Morning Report — It's bears vs. bulls in House budget debate

In today’s issue:  

• Gear up for the budget battle
• Under scrutiny, Musk defends DOGE
• Netanyahu threatens fragile Gaza ceasefire 
• Zelensky floats territory swap

It's bears vs. bulls in House budget debate

Budget, taxes and tariffs: These are some of the buzzwords on Capitol Hill this week as lawmakers tackle their legislative priorities while keeping pace with the Trump administration's breakneck speed of executive action.

House GOP leaders are striking a bullish tone on budget negotiations, despite weeks of delays as the fractious conference struggles to unify around “one big, beautiful bill” to advance President Trump’s legislative agenda. Spurred on by Senate GOP plans to release their own, two-bill budget plan this week, Speaker Mike Johnson (R-La.) said Tuesday he has had “very productive” conversations this week about his new fiscal blueprint.

But skepticism is running high among House Republicans that they can advance a framework by the end of the week. Johnson’s plan, which would encompass a massive party-line tax, border and energy bill, would increase spending cuts but also leave less room for sweeping tax policies. House Budget Committee Chair Jodey Arrington (R-Texas) announced his panel will meet tomorrow to mark up the draft.

The framework Arrington outlined includes a $1.5 trillion floor for spending cuts with a $2 trillion target, a structure meant to give committees flexibility when crafting the package, writes The Hill’s Mychael Schnell reports. The blueprint also includes a $4.5 trillion cap on the deficit impact of the Republicans’ plan to extend Trump’s 2017 tax cuts. Because most of those cuts will reduce federal revenues, they add to the federal debt. One source said there was “some degree of understanding” that if the $2 trillion in cuts is not achieved, the deficit increase number could decrease.

With key members still squabbling about the numbers to put in the budget resolution, The Hill’s Emily Brooks and Mychael Schnell report there is broad skepticism that the committee will actually advance a House bill.

“It’s pretty unlikely,” one House GOP member said of the budget resolution advancing this week, adding that “there’s a lot of frustration” across the conference directed at the fiscal hawks seeking to secure a higher baseline for budget cuts. 

▪ Politico: The House Freedom Caucus plans to throw another tax plan into the mix. It would follow a smaller bill focused on the border and energy and represent a separate track from the one proposed by House GOP leadership.

▪ The Hill: Republicans are considering doing away with one of Wall Street’s favorite tax breaks at the encouragement of Trump. The tax break on carried interest allows the managers of investment funds like private equity firms and hedge funds to count their income as capital gains and thereby have it be subject to a lower tax rate. 

As House Republicans struggle to get their ducks in a row, House Democrats are vowing to play hardball in the partisan battle over government spending, The Hill’s Mike Lillis reports. They’re driving to extract steep concessions from Republicans who will need bipartisan buy-in to prevent a shutdown next month. Democratic leaders are warning that they won’t support a funding package that includes steep cuts to their favored programs. The early maneuvering sets up a game of high-stakes chicken as both sides race to keep the government running beyond March 14. 

“I’m not a cheap date,” said Rep. Jim McGovern (D-Mass.). “They want to run and tell everybody that they have this huge mandate — that they can do whatever the hell they want to do. Well, if that's the case then they should put their mandate-pants on and do whatever the hell they want to do. But if you want us to be helpful, then you have to engage us. And we're not going to just be there to bail you out.” 

The threats have teeth, since House Republicans haven’t ironed out their differences over spending levels. 

Those dynamics mean that Democratic votes will be needed to get a federal spending bill through Congress and on to Trump’s desk — leverage Democrats said they intend to optimize to the greatest degree possible. 

“For us to support a deal we have to really rein in these rogue billionaires, because I think it is outrageous what’s going on now,” said Rep. Juan Vargas (D-Calif.). “The price that the Republicans have to pay here is going to be very, very high — to bring some sanity back to government — because I think at the moment it’s insane, all of these executive orders, all of these illegalities.”

▪ The Hill: A coalition of 30 House Democrats is asking Republicans and Democrats on the Senate Judiciary Committee to oppose Kash Patel’s nomination to lead the FBI.

▪ New York magazine: The Senate will vote today on the confirmations of former Rep. Tulsi Gabbard (Hawaii) as director of national intelligence and Robert F. Kennedy Jr. as secretary of Health and Human Services.

▪ The Hill: Democrats on Tuesday called on Trump to retract tariffs on Canada and Mexico before they are implemented.

SMART TAKE with NewsNation’s BLAKE BURMAN: 

Trump, Musk, Vance, DOGE, USAID.

You’ve likely heard references to those quite a few times recently, but how about this one: the American dream.  

Americans trying to buy a home right now face a roughly 7 percent interest rate on a 30-year mortgage. At this same point in the first Trump presidency, it was around 4.2 percent.

While several factors determine a prospective buyer’s rate, Federal Reserve Chair Jerome Powell made clear while testifying on Capitol Hill on Tuesday there are no plans at the moment to lower interest rates.

“Once we lower rates and rates return to a lower level, mortgage rates will come down. I don’t know when that will happen,” he said. “And even when it does happen, we’re still going to have a housing shortage in many places.”

Interest rates higher for longer is something we all should probably get used to, and something President Trump will have to deal with for the first time. 

Burman hosts “The Hill” weeknights, 6p/5c on NewsNation. 

3 THINGS TO KNOW TODAY:

▪ Trump ally Steve Bannon, a former top White House adviser and now a conservative podcaster, pleaded guilty Tuesday to felony fraud in New York for helping to defraud donors who were giving money to build a wall at the southern U.S. border. As part of a plea deal, he will serve no jail time.

▪ Federal Reserve Chair Jerome Powell will testify to the House today after telling a Senate panel on Tuesday that the economy is strong overall, the central bank is patient about interest rates and it has no role in devising trade policies. 

▪ The Hill’s third in a three-part “Future of Energy” series explores why red states are pulling ahead in America's clean energy race, reported by Sharon Udasin and Saul Elbein. Catch up on the first report in the series HERE and the second HERE.

LEADING THE DAY 

© The Associated Press | Alex Brandon

Trump adviser Elon Musk on Tuesday defended federal cost-cutting initiatives he and his Department of Government Efficiency (DOGE) team have launched since Jan. 20, arguing they have uncovered a federal bureaucracy rife with cheats and corruption. 

Standing next to a seated Trump in the Oval Office, the billionaire suggested his group is being transparent amid lawsuits arguing the opposite. He provided no evidence of federal corruption or DOGE steps to refer suspected fraud to the appropriate authorities. Musk and his team have cited (on social media platform X) tallies of potential taxpayer savings after canceling various federal contracts and Musk has said the target is to cut between $1 trillion to $2 trillion from the budget, considered a challenge based on current discretionary spending.