McCarthy’s Deal Risks Shutdown; Biden Announces More Ukraine Aid

A new budget-cutting deal Speaker Kevin McCarthy struck with ultra-conservative rebels risks a standoff with President Joe Biden and congressional Democrats and a US government shutdown in October.

Faced with a rebellion on his right flank, McCarthy (R-Calif.) agreed this week to push through the House spending cuts $120 billion deeper than caps set barely two weeks ago. The spending caps were the centerpiece of a hard-fought compromise the GOP leader reached with the White House to avert a catastrophic debt default.

Bill Clark/CQ-Roll Call, Inc via Getty Images

House Majority Leader Steve Scalise (R-La.) left, and Speaker McCarthy (R-Calif.) at the Capitol today.

Democrats balked at McCarthy’s move to abandon the deal.

“If we disregard the law of the land, we all but guarantee a government shutdown,” Rep. Rosa DeLauro (Conn.), the top Democrat on the Appropriations Committee, said.

The $120 billion cut proposed by Republicans would slightly slow the economy in a period when it’s already vulnerable, modestly increasing the risk that it tips into recession.

House Appropriations Chairwoman Kay Granger (R-Texas) this week dismissed the idea of a shutdown and defended McCarthy’s agreement with conservatives, saying the debt deal set “a ceiling, not a floor” for spending.

The House GOP plan would fund discretionary government accounts at $1.47 trillion next year rather than the $1.59 trillion in the debt deal, according to a copy of the plan.

“This will all come to a head in the appropriations process,” House Majority Leader Steve Scalise (R-La.) said.

McCarthy shrugged off any worries about the consequences of his new deal with conservatives. If the Senate can pass its own bills, he said, then both sides will work out their differences.

“You’ve got to be more positive,” McCarthy said. Read more

More on the Budget

• Spending Allocations: Financial services programs, federal lands, and foreign aid face the biggest cuts in House Republicans’ plan to fund the government, according to an outline by the House Appropriations Committee. Read more

• MilCon Cuts: The House Appropriations Committee approved on a party-line vote its Military Construction-VA annual funding bill that would cut federal spending on military construction. Read more

• Cyber Funds: The House Armed Services Committee’s cyber, information technologies and innovation panel approved its portion of the annual defense policy bill on Tuesday. Read more

US Announces $325 Million in Stingers, Bradleys for Ukraine

Alex Wong/Getty Images

President Joe Biden meets with Secretary General of the North Atlantic Treaty Organization (NATO) Jens Stoltenberg in the White House today.

The Biden administration announced a new $325 million military assistance package for Ukraine on Tuesday, including Bradley fighting vehicles, Stryker armored personnel carriers and Javelin anti-armor systems.

The weapons taken from US stockpiles will help Ukraine replace vehicles and munitions that it’s losing as it presses ahead with a counteroffensive meant to expel Russian forces from territory seized following the invasion in February of last year. Also included were 155mm and 105mm artillery rounds, TOW missiles, munitions for surface-to-air missile systems and communications gear.

The aid marked the 40th time the administration has tapped current US inventory under what’s known as Presidential Drawdown Authority. The Biden administration is eager to keep the weapons flowing to Ukraine despite threats by some Republicans to restrict the flow of money.

“The Ukrainians have launched the offensive, they are making advances, they are gaining ground,” NATO Secretary General Jens Stoltenberg said Tuesday during a visit to Washington. “This is still early days, but what we all know is the more land the Ukrainians are able to liberate, the stronger their hand will be at the negotiation table.” Read more

• Streamline Sales: The Pentagon will try to streamline the laborious process for arms sales abroad, officials said, starting with help to allies in crafting their weapons wish lists. The paperwork for such Foreign Military Sales can stretch for months, if not years. Read more

What Else to Know Today

Trump Arrives in Florida Court to Face Federal Records Charges

Donald Trump arrived in a Miami court for his arraignment on historic charges accusing him of mishandling top-secret government documents and conspiring to obstruct justice as the US sought to recover them — the first time a former president has been indicted in a federal case.

Labor Chief Visits California to Break Deadlock in Port Talks

Acting Labor Secretary Julie Su is in California for talks with West Coast port employers and the dockworkers’ union in an effort to break an impasse in a long-running contract negotiation.

I-95 Collapse to Lift Prices of East Coast Goods, Buttigieg Says

Transportation Secretary Pete Buttigieg said there’s “no question” the collapse of a section of Interstate 95 in northeastern Philadelphia will result in higher prices of goods on the East Coast.

US Inflation Slows, Giving Room for Fed to Pause Rate Hikes

US inflation slowed in May, supporting the case for Federal Reserve officials to pause their run of interest-rate hikes this week.

US Consumer Watchdog Warns About A.I.’s Impact on Financial System

The top US consumer watchdog is warning that the unchecked use of artificial intelligence tools by financial firms will have pernicious impacts on the housing market and beyond.

Texas Seen Breaking Power-Demand Record Amid Intense Heat

Texas’s fragile power grid will be pushed to the brink in coming days as unusually hot weather grips the second-largest US state.

To contact the reporter on this story: Andrew Small at asmall@bgov.com

To contact the editors responsible for this story: Katrice Eborn at keborn@bgov.com; Giuseppe Macri at gmacri@bgov.com; Kayla Sharpe at ksharpe@bloombergindustry.com