The Hill's Morning Report — White House changes tune, seeks to avoid shutdown | Lawmakers negotiate last-minute spending deal | Senate passes criminal justice reform, handing Trump a win | Judge to Flynn: ‘You sold your country out’ | Trump charity dissolves amid allegations of ‘shocking pattern of illegality’ | McSally to fill McCain’s seat through 2020 | Trump steps up attacks on Fed ahead of key rates announcement today | Dem feud over Israel could impact shutdown negotiations | Trump bans bump stocks

© Getty Images   Welcome to The Hill's Morning Report and happy Wednesday! Our newsletter gets you up to speed on the most important developments in politics and policy, plus trends to watch, co-created by Jonathan Easley and Alexis Simendinger. (CLICK HERE to subscribe!) On Twitter, find us at @joneasley and @asimendinger   President Trump blinked first in the shutdown standoff with Congress.   The president initially said he'd be happy to shut the government down unless lawmakers send him a government funding package that includes $5 billion for a border wall. About a quarter of the government will shut down on Friday at midnight unless Congress passes a spending bill that Trump signs into law.   On Tuesday, the White House backed away from the brink, with press secretary Sarah Huckabee Sanders saying the administration wants to avoid a shutdown and that there are "other ways to get to that $5 billion."   The White House is asking federal agencies to see if there is already money that can be put toward the border wall, although it's unclear how this would work. Still, the plan might give Trump enough cover to backtrack and sign a spending bill that doesn't give him the full $5 billion.   "There's certainly a number of different funding sources that we've identified that we can use, that we can couple with the money that would be given through congressional appropriations, that would help us get to that $5 billion that the president needs in order to protect our borders." — Sanders   The Hill: Trump retreats on shutdown.   The softer tone coming out of the White House coincided with early-stage spending negotiations on Capitol Hill, although hurdles remain.   Senate Majority Leader Mitch McConnell (R-Ky.) has proposed $1.6 billion for "fencing" and an additional $1 billion for general  border security that could not be used for a wall.   House Democratic Leader Nancy Pelosi (Calif.) and Senate Minority Leader Charles Schumer (D-N.Y.) said they won't budge from their offer of $1.3 billion for border fencing.   Senate Appropriations Committee Chairman Richard Shelby (R-Ala.) is drafting a continuing resolution that would keep the full government open through February, kicking the fight to early next year when Democrats will control the House.   The good news is that the two sides are at least negotiating as the deadline looms, but nothing is certain until Trump signs off. Late Tuesday, the president told reporters "it's too early to say" whether the shutdown can be avoided.   "We'll see what happens." — Trump   The Senate accomplished one bipartisan achievement on Tuesday, passing a criminal justice reform bill that was described by supporters as the largest and most significant such legislation in a generation. The measure passed with 87 votes. Twelve Republicans voted against it.   In the West Wing, it was seen as a significant win for Trump adviser Jared Kushner, a driving force behind the "First Step Act" this year (ABC News).   The bill could come before the House as soon as Thursday, presenting Congress an opportunity to end 2018 on a bipartisan high-note (The Hill).   "I look forward to signing this into law!" Trump tweeted.   LEADING THE DAY INVESTIGATIONS: Trump's former national security adviser Michael Flynn has requested to delay his sentencing until his cooperation with federal prosecutors is fully complete (The Hill).   Flynn has pleaded guilty to lying to the FBI about his contacts with a former Russian ambassador and was scheduled to be sentenced on Tuesday. He has been assisting the special counsel probe, and Robert Mueller told the judge that information Flynn had provided was useful. Mueller recommended a light sentence.   It seemed that recommendation might help Flynn avoid jail time, but on Tuesday, Judge Emmet Sullivan admonished the retired three-star Army general and talked up the seriousness of his crime.   "This is a very serious offense. A high-ranking senior official of the government making false statements to the Federal Bureau of Investigation while on the physical premises of the White House." — Sullivan   Sullivan also noted that Flynn's cooperation with the special counsel helped him escape charges on illegal foreign lobbying for work he'd done on behalf of the Turkish government while advising the president on foreign policy.   "Arguably, that undermines everything this flag over here stands for. Arguably, you sold your country out." — Sullivan   © Twitter   The Associated Press: Judge's rebuke of Flynn upends sentencing, prolongs case.   Also on Tuesday, Flynn's former associate pleaded not guilty to charges he illegally lobbied on behalf of the Turkish government and will appear back in court in February (ABC News).   Democrats are itching to get a crack at Flynn and other current and former administration officials once they take the majority in January.   © Twitter   The New York Times: How far will these Democrats go in investigating the White House?   More from the investigations front … Trump's charity has agreed to dissolve amid allegations of a "shocking pattern of illegality" (The Hill) … Court orders company to comply with special counsel subpoena in mystery grand jury appeal (CNN) … Read the transcript from former FBI Director James Comey's latest meeting with House Republicans (The Hill) … Former Trump adviser Roger Stone admits to spreading lies online (NBC News).   *** POLITICS: Arizona Gov. Doug Ducey (R) tapped outgoing Rep. Martha McSally (R-Ariz.) to fill the seat of the late Sen. John McCain (R-Ariz.).   McSally lost a close and bitterly contested race in November to Sen.-elect Kyrsten Sinema (D-Ariz.).   She'll serve out the remaining two years of McCain's term, which expires in January 2021, facing a special election for a full, six-year term in 2020 (The Hill).   © Getty Images   Meanwhile, Reid Wilson writes about how Sen. Lamar Alexander's (R) announced retirement this week marks a generational and geographic shift in Tennessee politics (The Hill).   It also makes Alexander the latest high-ranking Republican senator to retire since Trump was elected; a list that also includes Sens. Orrin Hatch (R-Utah), Jeff Flake (R-Ariz.) and Bob Corker (R-Tenn.).   > On the Democratic side, there are a couple of brewing intraparty feuds.   Sen. Ben Cardin (D-Md.) and other members are pressing congressional leaders to attach his Israel anti-boycott legislation to the year-end spending package, which could potentially complicate efforts to avoid a government shutdown (The Hill).   That's a controversial move, particularly among Democrats, some of whom  have accused Israel of human rights abuses around the Palestinian conflict.     Meanwhile, the Democratic National Committee has been clashing with state parties over ownership of valuable voter data files.   Rep.-elect Alexandria Ocasio-Cortez (D-N.Y.), who has been quick to take sides on all of the hot-button controversies and skirmishes of the day, sided with the state parties over the DNC.   © Twitter   More on campaigns and politics … Marijuana legalization supporters are dipping their toes into the world of campaigns and elections, hoping to build their influence on Capitol Hill (The Hill) … Allies to former Vice President Joe Biden are scanning the presidential field and have identified Rep. Beto O'Rourke (D-Texas) as someone they're worried about (The Hill) … Sen. Amy Klobuchar (D-Minn.) is on the rise in Iowa (Politico).   IN FOCUS/SHARP TAKES WHITE HOUSE & ADMINISTRATION: Guns: The Trump administration moved to officially ban bump stocks by next spring, relying on federal rulemaking to impose the change (The Hill). A gun rights group says it will sue the government to protest the new ban on devices that allow semi-automatic weapons to fire ammunition more rapidly (The Hill).   Federal Reserve: Trump's complaints about the nation's central bank and his Tuesday instruction that its members should "feel the market" points to a nervousness that the economy in general and the stock market in particular — both of which have been bright spots for Trump — are increasingly the subject of anxiety and political peril (The Memo).   Trump's tweet fueled lively conversations among economic and political analysts in advance of Fed Chairman Jerome Powell's news conference this afternoon about interest rates, inflation and the outlook for the U.S. economy:   "I hope the people over at the Fed will read today's Wall Street Journal Editorial before they make yet another mistake. Also, don't let the market become any more illiquid than it already is. Stop with the 50 B's. Feel the market, don't just go by meaningless numbers. Good luck!" — Trump   Reuters: After plunge, U.S. stocks try to claw out of doldrums. The New York Times: The market is worried. The economy is strong. How will the Fed react?   Immigration: The Department of Health and Human Services, which cares for children who cross the U.S. border alone, said on Tuesday the administration is reversing a controversial policy that required extensive background checks of all adults living with sponsors of migrant children because it increased the time children were in government custody without turning up more red flags. The number of immigrant children in government-run shelters has ballooned to a record 14,700 as of Dec. 17, according to the department (Reuters).   EPA - lead exposure: The Environmental Protection Agency plans to unveil a Federal Lead Action Plan this morning along with members of the President's Task Force on Environmental Health Risks and Safety Risks to Children (The Hill).   Global economic summit: Trump plans in late January to attend the World Economic Forum held annually in Davos, Switzerland, for the second time as president (The Hill).   Interior - secretary: Washington is sizing up potential contenders Trump may tap to replace Ryan Zinke as Interior secretary (The Hill).     OPINION The pressure is on Pelosi to deliver for Democrats, by Bradley Blakeman, opinion contributor, The Hill. http://bit.ly/2T2nOn1   Trump is preparing to blame the Federal Reserve for a recession, by Evan Kraft, opinion contributor, The Hill. http://bit.ly/2ECFVwz   WHERE AND WHEN The Senate convenes at 10 a.m.   The House convenes at noon. Speaker Paul Ryan (R-Wis.) delivers a farewell address at 1 p.m. at the Library of Congress in advance of his retirement from Congress at the end of this session. C-SPAN will broadcast his speech live HERE.   The president has lunch with Secretary of State Mike Pompeo. The president and first lady Melania Trump host two Christmas receptions this evening at the White House.   Vice President Pence will be at the Pentagon this morning to receive a briefing on space operations and cyber defense, and to meet Defense Department employees. He'll then travel to Capitol Hill to join Republican colleagues on the Senate Steering Committee for lunch.   The Federal Open Market Committee wraps up its final meeting of the year with a statement at 2 p.m., followed by a press conference by Powell at 2:30 p.m. Other U.S.economic indicators to watch today: the current account deficit for the third quarter, at 8:30 a.m., and existing home sales in November, released at 10 a.m.   Treasury Secretary Steven Mnuchin will speak at 4:45 p.m. at the opening session of the Financial Stability Oversight Council, which meets in the department's Cash Room.   Veterans Affairs Secretary Robert Wilkie testifies before the House Veterans' Affairs Committee about implementation of legislation titled the "Tracking Transformation: VA Mission (Maintaining Systems and Strengthening Integrated Outside Networks) Act."   ELSEWHERE > Tech: Facebook is attempting to reassure civil rights leaders after a pair of reports prepared for Congress detailed how a Russian troll farm used its system to attempt to suppress U.S. black voter turnout to swing the 2016 election to Trump (The Hill). Separately, a New York Times investigation concludes the social network gave Microsoft, Amazon, Spotify and other tech firms far greater access to people's data than Facebook publicly disclosed.   > Cyber spying: Hackers infiltrated the European Union's diplomatic communications network for years, downloading thousands of cables that reveal concerns about an unpredictable Trump administration and struggles to deal with Russia and China and the risk that Iran would revive its nuclear program. Included in hacked communications obtained by The New York Times are internal AFL-CIO discussions about the Trans-Pacific Partnership, of interest to China.      > Catholic Church: A Vatican committee warns that the credibility of the church is in peril because of the far-reaching sexual abuse scandal. Organizers of an upcoming Vatican summit in February want church leaders to meet with victims and acknowledge "the horror of what happened" (The Associated Press).   > German bank with U.S. troubles: Deutsche Bank, Germany's largest financial institution, has stumbled amid growing financial and legal troubles in the U.S. and abroad. Now, U.S. Democratic lawmakers are poised to probe the bank's financial connections to Trump (The New Yorker). The bank is also under investigation in Europe for money laundering and tax avoidance (The Hill).   > Supreme Court: A panel of judges dismissed ethics complaints against Supreme Court Justice Brett Kavanaugh because the objections were filed under a federal law that does not apply to Supreme Court justices. The complaints dealt with statements Kavanaugh made during his Senate confirmation hearing (The Washington Post).   > Space: Trump signed an order on Tuesday launching the Pentagon's Space Command (The Associated Press). Meanwhile, SpaceX and Blue Origin scratched nearly simultaneous rocket launches scheduled Tuesday morning because of glitches. SpaceX — with Pence in attendance and the U.S. Air Force as a client for a mission to update Global Positioning System satellites — plans to try again today at 9:07 a.m (Space.com).   THE CLOSER And finally … 🎄No well-intentioned holiday decorations seem to go unpunished, including in some major metropolises.   In New York City, travelers were irked by a tree and wreath that just didn't look right mounted atop the Holland Tunnel. Authorities shut down four lanes of traffic for 45 minutes to fix the yuletide problem (The New York Post).   © Twitter   In Belgrade, Serbia, taxpayers are furious that the city spent millions on elaborate publicly-funded decorations. Angry citizens would rather have seen that money go toward repairing potholes or funding new public transportation projects (The Guardian).   And be sure to click on this wind-driven, knock-down encounter in Oregon between two inflatable snowpeople, clearly not in the Christmas spirit (ABC6 Action News).   © Twitter   © Twitter   The Morning Report is created by journalists Jonathan Easley jeasley@thehill.com & Alexis Simendinger asimendinger@thehill.com. Suggestions? Tips? We want to hear from you! 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