Republicans Dare Democrats to Force a Government Shutdown

Happy Mond - wait, nope. Not a happy Monday at all, as economic concerns fueled by President Donald Trump's tariff policy and his refusal to rule out the possibility of a recession led to another stock market rout. The S&P 500 index suffered a 2.7% drop, its worst day of the year. We've got details and an update on this week's government shutdown deadline.

Trump Tariffs Are Ringing Recession Warning Bells

President Donald Trump's still-developing trade war is causing jitters on Wall Street and in corporate boardrooms as investors and decision-makers face the growing - if still uncertain - possibility of a recession, potentially sparked by the administration's pursuit of punishing new tariffs, amplified by significant government layoffs and mass deportations.

Asked about the likelihood of a recession this year by Maria Bartiromo of Fox News in a segment that aired Sunday, Trump declined to rule it out and instead talked up the magnitude of the changes he is making in how the U.S. economy operates.

"I hate to predict things like that," Trump said. "There is a period of transition, because what we're doing is very big. We're bringing wealth back to America. That's a big thing, and there are always periods of, it takes a little time. It takes a little time, but I think it should be great for us."

More trouble ahead? Even before taking office, Trump announced he would be imposing new tariffs on goods in imported from China, Canada and Mexico, the country's largest trade partners. He has followed through on the threat against China, imposing a 20% tariff on imports in two installments. But most of his threatened 25% tariffs against Canada and Mexico have been delayed twice and are now scheduled to take effect on April 2, along with a new set of "reciprocal tariffs" on all other trading partners, including the European Union.

In the Fox interview, Bartiromo noted that business leaders crave certainty and asked if there will be "clarity" on trade policy after April 2, but Trump was less than clear about his plans. "We may go up with some tariffs. It depends," he said. "We may go up. I don't think we'll go down, or we may go up."

Trump pushed back against the idea that decision-makers are having difficulties in the current topsy-turvy economic environment, and then reiterated his long-held grievances over trade issues. "They have plenty of clarity," he said. "They just use that. That's almost a sound bite. They always say that we want clarity. Look, our country has been ripped off for many decades, for many, many decades, and we're not going to be ripped off anymore."

White House economic adviser Kevin Hassett defended Trump's approach Monday, but he admitted that uncertainty around tariff policy could weigh on the economy in the first quarter of the year, even if that period of uncertainty would be followed by a great boom. "I think that what's going to happen is the first quarter is going to squeak into the positive category," he told CNBC, referring to economic growth, "and then the second quarter is going to take off as everybody sees the reality of the tax cuts."

Another key member of the administration, Treasury Secretary Scott Bessent, was less optimistic last week when he told CNBC that he could see the economy "starting to roll a bit" as it goes through what he said was a necessary "detox period" of lower government spending.

Investors not pleased: Traders on Wall Street seemed to be listening more to Trump and Bessent than Hassett Monday, sending the S&P 500 down by 2.7%, with the Dow Jones Industrial Average falling 2.1%, or nearly 900 points. The S&P 500 index has now fallen 5% in just nine days, the fastest decline of that size since the early days of the pandemic in February 2020, Bloomberg reports.

Part of the problem is the way Trump has unveiled and teased his threatened trade war. "The talk of tariffs is, in a lot of ways, worse than the implementation of them," said David Bahnsen, chief investment officer at the Bahnsen Group, per CNN. "The tariff talk, reversal, speculation, and chaos only fosters uncertainty." That uncertainty is starting to have real effects on the economy, raising the odds that damage could be done, and for an unknown length of time.

Analysts at JPMorgan Chase said there is now "materially higher risk of a global recession this year due to extreme U.S. policies," per The New York Times. They raised their probability of a downturn to 40%.

Ed Yardeni, president of Yardeni Research, said investors appear to be reconsidering the wisdom of the new administration's agenda. "The stock market is losing its confidence in the Trump 2.0 policies," he told CNN.

Republicans Dare Democrats to Force a Government Shutdown

With four days to go before a Friday night deadline to fund the government and no bipartisan compromise in sight, House Republicans unveiled a 99-page bill over the weekend to extend current federal funding, with some notable adjustments, through the end of the fiscal year in September. A House vote is expected tomorrow.

Democratic leaders oppose the GOP plan and are calling on their members to vote against it, arguing that it gives President Donald Trump and Elon Musk too much leeway to shut off or redirect funding approved by Congress. They also argue that the bill is far from a "clean" continuing resolution and instead adds money for deportations and the military while removing funding for non-defense programs. Thousands of non-defense earmarks are being left out, for example. Combined with other cuts and rescissions, Democrats note that the bill cuts nondefense funding by $15 billion and defense spending by $3 billion compared to an earlier bipartisan deal. (Read more about what's in the bill here or here.)

Top Democratic appropriators have been calling for Republicans to negotiate full-year funding bills instead of a six-month extension.

"Instead of working with Democrats to invest in working families and communities all across America, Speaker Johnson has rolled out a slush fund continuing resolution that would give Donald Trump and Elon Musk more power over federal spending-and more power to pick winners and losers, which threatens families in blue and red states alike," Sen. Patty Murray, the top Democrat on the Senate Appropriations Committee, said in a statement. "Congress-not Trump or Musk-should decide through careful bipartisan negotiations how to invest in our states and districts-and whether critical programs that support students, veterans, families, and patients get funded or not."

Republicans say they've avoided including any poison pills even as they rejected what they call "outlandish and unrealistic" demands by Democrats to impose restrictions on Trump. They are essentially daring Democrats to vote against the bill and let the government shut down. "Democrats have a choice to join us or display their true intentions," House Appropriations Committee Chairman Tom Cole said in a statement. "Should they choose to vote to shut the government for negotiation leverage and their contempt of President Trump, they are readying to hurt hundreds of millions more. It's a battle they lost in November, and one the people will continue to see through."

It's not clear yet if House Speaker Mike Johnson can get the Republican votes he needs to pass the bill. Rep. Thomas Massie of Kentucky has already said he won't support the plan. Other GOP hardliners would typically oppose a stopgap funding bill, and certainly one that keeps in place Biden-era spending levels. This time, though, they argue that by keeping the government open they're allowing the DOGE cost-cutting effort to move ahead and avoiding the sort of massive year-end funding package they loathe while also setting up spending cuts for next year and beyond.

Trump is urging Republicans to back the bill, which he described as "very good" given the circumstances. "Great things are coming for America, and I am asking you all to give us a few months to get us through to September so we can continue to put the Country's 'financial house' in order," he wrote in a post on his Truth Social site. "We have to remain UNITED - NO DISSENT - Fight for another day when the timing is right."

What's next: The House is scheduled to wrap up for the week on Wednesday and be out until March 24. So House Republicans want to pass their bill and leave town, forcing Senate Democrats to go along quickly or face a shutdown. With Republican Sen. Rand Paul expected to vote against the bill, as many as eight Senate Democratic votes could be needed to pass it.

Even if the continuing resolution is passed and a shutdown is avoided, congressional budget battles will continue given that Republicans still need to finalize a deal between the House and Senate on their budget blueprint for next year, a key step toward enacting the Trump agenda.

Deficit Tops $1 Trillion in First Five Months of 2025 Fiscal Year

The federal budget deficit was $308 billion during the month of February, according to the latest monthly estimate from the Congressional Budget Office.

That brings the total deficit for the first five months of the 2025 fiscal year to $1.1 trillion, which is $319 billion larger than the budget gap recorded in the first five months of the 2024 fiscal year.

Receipts rose 2% ($37 billion) in February 2025 relative to a year ago, but outlays grew significantly more, rising 7% ($200 billion).

As often happens, the change in the deficit was affected by shifts in the calendar from year to year. If the calendar had been the same, the five-month deficit would have been a bit smaller at $1.06 trillion, reducing the year-over-year increase to $163 billion.

Number of the Day: 83%

Secretary of State Marco Rubio announced Monday that 83% of the programs at the U.S. Agency for International Development (USAID) are being cancelled. "The 5200 contracts that are now cancelled spent tens of billions of dollars in ways that did not serve, (and in some cases even harmed), the core national interests of the United States," Rubio wrote. "In consultation with Congress, we intend for the remaining 18% of programs we are keeping (approximately 1000) to now be administered more effectively under the State Department. Thank you to DOGE and our hardworking staff who worked very long hours to achieve this overdue and historic reform."

Quote of the Day

"I don't think we have watchdog agencies anymore. The inspector generals are gone. The head of the Office of Government Ethics is gone. I'm gone. The independent watchdogs who are working on behalf of the American taxpayers, on behalf of military veterans, they've been pushed out. Independence, accountability, a safe place for federal government employee whistleblowers to come to and know that they'll be respected and protected - that's gone."

− Hampton Dellinger, who led the Office of Special Counsel for one year before being dismissed by President Donald Trump in the first weeks of his new administration, speaking to CBS News's "60 Minutes" on Sunday.

An independent federal agency with investigative and prosecutorial powers, the primary mission of the OSC (which has no connection to the office of the same name that prosecuted Trump during his first administration) is "to safeguard the merit system by protecting federal employees and applicants from prohibited personnel practices ... especially reprisal for whistleblowing," the agency's website says.

Like the inspectors general also dismissed by Trump, Dellinger said the role of the Office of Special Counsel is essentially apolitical - a posture that may no longer be possible to maintain. "My job ... was not partisan at all," he told CBS. "And my track record I will stand on as someone who has played it by the book. I'm not looking to promote a president's agenda or thwart it. I'm just trying to make sure the laws are followed."

Fiscal News Roundup

• GOP-Led Congress Races to Avert Government Shutdown Ahead of Friday Deadline – NBC News
• GOP Funding Patch Boosts Defense and Deportations, Cuts Other Programs – Politico
• Trump Predicts No Shutdown as Congress Faces Spending Deadline This Week – Roll Call
• House Democrats Whip "NO" on GOP Plan to Avoid Government Shutdown – Axios
• Who Are Johnson's Remaining GOP Holdouts on the Spending Bill? – Politico
• House GOP Conservatives Make Plea to 'Hesistant' Moderates on Medicaid Changes – Politico
• House Republicans Stew Over Senate Budget Delays – Politico
• Trump 'an Agent of Chaos and Confusion,' Economists Warn - but a U.S. Recession Isn't in the Cards Yet – CNBC
• Canada Slaps Electricity Tariffs on New York, Minnesota, Michigan – The Hill
• Trump's Call to Scrap 'Horrible' Chip Program Spreads Panic – New York Times
• House Republican Support Grows for Keeping Clean Energy Tax Breaks – Politico
• SALT Cap Increase Gets Boost From House Freedom Caucus Leader – Bloomberg
• Stalled Audits and a Skeleton Staff: Inside Trump's War on the IRS – New York Times
• Over Texts and 'Eyeball to Eyeball,' Republicans Succeed in Persuading Musk. But Democrats Hit Dead Ends – CNN
• Trump, With More Honey Than Vinegar, Cements an Iron Grip on Republicans – New York Times
• Karl Rove: Trump Claims of DOGE 'Fraud' Discoveries Will Backfire – The Hill
• Here's Why Banks Don't Want the CFPB to Disappear – CNBC
• Wealthy Colleges Fight to Protect Their Riches From Taxation – Bloomberg

Views and Analysis

• Cracks Are Forming in America's Economy. Trump Is a Big Reason Why – Daniel Goldman, CNN
• Wait, So Are We Really Headed for a Recession? – Alicia Wallace, CNN
• Recession Fears Are Being Blown Out of Proportion. Worry About Inflation Instead – Bryan Mena, CNN
• Nail-Biter Spending Vote Could Hinge on Trump-District Democrats – Mike Lillis and Aris Folley, The Hill
• Will Dems Pick Up Their Sword? – Josh Marshall, Talking Points Memo
• The Real "Stagflation" Risk: No Help From Washington – Neil Irwin and Courtenay Brown, Axios
• Trump's Recession Comment Betrays a Dicey Tariff Pitch – Aaron Blake, Washington Post
• Trump: Learn to 'Shut Up' on Egg Prices and Love the Recession – Margaret Hartmann, New York
• This Is Who Loses in a Trade War – Karen Karniol-Tambour, New York Times
• Trump's Dealmaking Is All About Him – Timothy L. O'Brien, Bloomberg
• Fact Check: What Trump Doesn't Mention About Canada's Dairy Tariffs – Daniel Dale, CNN
• We're Members of the House Freedom Caucus. The US Must Choose: Either $20 Trillion in Debt or Medicaid Reform – Reps. Eric Burlison, Chip Roy and Andy Harris, Fox News
• Trump Rips Up the Government's Agreement With Its Workers – Harold Meyerson, American Prospect
• The Fool's Gold of a Crypto Reserve – Wall Street Journal Editorial Board
• Some Democrats Endorse Bill Allowing Elon Musk to Create His Own Currency – David Dayen, American Prospect
• The Fed's Fixation on a 2% Inflation Target Is Risky – Mohamed A. El-Erian, Bloomberg
• House Spending Cuts Would Not Be Largest in History – Committee for a Responsible Federal Budget
• How Do We Defend Science? – Sarah Jones, New York