New US House speaker faces early test on Israel, government funding

By David Morgan

WASHINGTON (Reuters) -Republican Mike Johnson, the untried speaker of the U.S. House of Representatives, vowed on Wednesday to push forward with a $14.3 billion Israel aid bill, despite advice by nonpartisan researchers that his plan to offset the cost would actually increase the federal deficit.

In his first real test as Congress's top Republican, the Louisiana lawmaker will also try to pass three 2024 spending bills this week, as he tries to unify his splintered House majority around a temporary funding measure to address a potential government shutdown deadline on Nov. 17.

Johnson told Senate Republicans over lunch that he wants a continuing resolution, or "CR," that would fund the government to Jan. 15 to give the House time to pass all 12 full-year 2024 spending bills. Senators said he held out the possibility of extending temporary funding to April, with a 1% across-the-board spending cut as an incentive, should further time be needed.

"Jan. 15 may not be enough time to get it all done," Republican Senator John Barrasso told reporters. "The idea was, if they're not all done then, we may need to do another continuing resolution. But in that process, you're getting all the appropriation bills passed."

Johnson needs to navigate the same tensions between House Republican hardliners and centrists that led to the historic ouster of Johnson's predecessor Kevin McCarthy last month. Those tensions are already threatening to undermine support for this week's appropriations bills, which would fund congressional operations; transportation, housing and urban development; and the Department of the Interior and the environment through Sept. 30.

Hoping to showcase fiscal restraint as a Republican priority, Johnson intends to pay for the Israeli aid bill with money Democrats allocated to the Internal Revenue Service, a favorite target for partisan Republican criticism.

But cuts to the IRS budget would diminish the effectiveness of the agency's tax-collecting operations.

A report by the nonpartisan Congressional Budget Office said the end result would be a $27 billion loss in revenues and a $12.5 billion addition to the federal deficit over the coming decade. The U.S. Treasury estimates a much bigger loss of revenues, to the tune of $90 billion, according to a spokesman.

Johnson brushed aside the CBO report, telling reporters: "Only in Washington, when you cut spending, do they call it an increase in the deficit."

A House vote on the Israel aid measure is expected on Thursday.

SENATE DEMOCRATS REJECT PITCH

But Senate Majority Leader Chuck Schumer warned that the bill will go nowhere in his Democratic-led chamber. "It's dead before it even is voted on. The speaker should start over," said Schumer.

President Joe Biden has requested a $106 billion packagethat would include aid for Israel and Ukraine and funding to boost competition with China in the Indo-Pacific as well as security along the U.S. border with Mexico.

Johnson told Senate Republicans that he could not pass a bill that includes aid for both Israel and Ukraine, because of differences between rival Republican caucuses.

"He just said over and over again: listen, for me it's just numbers. I cannot do them together,” Republican Senator Josh Hawley recalled the speaker saying.

Johnson said he planned instead to attach Ukraine funding to unspecified provisions to tighten the U.S.-Mexico border.

The Israel aid, the CR and appropriations measures pose an early test of Johnson and his narrow 221-212 majority's ability to agree among themselves and to work with Democrats, who hold the Senate majority and the Oval Office.

"This will be a litmus test," said Representative Ryan Zinke, a Republican who sits on the House committee that sets spending priorities. "There's going to be some groaning and moaning, but I think they'll pass."

The U.S. budget deficit soared to $1.7 trillion in the fiscal year ended Sept. 30, the highest outside the COVID-19 era. Rising interest rates, the high costs of the Social Security and Medicare programs and the lingering effects of a 2017 tax cut have pushed the nation's debt over $33 trillion.

Hardliners are pressing for spending cuts and policy wins as part of any CR.

Former Speaker McCarthy was ousted by a small band of hardliners after agreeing to pass a CR with Democratic support. The intraparty brawl that followed has left many Republicans wary of picking another shutdown fight.

"We just wasted three weeks with whatever this last goat rodeo was," said Representative Kelly Armstrong of South Dakota. "It's very difficult for members in tough districts to go home and explain any reason for a shutdown right now."

That raises the likelihood of Johnson ultimately opting for a "clean" CR without conditions or spending cuts.

(Reporting by David Morgan; Additional reporting by David Lawder, Katharine Jackson and Patricia Zengerle; Editing by Scott Malone, Alistair Bell and Jonathan Oatis)