What to Know in Washington: Trump Drops Agenda for Probe Fight

Donald Trump’s dramatic decision to blow up infrastructure negotiations amid swirling talk of impeachment revealed a president willing to abandon the remainder of his first-term legislative agenda for a political brawl.

Trump stormed out of talks with Democrats yesterday, saying he wouldn’t negotiate with leaders who hours earlier accused him of a “cover-up” to evade probes into his personal conduct and finances. The drama — which Democrats painted as a premeditated stunt — was the latest display of Washington’s personal and partisan division.

In threatening to set aside work on issues of broad concern to American citizens — including crumbling highways and skyrocketing drug prices — the president allowed his critics to say he’s put his own political fortunes ahead of the nation’s business. The display unnerved even some of his closest congressional allies.

The move also seems likely to effect negotiations to raise budget caps and avoid severe, automatic cuts to federal spending in December. Still, a White House official said Trump is still willing to negotiate a budget agreement, even if he abandons other talks.

Trump is also counting on House Democrats to approve the new trade deal his team negotiated to replace NAFTA — the United States-Mexico-Canada Agreement. But the president ultimately saw greater political advantage in picking a fight.

“I understand his frustration, but it’s not a sustainable position,” said Sen. Lindsey Graham (R-S.C.), who has become one of Trump’s biggest backers on Capitol Hill. “The party that’s seen that they don’t want to govern at all is going to be in real trouble.”

For Trump, the infrastructure negotiations he abandoned offered a chance to demonstrate pragmatism and break from Republican anti-government orthodoxy.
Democrats, meanwhile, appeared eager to show they sought legislative accomplishments and not just unbending opposition to the president and his agenda. They hoped to exploit Trump’s affinity for big construction projects and one-on-one deal-making.

That opportunity was lost when Trump left yesterday’s meeting and proceeded to the White House Rose Garden to complain about Special Counsel Robert Mueller’s probe and those launched by House Democrats. Read more from Justin Sink.

Photographer: Sarah Silbiger/Bloomberg
Trump at the White House on Wednesday.

Happening on the Hill

Infrastructure Bill Now ‘Hopeless’: Advocates for restoring U.S. roads, bridges and other public works pledged to keep pushing for an initiative after the blow-up, but many said it effectively ends the plan’s chances in his first term. “As of today, it’s hopeless,’’ said Ray LaHood, a Republican and former transportation secretary under President Barack Obama, who promotes infrastructure funding through the Building America’s Future coalition. “This is a very sad day for America.’’

Groups representing businesses, labor unions, construction workers and equipment manufactures released statements expressing their disappointment, but suggested there was still hope of accomplishing something before the 2020 election. Mark Niquette rounds up the reactions.

House, Senate Weigh Gold Star Tax Fix: Senate Finance Committee Chairman Chuck Grassley (R-Iowa) said yesterday he’s open to the House’s fix to a 2017 tax law provision that imposed higher taxes on survivor benefits for military families. Lawmakers in both chambers have raced to shield survivors from an error in the 2017 tax overhaul that imposes taxes on their survivor benefits up to rates of 37%, rather than 12% to 15%. The Senate passed legislation by unanimous consent on Tuesday that undoes the changes for military families.

But a broader fix is in the works in the House. Ways and Means Committee Chairman Richard Neal (D-Mass.) has attached to a comprehensive retirement savings bill on the House floor today a provision that undoes all the changes to the “kiddie tax”—special rules that apply to the net unearned income of certain children— made by the 2017 tax overhaul. The provision not only includes protection for Gold Star families but would provide relief for survivors of first responders as well. Read more from Robert Lee.

• Read more: How Washington Made a Mess Out of Retirement Savings

Temporary Tax Breaks on To-Do List: The leaders of Congress’ tax-writing committees are discussing temporary tax breaks known as extenders and plan to revisit the expired provisions, Neal said yesterday. Neal and Grassley have discussed the possibility of taking tax breaks that would expire at the end of 2019 and “doing them now,” which would avoid an end-of-the-year battle, Neal said. “I did mention that I was very interested in expanding the earned income tax credit,” Neal said.

The discussions come as Grassley and Finance Committee ranking member Ron Wyden (D-Ore.) have formed task forces to examine the utility of the temporary incentives. Read more from Kaustuv Basu and Robert Lee.

Clinton Indictment Lawyer Confirmed as Judge: A former prosecutor and law partner who made a case for indicting Hillary Clinton over her use of an unclassified email server while secretary of state was confirmed yesterday to the federal bench. The Senate voted 55 to 43 to approve Kenneth Bell, a partner at McGuireWoods, for the U.S. District Court for the Western District of North Carolina, which includes Charlotte.

Also confirmed to lifetime district judgeships were District of Utah nominee Howard Nielson, an attorney who took litigation positions opposed to LGBT rights; Eastern District of Missouri nominee Stephen Clark, a former director of an anti-abortion organization; and Carl Nichols, a partner at Wilmer Cutler Pickering Hale & Dorr who’s headed for the District of Columbia. Nichols clerked for conservative Supreme Court Justice Clarence Thomas. Read more from Patrick L. Gregory.

FEC Hacking Response Victim of Partisanship: Partisan deadlock on the four-member Federal Election Commission has hampered the agency’s ability to address foreign interference in U.S. elections, the panel’s chairwoman told House lawmakers. Mandating disclosure to campaign spending groups and naming sponsors of online political ads could help uncover foreign efforts like Russia’s intervention in the 2016 presidential race, said the FEC’s Democratic Chairwoman Ellen Weintraub in written testimony for a House Oversight and Reform subcommitte e hearing yesterday. But she said those efforts have foundered because of partisan disputes on a commission equally divided between Republicans and Democrats. Read more from Kenneth P. Doyle.

Border Funding Fight: An accusation by a Democratic lawmaker that the recent deaths of migrant children in U.S. custody at the Southwest border were an “intentional” result of Trump administration policies drew a pointed rebuke at a heated House Homeland Security Committee hearing yesterday. The exchange, involving acting Homeland Security Secretary Kevin McAleenan and Rep. Lauren Underwood (D-Ill.) during a hearing on the department’s budget, underscored how high tensions are running on the issue and, to Republicans, the hypocrisy of Democrats’ opposition to border wall funding. Read more from Michaela Ross.

Happening on K Street

Hikvision Spends Big on K Street: A Trump administration threat to blacklist Hangzhou Hikvision Digital Technology from using American-made components could have the company turning to its U.S. subsidiary’s K Street allies to plead its case. The potential embargo comes after the Trump administration blocked another Chinese company, Huawei, from buying U.S. technology.

Hikvision USA has three firms actively lobbying on its behalf, including Sidley Austin, which has former Rep. Rick Boucher (D-Va.) on the contract. Burson-Marsteller and Mercury Public Affairs, its other firms, have a global reach, though according to their public disclosure reports, they’re focused in the U.S. Those efforts include targeting officials in Congress and throughout the Trump administration and reaching out to journalists. Read more on the company’s lobbying activity from Megan R. Wilson.

Drugmaker’s Lobby on Trump’s HIV, Kidney Plans: HIV drug manufacturer Gilead Sciences and kidney disease product maker Baxter International found receptive ears at the HHS in 2019, lobbying records show. While keeping down prices on costly drugs remained the top talking point for lobbyists, other issues Trump has recently taken an interest in also appear to be getting increased attention from those with skin in the game.

The Pharmaceutical Research and Manufacturers of America solidly remained the agency’s No. 1 lobbyist to start the year, according to filings analyzed by Bloomberg Law. But Gilead and Baxter both catapulted toward the top of the HHS’ meeting list, increasing their lobbying for the first quarter of 2019. Those increases come directly after the administration vowed to end new HIV infections by 2030 and announced efforts to reduce billions in Medicare spending on dialysis treatment for kidney disease by improving when it’s used. Read more from Madison Alder.

Politics & Elections

Biden’s Unity Theme Resonates: Democrats have called him naive, out of touch, or worse. But at his May 18 kickoff rally in Philadelphia, Joe Biden stood by his insistence that working with Republicans isn’t just possible, it’s the only way to “stop fighting and start fixing” the country. “I know some of the really smart folks say Democrats don’t want to hear about unity. They say Democrats are so angry that the angrier a candidate can be, the better chance he or she has to win the Democratic nomination,” he said, warming up t he crowd. “Well, I don’t believe it. I really don’t.”

For Biden, arguing any differently would be disingenuous: His almost 50-year record of friendships with Republicans won’t allow it. In the face of criticism from within his own party, which watched for eight years as he and President Barack Obama courted Republicans, for the most part fruitlessly, the former vice president is betting his campaign on the hope that voters have a little optimism left. Read more from Jennifer Epstein.

Buttigieg Surges Amid ‘Beto Overload’: Over the past two months, Pete Buttigieg surged from a virtual unknown to the top tier of contenders as Beto O’Rourke slipped down. “I’m hoping that I’m just on Beto overload, but my problem is I really enjoy Mayor Pete,” said one Iowa voter, Kim Sweat. “I don’t feel like he’s digging into a bag and pulling out an answer.”

Although the first votes in the nominating contest won’t be cast until the Iowa caucuses next February, Democrats in the state are already sorting through the field of 23 candidates who want to challenge Trump in 2020. Over a five-day span, Buttigieg and O’Rourke toured through the state, often competing for the same segment of voters, many of whom clearly were weighing the choice between the two men. Read more from Tyler Pager.

What Else to Know Today

Trump to Meet on Farm Trade: Trump’s bid to help American farmers struggling to navigate his trade war with China risks stumbling on a contentious point: market-distorting measures. When the president first tweeted about a plan to buy American crops and ship them to poor countries, he was met with skepticism about its viability given rules set out by the World Trade Organization.

An upcoming proposal is said to include payments to soybean growers of $2 per bushel, and 4 cents per bushel to corn farmers, based on the acreage sowed this year. The White House said it was holding a meeting about the package today. That reported proposal could end up distorting planting decisions as farmers still have to seed plenty of land, agriculture traders and analysts say. Read more from Isis Almeida and Michael Hirtzer.

U.S.-China Trade: The U.S. unilaterally escalated trade tensions and if it wants talks to resume, it needs to correct what it did and show sincerity, according to China’s Ministry of Commerce. “China’s stance on the talks has been clear — if the U.S. wants to resume talks, they should show sincerity and correct their wrong practices,” ministry spokesman Gao Feng said in Beijing today. “Only on a basis of equality and mutual respect can the talks continue.”

The comments are the latest sign that China has no intention of making concessions to the U.S. to restart talks, which collapsed earlier this month. The U.S. blames China for backing out on parts of the deal which were already agreed, while China blames the U.S. for escalating the trade war by announcing further tariffs. Read more.

Mideast Troop Plans: The Pentagon is planning to brief the White House on options to deploy as many as 5,000 American troops to the Middle East amid escalating tensions with Iran, a U.S. official said yesterday. The official, who was granted anonymity to discuss a national security matter, said that the deployment, if it went forward, would be for defensive purposes. The official added that General Joseph Dunford, the chairman of the Joint Chiefs of Staff, will take part in the briefing, and that Acting Defense Secretary Patrick Shanahan may be involved as well.

Word that the administration was considering sending more troops to the region came as concerns rise about the risk of conflict between the U.S. and the Tehran government. Read more from John Harney and Tony Capaccio.

Trump Effort to Block Subpoena Rejected: A federal judge in New York rejected Trump’s request to keep his banks from producing financial records to lawmakers, handing House Democrats a second convincing courtroom win this week in their efforts to delve into the president’s finances. U.S. District Judge Edgardo Ramos, ruling from the bench yesterday, denied Trump’s request for a preliminary injunction, saying that while the president, his family and his business would suffer irreparable harm from disclosure of the records, they were “unlikely to succeed on the merits” with their argument that the congressional subpoenas are improper. Read more from Bob Van Voris and Chris Dolmetsch.

SALT Cap Effort Eroded by Data: It was always a long-shot, but a quixotic lawsuit by four northeastern states to squelch the Trump tax law’s cap on state and local tax deductions is getting undermined by a repetitive drip of strong economic data. New York, Connecticut, Maryland and New Jersey will get their first hearing in June on a last-gasp attempt to kill one of the most controversial provisions of the 2017 tax law. To do so, their attorneys general are relying on early-1900s news clippings and Civil War-era congressional debate over whether to even have an income tax.

The case, being heard in U.S. District Court in New York, is a mostly forgotten bid started last July to nullify the $10,000 cap on the amount of state and local income and property taxes that Americans can deduct from their federal taxes. Read more from Joe Light.

Mnuchin Delays Harriet Tubman $20 Bill Decision: Treasury Secretary Steven Mnuchin said that a redesigned $20 bill would not be released until 2028, essentially punting a decision to put Harriet Tubman on the note to a future administration. “The imagery feature will not be an issue that comes up until most likely 2026,” Mnuchin told the House Financial Services Committee yesterday in response to questions from Rep. Ayanna Pressley (D-Mass.). Asked whether he supported Tubman being on the $20 bill, Mnuchin replied that he’d “made no decision as it relates to that and that decision won’t be made, and as I said, it won’t most likely be until 2026.”

“It’s not a decision that is likely to come until way past my term, even if I serve the second term for the president. So I am not focused on that at the moment,” Mnuchin said. Trump’s first term ends in January of 2021. If reelected, a second and final term would end in January of 2025. Read more from Chelsea Mes and John Harney.

To contact the reporter on this story: Zachary Sherwood in Washington at zsherwood@bgov.com

To contact the editors responsible for this story: Giuseppe Macri at gmacri@bgov.com; Loren Duggan at lduggan@bgov.com