MORNING REPORT

Friday, January 2 | By Jared Gans

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In today's issue:

▪ The political stories coming in 2026

▪ Trump warns Iran of possible US 'rescue'

▪ What to know as health subsidies expire

▪ Mamdani era begins with flurry of action

Storylines to watch in 2026

Happy New Year!

2025 was a lively year, and 2026 will almost certainly be no different. The country is heading into a critical midterm election cycle that will test the Trump administration's popularity with the public and set up the 2028 presidential primaries.

Meanwhile, tensions with Venezuela are on the rise, raising the possibility of a full-blown conflict. And the war between Russia and Ukraine is still raging, while the future of a ceasefire in Gaza between Israel and Hamas is unclear as the first phase of the peace agreement is almost completed.

Here are the storylines to watch in 2026:

Does Trump get other major legislation passed?

The main legislative highlight of President Trump's first year back in office was his One Big Beautiful Bill Act.

Signed into law in July, the legislation extended and made permanent tax cuts that Trump enacted in his first term, added funding for immigration enforcement, expanded production of oil, coal and natural gas over green energy, and created phased-in cuts to Medicaid, among other measures.

But polling has shown the legislation hasn't been widely popular with the public, while many Americans disapprove of the administration's broader handling of the economy.

Some Republicans have recently proposed the idea of pursuing another partisan legislative package to address affordability this year. But Trump has downplayed the need to pass other major bills because of the tax cuts legislation he got approved, and GOP leaders have signaled any package won't come close to the significance of the "Big Beautiful Bill."

▪ The Hill: Frustrated GOP lawmakers leaving Congress.

Does the Venezuela conflict boil over?

Trump's standoff with Venezuelan President Nicolás Maduro only escalated in the final months of 2025, and it isn't showing any signs of slowing down.

The U.S. military has repeatedly conducted strikes on alleged drug-trafficking boats in the Caribbean and eastern Pacific, killing more than 100 of what the Pentagon has called "narco-terrorists."

More recently, the strikes shifted to land as the CIA conducted a strike on a Venezuelan port facility believed to be used by the transnational gang Tren de Aragua to store illegal drugs.

Trump's ultimate goal with Venezuela hasn't been made clear, and polls have shown most Americans don't want a military conflict with the South American country.

But the administration has been aggressive in seeking to hold the Maduro regime accountable and Trump has said he believes Maduro's days in power are numbered, suggesting the conflict will only escalate further.

▪ The Hill: Trump ramps up oil sanctions on Venezuela.

Is a ceasefire reached in Ukraine?

The war between Russia and Ukraine is set to hit the four-year mark next month, and the fighting is still raging amid an essential stalemate over ending the conflict.

Trump has stepped up his efforts to try to reach a peace deal, speaking with Ukrainian President Volodymyr Zelensky on Sunday to set a proposal for the Kremlin. Zelensky said they agreed on 90 percent of issues, including the idea of a security guarantee, but the key sticking point between Russia and Ukraine remains control of territory.

Russian President Vladimir Putin originally expected the Russian military to take all of Ukraine within days in 2022, but Ukrainian defenses have held steady with backing from the U.S. and European allies. Still, Russia does control a few provinces, and Zelensky has remained adamant that Ukraine will not give up any territory.

Trump vowed during the 2024 campaign that he would quickly bring the war to an end, but has acknowledged it is one of the more difficult conflicts to resolve.

▪ The Hill: Putin, Zelensky give contrasting New Year's messages.

Can Republicans defy history?

Republicans are increasingly fretting over the president's poll numbers and negative views of his handling of the economy with the midterms fast approaching. If history is an indicator, the GOP could be heading for a rough election night in November.

With a few exceptions in modern history, the incumbent president's party has typically lost seats in Congress during the midterms. If that holds, it won't take many seats for Democrats to take back control of the House.

And Democrats are feeling bullish given their party's wins throughout much 2025, especially in last November's elections. Off-year success doesn't necessarily guarantee success in the midterms, as Republicans have noted over the past year, but Democrats are hoping to leverage fights over health care and other affordability issues heading to the polls.

The few exceptions to the president's party losing seats in the midterms have generally been because of a major unplanned event, like Republicans' success in 2002 in the aftermath of the 9/11 attacks.

▪ The Hill: Dems feeling momentum, challenges in 2026.

▪ The Hill: States to watch in the redistricting battle.

Who are the 2028 front-runners at year's end?

Vice President Vance and California Gov. Gavin Newsom (D) enter the year at the top of their respective parties' shadow primaries for the 2028 presidential race.

Early polls of the possible field have shown both on top, even as a lifetime in politics remains between now and 2028.

Vance is the obvious favorite for the GOP as the vice president serving under a term-limited president, but Trump hasn't said who he would support and other possible candidates like Secretary of State Marco Rubio could rise.

Newsom has become a high-profile leader within the Democratic Party as a chief antagonist to Trump, but he hasn't clearly broken away from the pack of other possible candidates.

How Vance and Newsom navigate 2026 and the midterms could go a long way in signaling their staying power heading into presidential campaign season.

▪ The Hill: Democrats' top 2028 contenders.

3 Things to Know Today

The Small Business Administration has suspended 6,900 Minnesota "borrowers" over alleged fraud in lending programs in the state. Nearly 100 people have been charged in the investigation.
The new anchor of "CBS Evening News," Tony Dokoupil, pledged transparency and called on viewers to hold him accountable ahead of the start of his tenure. He's set to begin anchoring Monday.
North Korean leader Kim Jong Un's daughter made her first known visit Thursday to the family mausoleum, which experts said is a step toward becoming her father's possible heir.

LEADING THE DAY

IRAN PROTESTS: Trump said Friday the U.S. would support protesters pushing back against the Iranian regime and warned Tehran the U.S. could "rescue" protesters as several were killed in clashes with police.

At least seven protesters were killed in relation to the demonstrations against the country's weakening economy and devaluing currency. The protests have intensified over the past week.

"If Iran [shoots] and violently kills peaceful protesters, which is their custom, the United States of America will come to their rescue. We are locked and loaded and ready to go," Trump wrote in a Truth Social post just before 3 a.m.

Iranian officials pushed backed strongly on any possible intervention from the U.S.

"Any interfering hand that touches Iran's security with flimsy pretexts, before it can even reach its target, will face a reaction that breeds regret," Ali Shamkhani, an adviser to Iran's supreme leader, said in a post on X.

Tensions with Iran have escalated over the past year, highlighted by the U.S. strikes on Iranian nuclear sites in June. More recently, the administration has sought to seize Venezuelan oil tankers it alleges have carried sanctioned Iranian oil.

The protests in Iran have become the largest since the death of 22-year-old Mahsa Amini in police custody in 2022 led to nationwide backlash. But they haven't yet become as widespread or intense.

Iranian President Masoud Pezeshkian is a reformist who has signaled interest in negotiating with the protesters but he's acknowledged he can't do much as Iran's currency, the rial, has rapidly depreciated.

SUBSIDIES EXPIRE: The Affordable Care Act's (ACA) enhanced tax credits to reduce health care premiums have officially expired, setting up millions to potentially face price hikes in the new year.

Congress had until the end of 2025 to pass an extension but was unable to reach a deal. The enhanced subsidies were first implemented by the Biden administration during the COVID-19 pandemic.

The subsidies were credited with driving record-high enrollment in ACA plans, but experts warn that their end would cause spiking premiums and millions priced out of the ACA marketplace and losing coverage.

Lawmakers still have an opportunity to reverse some of the cost increases when they come back to Washington. A vote will happen in the House this month on extending the subsidies, and some Republicans have expressed openness to it with some reforms.

But any path forward still has a long way to go.

The Hill's Joseph Choi reports on what to know with the subsidies expired.

▪ NPR: Farmers set to pay more for health insurance.

▪ Politico: States step into the breach.

TARIFF DELAY: Trump signed a proclamation this week delaying tariff increases on various imported furniture by one year.

The proclamation applies to upholstered furniture, kitchen cabinets and vanities in light of the "ongoing productive negotiations" on wood imports, according to a fact sheet from the White House. The U.S. imposes a 25 percent tariff on these items currently, and it was set to increase Thursday.

Trump has often imposed tariffs before lifting or delaying them throughout the past year, often leading to critiques that he isn't following through on his threats.

The Commerce Department also announced Thursday that the U.S. significantly cut tariffs on 13 Italian pasta exporters.

Trump credited his tariffs last month for the surprisingly strong 4.3 percent economic growth in the third quarter of 2025.

▪ PBS: These Trump tariff threats never materialized.

▪ The Detroit News: Tariffs dominated year's automotive stories.

WHEN & WHERE

The president will receive an intelligence briefing at 5:30 p.m. He will meet with the U.S. ambassador to China at 6:30 p.m.
The Senate will meet at 3 p.m. for a pro forma session.
The House will convene at 4 p.m. for a pro forma session.

ZOOM IN

Trump sought to downplay concerns about his health in an interview with The Wall Street Journal, saying he received a CT scan instead of an MRI when he visited Walter Reed National Military Medical Center for a "secondary" physical last year.

The president told the Journal in an interview published Thursday that the fact that he had cardiovascular and abdominal imaging done gave a "little ammunition" to raise questions about if something is wrong.

"I would have been a lot better off if they didn't, because the fact that I took it said, 'Oh gee, is something wrong?'" Trump said. "Well, nothing's wrong."

During the interview, the president also denied falling asleep during White House events, saying he sometimes closes his eyes.

"It's very relaxing to me," he said. "Sometimes they'll take a picture of me blinking, blinking, and they'll catch me with the blink."

Trump expressed irritation over the story itself, the Journal reported.

"Let's talk about health again for the 25th time," he told the newspaper, adding, "My health is perfect."

The president had told reporters in October that he had done a cognitive test and had an MRI while at Walter Reed but didn't say why.

ELSEWHERE

MAMDANI ERA: Newly minted New York City Mayor Zohran Mamdani is moving quickly to implement his affordability agenda, signing several executive orders on his first day in office aimed at helping renters and to build housing, The New York Times reports.

Mamdani rejected the idea of "small expectations" in his inaugural address outside City Hall on Thursday.

"Beginning today, we will govern expansively and audaciously. We may not always succeed, but never will we be accused of lacking the courage to try," he said.

Mamdani was formally sworn in to lead the country's largest city earlier Thursday by York Attorney General Letitia James, becoming the first Muslim to serve as New York City mayor as well as one of the city's youngest leaders ever.

It marked the final step in a stunning rise for the political upstart, who pulled off a major upset over former New York Gov. Andrew Cuomo (D) to win the Democratic primary last June before holding off an independent challenge from Cuomo to win the general election in November.

Mamdani called for sweeping change on the campaign trail, pushing for free city buses, freezing the rent for rent-controlled apartments, free universal child care and opening city-run grocery stores.

He also issued an order Thursday to revoke most of the orders issued by former Mayor Eric Adams (D) after the latter's indictment in September 2024.

"We speak about this day as a new era. And in order to fulfill that hope, we have to reckon with why so many New Yorkers have turned away from politics over the last few months, the last few years, the last few decades," he said.

Mamdani called the date Adams was indicted a moment when many New Yorkers "decided politics held nothing for them," portraying his revocation of the orders as a way to restore trust.

Adams was accused of accepting bribes from foreign businesspeople and a Turkish government official seeking to influence him. Prosecutors alleged Adams's conduct took place before, during and after his 2021 campaign for mayor.

But the Department of Justice dropped the case after Trump returned to office, leading to allegations of a quid pro quo between Adams and the administration.

Rep. Alexandria Ocasio-Cortez (D-N.Y.), who was a major supporter of Mamdani on the campaign trail, declared Thursday that Mamdani turns a new page for the city.

"This ascent marks a new era for New York City, led by a historic new mayor in Zohran Mamdani, guided by his dedication to a working class that makes our beautiful city run," she said.

▪ The New York Times: Mamdani surrounds himself with government veterans.

▪ The New Yorker: What Mamdani, Michael Bloomberg have in common.

▪ The New York Times: New York Magazine removes former Mamdani aide from photo after resignation.

SWISS FIRE ACCIDENT: About 40 people have been killed and more than 100 others were injured in a fire that ripped through a Swiss resort during a new year's celebration.

The fire happened at Le Constellation bar in the ski resort town of Crans-Montana on Thursday. Located in the Swiss Alps, the town is a popular destination for skiing and snowboarding.

Officials said they're investigating what caused the fire and have ruled out the possibility of an attack. Flags in the country will be flown at half-staff for five days.

A CNN affiliate reported that two witnesses said the fire was caused by sparklers that were placed in champagne bottles.

Swiss President Guy Parmelin told a Swiss newspaper that many foreign nationals were present at the resort. The New York Times reported that the number with severe injuries exceeds the capacity of Switzerland's burn units, requiring the transfer of patients to nearby Germany, Italy and France.

About 50 people are believed to have suffered the worst burns.

OPINION

Encouraging signs of political civility bring hope for 2026, Colin Pascal writes in The Hill.
No, AI won't ruin your life — it might even give you a 4-day workweek, Jeff Mayhugh writes in The Hill.

THE CLOSER

And finally … Readership and audience engagement is on the rise at several publications given the sweeping policy changes that Trump has implemented over the past year, Surina Venkat reports for The Hill.

Trump has spurred a wide range of legal challenges on subjects from federal spending to tariffs, leading outlets covering the legal system to shift in an effort to break down complicated industry topics.

"As the regulatory and policy landscape changes, and the pace of change accelerated, we had to be in more places, and we had to be more nimble," Cesca Antonelli, editor in chief of Bloomberg Industry Group, told Venkat.

Antonelli said Bloomberg has observed a "huge surge" in interest in the law and regulations. Other publications have created new resources for readers to understand legal decisions.

Readers have also started turning more to independent journalists and experts amid distrust in traditional media coverage.

▪ The Associated Press: A rough year for journalists.

▪ The Washington Times: Press corps questions spur Trump to act.