The House fell short of the two-thirds of votes necessary to override President Trump's veto of legislation that would have overturned his emergency declaration along the southwest border. The Senate failed to advance debate on the "Green New Deal," authored by Senator Ed Markey (D-MA) and Congresswoman Alexandria Ocasio-Cortez (D-NY) (see below). It then began debate on a $13.5 billion disaster aid bill.
The House will vote to reauthorize the Violence Against Women Act. The Senate will vote on a number of Trump administration nominees and address the approval process for nominees more generally.
Financial Services Issues
Housing Finance Focus.
Senate Banking Chairman Mike Crapo (R-ID) held two days of hearings on his plan for housing finance reform. The chairman’s proposal would create a new system where multiple private mortgage guarantors would be undergirded by a common securitization platform and a catastrophic government guarantee. Fannie Mae and Freddie Mac, the government sponsored entities (GSEs) that have long dominated the mortgage market and that have been under government control since the financial crisis, would become two of many private guarantors. The hearings highlighted the challenges with reaching broad bipartisan consensus on a plan, with funding and supporting affordable housing being a notable area of divergence. Given the dim prospects for legislative success, focus will continue to shift to the administration. The White House this week announced that the Treasury and HUD will issue a reform plan for the two GSEs and federal housing programs. One option under consideration is recapitalizing and privatizing Fannie and Freddie, but that has been roundly criticized by many industry groups and members on both sides of the political aisle. The Senate also will soon approve the nomination of Mark Calabria to become the head of the Federal Housing Finance Agency, which oversees Fannie and Freddie. While comprehensive reform plans may fall short, Calabria, a longtime critic of the GSEs, nevertheless will have significant powers at his disposal to alter and pare back the companies’ operations, activities and risk profiles.
Other Issues in Play
After 22 months, 2,800 subpoenas, 500 search warrants, 500 witness interviews and $25 million spent, Special Counsel Robert Mueller has concluded his investigation. His report on his findings has been transmitted to Attorney General William Barr, who has summarized its key conclusions to Congress and the public. A partially redacted version of the report is expected to be made publicly available in the coming weeks. Key takeaways are as follows.
What Next with the Report?
Attorney General Barr is working now to determine what content from the report he can make publicly available; he has pledged to make that text available in "weeks, not months." A key question will be the extent to which the report will be subject to redactions given that the law will prevent the disclosure of some aspects of it (notably, information on grand jury deliberations). Heavy redactions will inevitably trigger controversy given that some congressional Democrats are skeptical of the report's findings, specifically Attorney General Barr's conclusion that there was insufficient evidence of obstruction of justice by President Trump. Attorney General Barr will testify next month in both the House and Senate on the report once he has made it public. He is scheduled to testify before a Senate committee on April 9 on another issue -- Department of Justice funding needs for next year -- but that hearing could be postponed. It is also likely that Mueller will testify but after Barr and perhaps in a more limited fashion. We think most of the general public will learn everything it wants to know about this report in the coming weeks.
Is Impeachment Still on the Table?
Yes, it is for some Democrats in the House and some of the Democratic presidential candidates. However, the Mueller report's conclusions have taken some wind from those sails. Democrats still favoring impeachment seem to be a minority in the House and now will have their work cut out for them. Since the Mueller report likely will not provide the needed fodder to advance impeachment, these members instead will turn to a wide range of investigations into the President, his finances, his family, his former businesses and his administration to determine whether there are improprieties. Investigative hearings will be launched by several House committees over the next few weeks and months and will be an ongoing focus for many House Democrats throughout the year in pursuit of a "smoking gun."
The Politics of It.
President Trump was thrilled with the conclusion of "no collusion," but he is far from putting these and other legal issues behind him. His focus will be to move past the actual Mueller report and belittle the media for giving it so much prime-time attention over the last two years. A bigger challenge awaits Democrats.Can they accept these findings and any that don't directly implicate the President? Will Democrats push this too far and turn independent voters off in 2020 as Republicans did when they pushed impeachment of President Clinton in 1998? The President will need significant help from the large group of independent voters to win re-election next year, and a Democratic overreach on impeachment could swing many of those voters in his direction.
What About Russia's Action?
The report concluded that Russia actively intervened in the 2016 US presidential election, but very few people in Washington have focused on this element of the investigation. Combined with Russia's new military presence in Venezuela and its likely meddling in the election in Ukraine this weekend, further US sanctions against Russia seem all but certain. The Treasury Department will likely impose new sanctions first, and Congress will consider additional sanctions in the upcoming weeks.
Green New Deal.
The Senate voted to table further debate and votes on the Green New Deal (GND), a comprehensive plan authored by key Democrats to address climate change and related socio-economic issues. The resolution calls for the end to a carbon-based energy system in the US within ten years and targets other potential economic challenges caused by global warming. Senate Republicans opposed the measure and brought it to a vote in hopes of showcasing some of its more contentious provisions and thereby putting Democrats on the defensive. Republicans believe the bill's estimated $93 trillion cost and ambitious goals would be disruptive to the economy. Forty-three of 47 Senate Democrats, including the six Senate members running for president in 2020 who are all co-sponsoring the measure, voted "present" on the measure. The GND also won't advance in the House, where Democrats have a majority, but it will be used as a political punching bag against Democrats through the 2020 election.
SALT Deduction Cap.
Many readers impacted by the State and Local Tax (SALT) deduction cap this tax season have reached out to inquire if there are serious efforts to reverse the cap. As a reminder, the SALT deduction allows taxpayers to deduct local tax payments on their federal tax returns, which can be very valuable if you live in a high-tax state. The new tax law capped this deduction at $10,000. Numerous bills have been introduced in the House and Senate to help taxpayers impacted by the cap on the SALT deduction. A full repeal of the cap is highly unlikely, however, as it would cost several hundred billion dollars in lost revenue and be perceived by many voters as a giveaway to wealthy taxpayers. While a scaled back measure to provide SALT relief to middle-class families would have a better chance, we also are not optimistic on the prospect for this type of revision either.
The Final Word
Abolishing the Electoral College?
Yesterday, Delaware became the 13th state to enact the "National Popular Vote" bill. The premise of this bill is for the enacting states to commit their electoral votes in presidential elections to the winner of the national popular vote, not necessarily the candidate who won in those states. The 13 Democratic-leaning states (plus Washington, D.C., which has also approved of it) account for 184 electoral votes, but the measure would only go into effect once states totaling 270 electoral votes (a majority of the 538 electoral votes possible in a presidential election) have passed it. While the idea of circumventing, or abolishing, the electoral college is not a new one, it has gained steam among Democrats following the 2016 elections, which was the second time in the last five elections where the winner of the popular vote lost the presidential election. A recent survey showed 55% of voters favored eliminating the electoral college, with 76% of Democrats favoring its elimination. Senator Elizabeth Warren (D-MA) recently became the first presidential candidate to call for the elimination of the electoral college, but she won't be the last. The idea will not advance this or next year, but we believe that calling for the abolishment of the electoral college will become a major litmus test in the Democratic primary election.