Happy Tuesday and welcome to the post-Labor Day sprint — or slog — to Election Day, which is now just — or still — nine weeks away. We’re also one week away from the high-stakes presidential debate between Vice President Kamala Harris and former President Donald Trump.
Ahead of that showdown, Harris and Trump are each set to hold campaign events this week in key states. Harris is also poised to roll out a new tax proposal tomorrow. And as the presidential contest continues, another battle is brewing in Congress over a spending bill needed to avert a government shutdown on October 1. We’ve got details.
Egged on by Trump, Republicans Set Up September Shutdown Drama
When Congress returns to the Capitol next week, lawmakers will have to finalize and pass a stopgap spending bill by the end of the month — and while neither party really wants to be blamed by voters for having federal agencies shuttered just weeks before the election, the path to avoiding a government shutdown now looks likely to involve considerable political drama.
House Speaker Mike Johnson is reportedly planning to pursue a partisan approach promoted by the conservative House Freedom Caucus and former President Donald Trump, the Republican presidential nominee. He is apparently set to bring up a continuing resolution, or CR, that would fund the government into March 2025, at levels below what Democrats want — and would also attach the Safeguard American Voter Eligibility (SAVE) Act, which requires proof of citizenship from anyone registering to vote in federal elections. It is already illegal for noncitizens to vote in those elections. Five Democrats helped House Republicans pass that bill in July, but it went nowhere in the Senate. Democratic leaders see the legislation as a nonstarter and worry that it could result in eligible citizens being purged from voter rolls.
The Freedom Caucus earlier this month called for the SAVE Act to be attached to the stopgap spending bill. Trump last week publicly urged House and Senate Republicans try to win some concessions in government funding talks and said that he would “shut down the government in a heartbeat” if the SAVE Act isn’t included in the bill.
“They ought to focus on borders and elections, and if you can’t get the borders right and if you can’t get the elections right, they ought to close it up, just close it up and let it sit,” Trump told The Monica Crowley Podcast, hosted by a former member of his administration. “If they don’t get these bills, they should close it down and Republicans should not approve it.”
Senate Minority Leader Mitch McConnell’s office has been working to get House conservatives to drop their demands on the voting bill because the measure would be dead on arrival in his chamber, Axios reported last week. “In a recent meeting with other GOP offices about a short-term spending bill strategy, top McConnell staffers argued that adding a non-citizen voting bill would backfire,” Stef W. Kight and Juliegrace Brufke reported. “One fear is such a move would open the door for Democrats to tack on their own voting-related legislation, two GOP aides familiar with the conversation told Axios.”
Democrats also object to the funding levels that House Republicans have proposed, which leave out the “side deals” on spending that were part of an agreement hashed out last year between the Biden White House and then-Speaker Kevin McCarthy. Republicans argue that they don’t have to abide by McCarthy’s deal since he’s no longer speaker.
The bottom line: Johnson appears poised to try to appease Trump and his conservative members on a CR, even if their approach is doomed to fail. That may add obstacles and time pressure to the process of funding the government, but lawmakers may still be likely to avoid a shutdown. “The good news for Johnson here is that he has enough time for Plan B on a CR if and when this effort fails to come together,” Punchbowl News notes.
Harris to Propose Tax Breaks for Small Business
Vice President Kamala Harris is expected to unveil a new tax proposal on Wednesday that is intended to boost small-business startups, according to multiple reports Tuesday.
In a speech in New Hampshire, Harris will reportedly propose to allow new businesses to write off $50,000 in start-up expenses — 10 times the current $5,000 limit. According to The New York Times, the tax break could benefit upwards of 25 million small businesses.
Campaign officials told the Times that Harris will propose several other tax changes for small businesses, including the creation of a universal deduction that would shield more income from taxes.
The Washington Post’s Jeff Stein says the new proposals likely aim to push back against the idea that Harris is too liberal and unsupportive of business. And they come as more Americans focus on starting their own businesses. “The United States is in the midst of an unprecedented small-business and start-up boom that nobody saw coming,” John Lettieri, president of the Economic Innovation Group, told Stein. “There’s been precious little from any policymaker to harness this and keep it going.”
Quote of the Day
“In terms of the history of the last two decades, if we’re asking: Can we have a revenue system to support the government that we have? The answer is yes. We about had that, and we made an explicit set of choices in the 21st century to no longer have that.”
– David Kamin, a tax expert at New York University School of Law who served as an economic adviser in the Biden White House, talking to The New York Times’ Andrew Duehren about the ongoing political battle over taxation in the U.S.
Duehren notes that federal tax revenues were robust when George W. Bush won the presidency, sparking concerns among conservatives that the money would be used to increase government spending. The Bush tax cuts in 2001 and 2003 were designed in part to act as a temporary drag on those growing tax revenues, but Congress has repeatedly extended the cuts. A significant portion of the 2017 tax cuts under former President Donald Trump were also designed to be temporary, but many lawmakers are pushing to extend them, threatening to raise deficits for years to come.
Some Democrats say supposedly temporary tax cuts kick off a “tax doom loop” in which it becomes all but impossible to raise taxes again as households grow used to the lower tax burden and lawmakers on both sides of the aisle grow wary of upsetting the status quo. Duehren reports that Democrats are hoping they have found a way around that problem as they propose raising taxes on corporations and the very rich while leaving the middle class — defined somewhat dubiously as households earning less than $400,000 a year — untouched.
The issue will likely come to a head next year, as lawmakers gear up to reshape the tax code ahead of the expiration of portions of the Trump tax cuts at the end of 2025.
Number of the Day: $25 Million
The Harris presidential campaign is sending nearly $25 million to Democratic candidates running in federal and state races, Politico’s Jesica Piper reports. While it’s not unusual for the top of the ticket to share resources with those in down-ballot races, the amount is larger than it has been in previous campaigns and the money is flowing earlier than usual.
Democrats say the money is part of an effort to mobilize voters in all parts of the country — an effort made more attainable by the late-in-the-game change at the top of the ticket. “Harris’ campaign and the DNC are positioned to transfer more money this cycle due to a massive surge in fundraising after former President Joe Biden dropped out of the race in July,” Piper writes. “The vice president’s ascendancy led both grassroots and big-dollar donors to pick up their giving, and her campaign quickly surpassed Trump’s in terms of monthly fundraising and total campaign cash.”
X Post of the Day
From Bobby Kogan, senior director of federal budget policy at the Center for American Progress, a left-leaning think tank:
Fiscal News Roundup
- Harris Readies Aggressive Tax Boost for New Small Businesses – Axios
- Harris, Proposing a Tax Break, Makes a Play for Small-Business Owners – New York Times
- Harris to Release New Economic Policy Plans Before Debate – Washington Post
- Democrats Slam Mike Johnson Over Government-Funding Plan – Punchbowl News
- 4 Things That Could Complicate Congress’s Efforts to Avert Shutdown – The Hill
- Donald Trump Calls for Government Shutdown Over Fake Voter Fraud Fears – HuffPost
- US Jobs Data Return to Center Stage as Fed Mulls Rate-Cut Size – Bloomberg
- Supreme Court Allows HHS to Divert Funds Over Abortion Referrals – Washington Post
- Advocates Hope Harris Will Boost Momentum on Reparations to Black Americans – Washington Post
Views and Analysis
- Can Democrats Stop the ‘Tax Doom Loop’? – Andrew Duehren, New York Times
- Trump’s Misleading Attempt to Make Harris Responsible for Inflation – David Featherstone, New York Times
- Control of U.S. House May Come Down to Six Races in California – Russell Contreras, Axios
- The Jobs Numbers Went Down, But Trust in Them Shouldn’t – Claudia Sahm, Bloomberg
- Cash Alone Proves Inadequate to Solve the Problems of the Poor – Megan McArdle, Washington Post
- Young Americans Can’t Keep Funding Boomers and Beyond – C. Eugene Steuerle and Glenn Kramon, New York Times
- This Is How to Fix the Housing Crisis – Edward L. Glaeser, New York Times
- The Political Rage of Left-Behind Regions – Paul Krugman, New York Times
- House Republican Agendas and Project 2025 Would Increase Poverty and Hardship – Center on Budget and Policy Priorities
- Trump Administration Budgets and Programs for People of Limited Means – Robert Greenstein, Hamilton Project