BUDGET CLOCK TICKING DOWN: Congress now has just three days to strike a new deal to fund the military and the rest of the federal government before the current stopgap budget expires on Friday night. Much of the air on Capitol Hill has been sucked into the Republican effort to pass a historic tax reform bill, which passed this morning on a strict party line vote 51-48. Senate Armed Service Chairman John McCain remains on medical leave in Arizona, but his vote was not needed. The bill, which had to be changed to comply with Senate rules, now must get a second vote in the House this morning, before being sent to the president’s desk to be signed into law.

Then the race will be on for what Senate Majority Leader Mitch McConnell said will be another continuing resolution, or CR. The House introduced an omnibus budget bill last week that includes a CR to fund the government through Jan. 19, but also gives the military a full year of funding. That full-year funding for the military effort now seems doomed. Senate Minority Leader Chuck Schumer said this week that the so-called “CRomnibus” bill would be “dead on arrival” in the Senate, and Politico reports House Republicans have lowered their sights, and now just hope to kick the can into next month with third short-term CR for the whole government.

NOBODY WANTS A SHUTDOWN: “We don't want to shut down the government. We can't shut down the government. The only people who can shut down the government are Republicans. We don't have the votes to shut down government. And we don't want government to shut down,” Rep. Steny Hoyer, House minority whip, said on Fox yesterday. Hoyer sought to put any blame for a shutdown on Republicans who hold a majority in the House. “They've got 240 members. It won't make any difference how we vote,” he said, but still expressed optimism that by Friday a shutdown will be avoided again. “We haven't had a great show of bipartisanship up to this point in time. But I am hopeful that we will, they will reach across the aisle and we will have discussions and we will do the things the American people need done.”

Democrats have dug in their heels over any attempt to fund defense without increases in non-defense spending. Unresolved issues such as disaster aid, Obamacare subsidies and the Children’s Health Insurance Program are complicating the budget picture. Any resolution beyond the CR may now have to wait until after the New Year. The $700 billion National Defense Authorization Act signed by President Trump last week hangs in the balance. Before the NDAA’s increases in aircraft, ships and troops can be realized, they must be fully funded through an appropriations deal in Congress. That requires a heavy political lift beyond any CR, an overarching deal to lift spending caps set by the Budget Control Act.

FISA AUTHORIZATION: Two Republican senators warned Tuesday that they would vote against any government spending bill that includes permanent reauthorization of a controversial provision of the Foreign Intelligence Surveillance Act. Sens. Rand Paul and Mike Lee said they would go that far to oppose a permanent authorization of Section 702 of the FISA law.

“I would vote against any spending bill that has permanent reauthorization,” Paul said yesterday, adding that the intelligence community “needs more oversight, not less” of the provision. Lee said anything more than a year-long extension of FISA Section 702 as the law stands right now would also put his spending bill vote in jeopardy.

Good Wednesday morning and welcome to Jamie McIntyre’s Daily on Defense, compiled by Washington Examiner National Security Senior Writer Jamie McIntyre (@jamiejmcintyre), National Security Writer Travis J. Tritten (@travis_tritten) and Senior Editor David Brown (@dave_brown24). Email us here for tips, suggestions, calendar items and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email and we’ll add you to our list. And be sure to follow us on Twitter @dailyondefense.



BOEING OFFERS PEEK AT ITS STINGRAY: Boeing released a photo of its offering for the Navy’s MQ-25 tanker drone program on Tuesday. The Navy released its request for proposal in October and submissions are due Jan. 3. Lockheed Martin and General Atomics are also expected to bid on the program.

“Boeing has been delivering carrier aircraft to the Navy for almost 90 years,” retired Rear Adm. Don “BD” Gaddis, head of the refueling system program for Boeing’s Phantom Works technology organization, said in a release. “Our expertise gives us confidence in our approach. We will be ready for flight testing when the engineering and manufacturing development contract is awarded.”

The statement said the system is going through engine runs, to be followed by deck handling demonstrations next year.

McMASTER TO THE DEFENSE: White House national security adviser Lt. Gen. H.R. McMaster defended his boss yesterday from the criticism of former spymaster James Clapper that Russian President Vladimir Putin was manipulating Trump as he would any intelligence asset. "That's just not true," McMaster told CBS News' "This Morning."

“What the president has asked us to do with Russia though as well is make sure we can deter conflict,” McMaster said. “You see that with the peace through strength pillar in the national security strategy, but also to try to find areas of cooperation.”

The question of manipulation was prompted by Monday remarks by Clapper — former director of national intelligence and current CNN contributor — who told CNN that Putin’s phone call thanking the U.S. for intelligence that thwarted a terrorist attack show what a “great case officer” Putin is. “He knows how to handle an asset, and that's what he's doing with the president.”

Clapper said Trump is easily manipulated by insincere flattery, and that Putin continues to play on his insecurities and ego. “If people say nice things about him, he will reciprocate. And that's certainly been the case in spades with Putin,” Clapper said. “I'm saying this figuratively. I think, you have to remember Putin's background. He's a KGB officer. That's what they do. They recruit assets. And I think some of that experience and instincts of Putin has come into play here in his managing of a pretty important account for him, if I could use that term, with our president.”

McMaster said Trump has not shown any unwillingness to confront Russia's destabilizing behavior. “President made clear in his national security strategy and in his speech that he's going to stand up for America no matter who threatens America.”

U.S. CALLS OUT RUSSIA IN SYRIA: While Putin has declared final victory over the Islamic State in Syria and made noise about pulling some of his troops out, the U.S. military says Russian-backed Syrian government forces are doing little to stop the flow of ISIS fighters, who are fleeing U.S.-backed Syrian forces in the east, and finding sanctuary in the regime-controlled area of the west.

The U.S. says “a desperate and dwindling ISIS force, estimated at fewer than 2,000, “continues to fight vigorously” from their last redoubt in the Middle Euphrates River Valley, or MERV, as the military calls it. “Syrian regime commanders in eastern Syria suggest that ISIS fighters from the MERV may have slipped through porous Syrian and Russian defenses to arrive in areas near Damascus,” Col. Ryan Dillon said yesterday at a Pentagon teleconference with reporters. “ISIS is putting up a stiff defense in remaining territories in the MERV, likely as a delaying action to allow other elements to displace to southwest and northwest Syria to seek sanctuary and/or continue to fight.”

ISIS LEADERS KILLED: U.S. Central Command announced yesterday that three senior ISIS leaders were killed in two separate airstrikes in the past three weeks. On Dec. 1, Abu Faysal, described as a senior ISIS leader, and his deputy Abu Qudamah al-Iraqi, were killed in the Middle Euphrates River Valley. And on Nov. 28, a man described as a senior ISIS courier, Mustafa Kamal Jasim Muhammad al-Zawi, was killed near al-Sharqat, Iraq.

COALITION NON-COMBAT DEATH: The U.S. coalition fighting ISIS has announced a service member with Combined Joint Task Force - Operation Inherent Resolve died today in what appears to be a non-combat-related incident. “The service member's name and the circumstances surrounding the death will be released at the discretion of the pertinent national authorities,” said a brief statement, indicating the service member may not be American.

TIME RUNNING OUT OR ALREADY RUN OUT? Secretary of State Rex Tillerson says diplomacy remains a viable path for resolving the nuclear standoff with North Korea, while White House homeland security adviser Tom Bossert seems to think the clock has run out.

“Well, at this point, North Korea has done everything wrong as an actor on the global stage that a country can do,” Bossert said yesterday at a White House briefing accusing North Korea of responsibility for the WannaCry ransomware virus. “President Trump has used just about everything you can use, short of starving the people of North Korea to death, to change their behavior. So, we don't have a lot of room left here to apply pressure to change their behavior."

At an appearance with Canadian Foreign Minister Chrystia Freeland in Vancouver yesterday, Tillerson said the strategy of “peaceful pressure” is still in effect, and that the whole point is to lead to talks, not war. “Now, we can’t talk unless North Korea is ready to talk. And I think as we’ve indicated, we’re waiting for them to indicate a readiness to talk,” Tillerson said. “But what’s important for North Korea to know is that this pressure campaign will not abate. We will not be rolling any of it back. It will only be intensified as time goes by. And it will remain in place until they agree to give up their nuclear weapons and allow us to verify that, in fact, that is what they have done.”

NOW IS NOT THE TIME: “The president has made very clear that … now is not the time to talk. And what he means is, there can't be negotiations under these current conditions,” McMaster said on CBS yesterday. “The North has to show initial steps toward denuclearization and the reason for this is previous approaches to negotiating with North Korea have failed miserably. What the regime does is they enter into negotiations, all the while they continue these very destructive programs, these talks often times end in a weak agreement and then North Korea immediately violates that agreement,” McMaster said. “The problem is now that their programs have advanced so far we don't have time to do that again and so we can't repeat the failed pattern of the past.”

NO DELAY: Tillerson also said he was unaware of any plans to delay regularly scheduled military exercises with South Korea and Japan in deference to the Olympics. “These exercises have been ongoing for many years. They are carried out on a scheduled basis. We announced them in advance,” Tillerson said. “There’s nothing surprising about them and, I’m not aware of any plans to change what is scheduled.” NBC reported yesterday that South Korean President Moon Jae-in said he has asked the U.S. if drills could be pushed back so long as Pyongyang also shows willingness to pause its nuclear and missile tests before the winter games in February.

“If North Korea stops its provocations leading up to the Pyeongchang Olympics, it will greatly help in holding a safe Olympics," Moon said. "Also, it will help in creating conducive atmosphere towards inter-Korean as well as U.S.-North Korean dialogue."

DEEP STATE CONSPIRACY: The president’s son, Donald Trump Jr., suggested in remarks yesterday that people in the government are working to undermine his father’s presidency. “My father talked about a rigged system throughout the campaign and people were like, oh, what are you talking about? But it is and you're seeing it,” he told conservative activists in Florida. “There is and there are people at the highest levels of government that don't want to let America be America. They don't want to let the little guy have a voice.”

The comment drew a rebuke from former CIA and NSA Director Michael Hayden on CNN last night. “When I first heard that earlier this evening that was a little scary,” Hayden said. “That is an appeal to the heart of autocracy and challenging the patriotism of those folks who work in the United States government.”

WORKING FOR ISIS: David Wright, 28, has been sentenced to 28 years in prison for leading an Islamic State-inspired plot to behead a conservative blogger who upset Muslims when she organized a Prophet Muhammad cartoon contest, the Associated Press reported.

Wright was sentenced by a federal judge in Boston two months after jurors found him guilty of conspiring with his uncle and a Rhode Island man to kill blogger Pamela Geller on behalf of the terror group.

Wright's attorneys had asked for a 16-year sentence, saying he should be given the chance to redeem himself after serving his time. Wright insisted he never really wanted to hurt anyone but pretended to support the Islamic State group to get attention online.

THE UFO PILOT SPEAKS: The release of a U.S. Navy video of a UFO spotted by a pair of two-seater F/A-18s in 2004 has everyone talking about what it could be, and more than a few people questioning their previous skepticism about UFOs. One of the four pilots who tracked the object over the Pacific Ocean 13 years ago was on CNN last night. Retired Cmdr. David Fravor said it was like nothing he had ever seen

“The first thing is, it had no wings, So you think OK, it’s a helicopter, but there was no rotor wash in the water, there’s no rotors, and when helicopters move side to side, they’re kinda slow, and then they pick up speed going the other way. This was extremely abrupt, like a ping pong ball, bouncing off a wall. It would hit and go the other way, changing direction at will. The ability to hover over the water, and then start a vertical climb, from basically zero up towards about 12,000 feet, and then accelerate in less than two seconds, and disappear is something I had never seen in my life.”

But was it an alien craft? “It's easy to doubt what we can't explain, but when you actually see things,” Fravor said. “I would argue it wasn’t a weather balloon, it wasn’t a flare. It was an actual object we tracked and looked at for somewhere around five minutes before it rapidly accelerated.”

THE RUNDOWN

Military Times: This young man is transgender, and ready to enlist Jan. 1

NBC News: North Korea tensions: South urges U.S. to delay military drills ahead of Olympics

AP: US short of options to punish NKorea for serious cyberattack

Wall Street Journal: Trump's New National-Security Policy: Paper Tiger or Hidden Dragon?

USNI News: CNO Adm. Richardson Wants More Exercises with Foreign Navies in 2018

USA Today: Christmas is banned in North Korea. Here's why.

BuzzFeed: How ISIS Members Fled The Caliphate, Perhaps To Fight Another Day

Stars and Stripes: ISIS nearly defeated on the battlefield but remains dangerous, US military says

Daily Beast: How Do You Deprogram a Country After ISIS Is Defeated?

Reuters: After U.S. veto, U.N. General Assembly to meet on Jerusalem status

Air Force Times: ‘Ethical hackers’ earn windfall hacking Air Force networks

New York Times: Russia and China Object to New ‘America First’ Security Doctrine

Defense News: Here’s how the Trump administration could make it easier to sell military drones

Foreign Policy: Trump Nominee Concedes Saudi Siege of Yemen Could Be Violating U.S. Law

Defense One: What Does a Government Shutdown Mean for the Department of Defense?

AP: Somalis on US deportation flight shackled for days: Lawsuit

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