With government funding set to expire on February 18, the House this week passed legislation to continue current levels of spending through March 11. (ddp)

Government Funding Deadline. With government funding set to expire on February 18, the House this week passed legislation to continue current levels of spending through March 11. The Senate is expected to approve this extension next week.

Lawmakers will have another three weeks to reconcile their differences and pass a bill to fund government agencies through the remainder of the fiscal year (September 30). While there are hundreds of spending provisions in this bill, the primary issue of contention concerns the size of spending increases for both defense and domestic programs. There will be spending increases for both that will add to the budget deficit, though the size of those increases is still being worked out. Lawmakers go through this exercise every year and ultimately settle on a compromise.

The current activity should yield the same result by March 11, if not earlier.

Stablecoins and Digital Assets. The House Financial Services Committee this week held a lengthy hearing on the regulation of stablecoins, which are digital assets issued by private entities but backed by other assets, including fiat currencies like the dollar.

At the hearing, a senior Treasury official discussed recommendations made in a stablecoin report issued by the Treasury and other regulators. To fill in regulatory gaps and address financial stability concerns, the regulators would like Congress to develop legislation that regulates stablecoin issuers as banks, a point that received pushback from some lawmakers. Stablecoins are not the only area where regulators want Congress to act. The Federal Reserve recently issued a much-anticipated report on Central Bank Digital Currency (CBDC) where it made it clear that it would like direction from Congress before it would proceed with a CBDC. While interest in these burgeoning issues is growing in Congress and among the broader public (the Biden administration also will weigh in with an executive order in the near future), it will take time for lawmakers to digest the complexities of these issues and reconcile potentially divergent approaches on how digital assets should be regulated.

Regulators could be waiting a long time for Congressional action and in the meantime will need to grapple with these issues using the limited and imperfect authorities they already have.

Senate Bipartisanship. With Senator Ben Ray Lujan (D-NM) recuperating from a stroke and likely to be away from the Senate for at least another six weeks, Senate Democrats find themselves in the position of being one vote short in an evenly split Senate. This development further sidetracks President Biden’s Build Back Better plan of social spending and tax increases, which Democrats have tried to advance through a budget reconciliation process that only requires a majority vote. It also presents another headwind to Democrats’ ongoing inability to change Senate filibuster rules as a means of passing comprehensive voting reforms. Finally, it poses challenges in approving more controversial executive branch nominees. However, this development doesn’t stop the Senate from passing legislation with sufficient bipartisan support.

The following bills have bipartisan support and could advance in the next two months as Senate Democratic leaders deal with the reality of being one vote short of a majority.

  • Postal Reforms. The House this week passed bipartisan legislation to reform the US Postal Service in an effort to make the agency more competitive and financially viable. The Postal Service has posted operating deficits over the last 15 years, including a $4.9 billion deficit in the last fiscal year. Absent any changes, the agency is on pace to run out of funds by 2024. The House bill would drop a longstanding requirement that the agency pre-fund retiree health benefits, which would save about $27 billion. Unlike earlier versions, the current bill does not eliminate weekend mail delivery at residences or close any post offices in an effort to trim costs. Interestingly, the bill also would allow post offices to sell certain non-postal items like fishing and hunting licenses. Postal reform has been debated in Congress for a long time, and this could be the year it finally is enacted.

  • Boost in US Technology Competition. We discussed this bill last week following passage in the House. The bill invests federal money in a wide range of critical science and technology areas, with a specific emphasis on US production of semiconductors. Practically every lawmaker supports the bill’s core purpose of enhancing US competitiveness in science and technology. A Senate version passed on a bipartisan basis last year, but Republicans opposed the House bill because it addressed many issues that went far beyond the Senate’s focus on technology. The legislation is a major priority for Democratic leaders and President Biden, who are eager to show bipartisan victories in an election year. A final bill, which will be a product of bicameral negotiations, has a good shot at passing if it stays focused on technology competitiveness.

  • Port Congestion Relief. Disparities in freight rates have resulted in significant delays in US exports (primarily agricultural products) leaving US ports. A bipartisan bill to address this problem was included in the aforementioned US technology competition legislation approved by the House last week. The freight pricing bill would have little impact on the current supply chain dilemma, but it would provide some helpful longer-term relief. Though it was not included in the Senate competition legislation, we believe this provision will be part of any final agreement.

For more, see Washington Weekly, 11 February, 2022.

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Expiration: 2/28/23

Approval date: 2/11/2022

Review Code: IS2200792