SHUTDOWN SHOWDOWN: While things may have improved marginally over the past 24 hours for prospects of passage of the CR in the House, Speaker Paul Ryan still intends to move forward with a vote later today but his hold on defense hawks and the Freedom Caucus is tenuous. We think the Freedom Caucus will extract some concessions from Ryan while President Trump will continue his charm offensive to garner their support. The fight will come down to the Senate tomorrow where Majority Leader Mitch McConnell currently needs nine Democrats given opposition by Senator Lindsey Graham (R-SC) - and the Democrats in that chamber are showing no signs of caving. Two things to watch today that will impact the Senate vote: the Democrat vote count in the House should Ryan secure enough Republican votes and mounting pressure from the left and immigration advocates on Senate Democrats to hold out for deal.
IT KEEPS GETTING WORSE: In the past few days, Republican’s were on the receiving end of additional wake up calls on two political fronts. In Minnesota, former Republican Governor Tim Pawlenty backed out of a Senate run against newly-minted Democrat Senator Tina Smith (formerly held by Al Franken) dampening the chances of recapturing that seat. Add Pawlenty to the list of potential candidates who have begged off running in 2018 and now according to Politico "Republican leaders have failed to secure their top-choice candidate in eight of the 10 Senate races in states that Trump won in 2016." And, in Speaker Paul Ryan’s home state of Wisconsin, a state Senate seat that’s been in the Republican column for over 17 years (Trump won the district in 2016 by 17 points) changed hands with Democrat Senator-elect Patty Schnachtner propelled to victory in a special election sounding alarm bells with Republican pols in both Madison and Washington.
MISCELLANEOUS TARIFF BILL (MTB): Maybe, just maybe there is a semblance of common sense left wandering the halls of Congress. A tariff bill has not been passed by Congress since the last bill passed in 2010 expired in 2012. The MTB aims to “eliminate duties on imported raw materials needed for production” not easily found in the U.S. The legislation temporarily modifies rates of duty where inconsistencies in the U.S. tariff code remain and will end up saving companies millions a year by making them more competitive in the global economy. According to the International Trade Commission, over 1,700 petitions were eligible for the break in tariffs after hundreds of applications were vetted. With passage in the House yesterday, the Senate is under pressure to advance the legislation in the next few days.
ICYMI: If there is a government shutdown, guess who is exempt? Yup, Special Counsel Robert Mueller. According to DoJ: "All employees with the Special Counsel’s Office are considered exempt and would continue their operations in the case of a lapse in appropriations."
NET NEUTRALITY ACTIVITY IN CONGRESS AND THE COURTS (T, VZ, CMCSA): The latest from our Senior Telecom Analyst Paul Glenchur as he writes on the FCC's December order repealing common carrier net neutrality rules potentially surviving upcoming attacks in Congress and the courts. Read his note here.
LONG TERM PENTAGON BUDGET GROWTH TO BE STUNTED; 2018 WILL BE HIGH WATER MARK FOR DEFENSE SPENDING: Our Senior Defense Analyst Emo Gardner writes Pentagon spending will end up at ~$665B in FY18, +9% year/year and FY19 will be flat but we see real trouble beginning in FY20. Read his note here.
UKRAINE: DEFENSE TO OFFENSE: Our Senior Geopolitical advisor General Dan Christman writes on recent strategic moves by the U.S. in the Ukraine. Read his piece here.
WILL THE JUSTICE DEPARTMENT REVISIT COMCAST-NBC UNIVERSAL? (CMCSA, T, TWX): Our Senior Telecom Analyst Paul Glenchur writes that despite political pressure to extend DOJ merger conditions, Comcast should avoid a decree modification or a breakup effort. Read his piece here.
