The situation is very fast moving, and we don't know much more than what you know. "We chatted with multiple sources last night, and no one seems to know the way out," writes Playbook. Ditto.

We won't rehearse the events of the past 24 hours: an unpleasant but not-terrible CR was set to pass to avert a government shutdown. Given the decisions made in September, and the fact that in the lame duck Democrats still have a majority in the Senate and the White House, it seemed like the least-bad option on the table. Then Elon tweeted, the bill lost votes, and then Donald Trump and JD Vance put out a statement essentially sticking the last knife in the back of the CR.

The Trump-Vance statement, posted on X, naturally, is worth parsing word-by-word with the eyes of a kremlinologist. It sets out a number of positions, priorities, red lines, yellow lines, and what negotiation professionals call BATNAs.

First, the priority: the debt ceiling. What Trump-Vance clearly want, first and foremost, is an increase in the debt ceiling that guarantees they won't have a new debt ceiling fight for the next four years. As we were writing this, President-elect Trump even came out in favor of abolishing the debt ceiling. This is, in fact, very good policy, and would be a very good "Nixon to China" thing for Trump to do, giving cover to conservatives for voting to abolish the debt ceiling.

Second, the yellow lines: there's a specific list of things highlighted as things that should not be in the CR, although it doesn't state outright that they cannot be in it. "sweetheart provisions for government censors" (probably the funding for the State Department's Global Engagement Center. "The bill would make it easier to hide the records of the corrupt January 6 committee." And finally, "This bill would also give Congress a pay increase while many Americans are struggling this Christmas." (So, not a no on pay increases for Congress (also good policy), but a no on a pay increase right now.)

Thirdly, the statement goes on to use say that Congress should pass a "streamlined spending bill." Note that "streamlined" doesn't mean "clean."

Fourthly, the statement approves of putting farm support, disaster relief, and "setting our country up for success in 2025" (a very broad category) in the CR.

Fifthly, the spending bill should be "WITHOUT DEMOCRAT GIVEAWAYS" (caps in the original).

And sixthly, the statement sets out a negotiating position essentially daring the Democrats to shut down the government, saying that if the government does get shut down, it will be blamed on "Schumer and Biden," not Republicans and certainly not Trump.

This is actually a lot, a much more complex position than simply a "clean CR."

We see two possible outcomes.

First, President-elect Trump has made it clear that his priority here is getting a debt ceiling increase, or even abolition, because he doesn't want to have to deal with the debt ceiling during his term. There's a universe where something like the CR that just died, except with the most controversial stuff removed, but with the debt ceiling increase, passes, and everyone can go home for Christmas. That would require the Democrats to play ball, and they're understandably not inclined, and it would probably require time.

Second, perhaps there's no 4D chess. Perhaps it's what it looks like on the tin. Perhaps the President-elect is happy to have a government shutdown, since it won't be happening during his Presidency, and he can reap the political rewards of "fixing it" as he gets into office.

Policy News You Need To Know

#Entitlements — You won't hear e-right influencers talk about this. The so-called Social Security Fairness Act is set for final passage today after no fewer than 73 senators voted for it. This bill changes the formula used to calculate government workers' benefits. Its estimated cost is $195 billion. It would also make the so-called Social Security Trust Fund expire six months sooner (the "Trust Fund," of course, is an accounting fiction, but people are supposed to take it seriously in politics). That sounds like exactly like the sort of stuff that the combination of populist rabble-rousing and green-eyeshade watchdogging brought by Elon and Vivek's DOGE should stop. But not a peep. Meanwhile, this is also an example of "the social contract," a concept named after a popular French meme which we have talked about on occasion: how as society ages, the socioeconomic system becomes more and more about robbing the young to fund giveaways to the olds. It's easy to vote against some unpopular bit of pork-barrel spending. It's harder to vote against checks for millions of seniors who are already doing quite well on government retirement benefits and basic Social Security.

#MAHA #Life — Politico reports that Sen. Hawley said, after meeting with RJK, Jr., "he indicated to me he wanted to support the president’s pro-life agenda."

#Chyna — Rep. John Moolenaar is urging the International Trade Commission to ban imports of certain screens from the Chinese firm BOE after the company was found to be infringing patents from Samsung.

#TikTok — We thought the fate of the TikTok divestment bill sealed, but the Supreme Court has agreed to an emergency hearing on the app's fate, which will take place on January 10. The law is set to take effect on January 19.

#Energy — Very good paper from Cato's Travis Fisher and Joshua Loucks on how to deregulate to get more electricity to be able to run AI.

#Immigration #Work — Important from CIS: "Two new reports from the Center for Immigration Studies reveal a significant and long-term decline in labor force participation among U.S. born working-age men, particularly those without a bachelor’s degree. The reports emphasize the untapped labor potential in the United States, with millions of U.S.-born adults remaining on the economic sidelines, challenging the argument that a shortage of workers necessitates reliance on illegal immigration." Even though this fact has been public knowledge for a long time, the fact that men keep dropping out of the labor force year after year is never brought into discussions of the economic impacts of immigration restrictionism.

#Immigration — DHS published new H-1B rules aimed at helping the startup ecosystem, such as allowing company founders to self-petition, exempting researchers from the H-1B lottery, and more. Here's the outline. These seem like good changes at the margin, and who knows whether the Trump Administration will retain them, but the bigger problem is that the H-1B program is fundamentally broken, with the overwhelming majority of the spots going to outsourcing firms. All those who support high-skilled immigration to the US should support a total overhaul of the program.

#TaxPolicy — The good folks at the Tax Foundation have an overview of changes to state taxes that are set to take effect on Jan 1, 2025.