(UBS)
The House this week was able to pass a spending bill on foreign operations. The legislation included a controversial voter ID bill (called the SAVE Act). This provision was added after pressure from President Trump and some Republicans, but it is a non-starter in the Senate. Before heading out of town, the House will try to pass an annual national defense authorization bill, a budget resolution in hopes of paving a path for a reconciliation 3.0 bill (see below), and potentially a continuing resolution to extend government funding. The Senate will continue to approve Trump administration nominees and try to find paths forward on a few large items like defense authorization and crypto market structure legislation. The House has four weeks of session while the Senate has three when they return in September. That leaves only a total of 20 legislative days in the House and 29 days in the Senate before the midterm elections in November.
Reconciliation 3.0.
The House Republican leadership has laid out its plan on a third reconciliation bill. The House Budget Committee this week advanced a fiscal year 2027 budget resolution that would lay the groundwork for a roughly USD 95 billion reconciliation package. The resolution instructs four House committees to draft legislation by 11 September to provide USD 73 billion in defense funding (mostly for the cost of the war in Iran), USD 12 billion in farm aid, and USD 10 billion for election security measures (parts of the SAVE Act). House Speaker Mike Johnson (R-LA) said he intends to have a vote on the budget resolution next week, but he can only afford to lose a few votes. Despite prodding from the White House, many members appear to remain skeptical. Fiscal hawks have expressed dislike that the resolution does not currently pay for this spending, while other Republicans said they want more defense spending. Even if House Republicans are able to pass the budget resolution next week, its outlook in the Senate seems dim. With limited session time, we think moving a substantial reconciliation package across the finish line is an increasingly difficult task and there may not be enough Republican appetite or support to undertake it.
Graham’s Institutional Void.
Senator Lindsey Graham’s (R-SC) passing removes one of the Senate’s few remaining Republicans who could bridge the divide among factions in the Republican Party and within the Senate. As Budget Committee chairman and as a senior member of the Appropriations and Judiciary Committees, Graham was a key figure on a wide range of important issues (including defense spending, Russia sanctions, appropriations, and confirmation fights) over many years. Senator Graham also served as a primary liaison between the Senate and President Trump. While his seat has been temporarily filled, it will be hard to replace the relationships, institutional memory, and bipartisan credibility that allowed Graham to move between Trump, Senate leaders, Democrats, and foreign officials. Despite fraught partisan relationships in recent years, Graham’s passing has brought an outpouring of bipartisan sympathy and remembrances, and it’s clear that his passing will leave a significant void in the Senate.
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