATIONAL

Israel detonated thousands of two-way personal radios used by Hezbollah members in Lebanon in a second wave of an operation that started Tuesday with the explosions of pager devices, Axios reports. The walkie-talkies were rigged in advance by Israeli intelligence services and then delivered to Hezbollah as part of the militia’s emergency communications system. At least 20 people were killed and 450 injured, the Lebanese Health Ministry said.

United Nations Secretary-General António Guterres is “deeply alarmed” by the reports of the explosions, his spokesperson said in a Wednesday statement.

Meanwhile, Hezbollah said Wednesday it attacked Israeli artillery positions with rockets in the first strike since pager blasts wounded thousands of its members in Lebanon and raised the prospect of a wider regional war (Reuters).

Secretary of State Antony Blinken said Wednesday in Egypt that the U.S. did not know about and was not involved in the wave of exploding pagers aimed at Hezbollah, and urged restraint among all parties to avoid escalating further conflict in the Middle East. 

“We’ve been very clear and we remain very clear about the importance of all parties avoiding any steps that could further escalate the conflict,” Blinken said. “We’re focused on getting this cease-fire over the finish line.”

DESTRUCTION OF SCHOOL BUILDINGS and entire education systems in Gaza, Ukraine and other war-torn countries has created a perilous situation for students, The Hill’s Lexi Lonas Cochran reports. 

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THE CLOSER 

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