Washington Weekly: COVID-19 Stimulus Bill

House and Senate leaders moved closer to agreeing on a bipartisan COVID-19 stimulus and relief bill (see below) that is expected to be added to the final government funding bill (see below). A single bill carrying both of these measures is expected to pass this weekend in both chambers. The Senate also approved several judicial nominations.

The above action expected this weekend should complete House and Senate work for this year. Both chambers will return to Washington for the start of a new Congress – the 117^th Congress – on January 3 (see below). 

COVID-19 Stimulus Bill. 

We believe a final bill is on the verge of being agreed to by congressional leaders and the White House and will be acted on this weekend. The final bill will be in the range of $900 billion and has many bipartisan provisions, including more federal funds for vaccine distribution, the unemployed, small businesses, schools and health care providers. Although the emerging deal is defined in the media as a scaled-back compromise, it provides meaningful support to many Americans in need. The final bill is unlikely to include liability protections for businesses, schools and other entities or additional general money for state and local governments (though they will get funds for specific purposes such as vaccine distribution and schools). Congressional leaders have decided to extend the battle over those contentious issues to next year if another stimulus bill (it would be the sixth) is warranted. The general compromise that is emerging has been available as a possible solution to the congressional negotiators for months, but the politics of accepting this compromise hasn’t been attractive until very recently. Congress often acts on major issues on the eve of a major holiday season, and this year looks to be no exception.

While the final details of this bill have not yet been agreed to, we believe the bill will strongly resemble the summary of the proposed legislation outlined earlier this week by a bipartisan and bicameral group of members.

Fiduciary Rule

The Department of Labor (DOL) this week issued a final rule that sets forth conduct and disclosure standards for retirement accounts that are intended to be aligned with the SEC’s Regulation Best Interest (Reg BI), which was finalized in 2019 and establishes a comprehensive best interest standard for brokers. Reg BI raised standards for brokers while also preserving investors’ access and choice regarding investment advice and products, a major problem with a 2016 rule on fiduciary standards issued by the DOL under the Obama administration that was later invalidated by a federal court in 2018. The final rule issued by the DOL this week isn’t set to go into effect until mid-February, making it vulnerable for delay and eventual removal by an incoming Biden administration. The SEC under a Biden administration will also examine and likely revise Reg BI, but this will be a lengthy process requiring analysis, notice and comment. The potential disruptive impact of completely overhauling the existing Reg BI framework and instead opting for something akin to the Obama administration’s fiduciary rule may give regulators pause and lead them to focus instead on reviewing how the existing Reg BI framework is working with an eye toward tightening certain regulatory requirements under the rule.

Government Funding Bill

Assuming the government funding bill passes this weekend, which will fund government agencies through the rest of this fiscal year (through September 30), we shouldn’t hear any more of the issue until the summer. At that point, Congress will begin debating the federal government’s budget for the next fiscal year. This means we won’t hear of the predictable threats of a government shutdown or depleted federal budgets for most of next year. The last government shutdown was just two years ago and extended for 35 days, which made it the longest government shutdown in US history. Removing a potential government shutdown during the next nine months from the list of issues that financial markets worry about is a positive development.

Surprise Medical Billing

Despite the primary focus on stimulus and government funding bills this late in the session, a group of bipartisan lawmakers is making a last-ditch effort to add another issue into the final spending bill. The issue relates to relief from medical “surprise billing,” the familiar practice that many patients (especially emergency room patients) experience when they receive treatment and are later presented with surprisingly large bills for the service, often months after the fact. Usually, the services provided are outside of the patients’ insurance coverage network and therefore are more expensive. The bill would address that problem by setting all care and services in such settings at the same rate as if they were in network. The bipartisan bill has broad support but is opposed by the American Medical Association, one of the largest trade associations representing physicians. The bill likely has sufficient support to pass, but time may run out on it unless it is able to hitch a ride on the spending bill that should be approved this weekend. If it doesn’t, it will be back next year with a high level of bipartisan support.

Early January Schedule

With Congress on the verge of completing its priority work this weekend, members will soon go home and likely return to Washington in early January. This weekend may mark the end of the 116^th Congress, with the new Congress convening in Washington on January 3. On that day, 67 newly-elected House and Senate members will be sworn in. The legislative slate will be wiped clean at that time. All bills that did not reach the finish line over the past two years will have to start from scratch. On January 6, members will vote on the action taken by states earlier this week to certify the awarding of their electoral votes from the November election, which resulted in a Joe Biden electoral college victory of 306-232. Parts of this vote count may be challenged by certain members, but the states’ actions, as announced this week, are widely expected to be approved in both the House and Senate. President-elect Biden’s inauguration will be held on January 20. The Senate likely will begin holding hearings on some of Biden’s nominations before then so that some key positions are filled by Senate-confirmed cabinet secretaries in the early days of his administration. After the festivities associated with the inauguration, most of which will be virtual this year, Washington will turn to policymaking and the inevitable fireworks that surround that process.

Speaker Pelosi?

One of the first orders of business next year when Congress convenes is for the House to elect its Speaker. During the 2019 election for Speaker, 15 Democrats either voted “present” or for someone other than Speaker Nancy Pelosi (D-CA). Five of those 15 opposing members will not be in the House next year for the Speaker vote. Of those remaining 10, Pelosi will need the support of seven of them to garner 218 votes and officially become the Speaker of the House next Congress. This won’t be an easy task, but Pelosi has proven herself over the years to be a skilled political survivor and already three of the 10 are on record saying they will support her bid for Speaker this year. The bigger problem, and one that is out of Pelosi’s control, is that she will need all of the Democrats healthy and able to cast their vote for Speaker. With such a thin margin, anyDemocrat quarantined due to COVID-19 could push her below the 218 mark. We anticipate drama around the vote for Speaker on January 3 but for Pelosi to survive yet another close vote and continue to wield the gavel in the House.

Every Vote Counts

In the past 100 years, there have been a handful of close elections in the House and Senate but only four have been decided by fewer than 20 votes. The first instance occurred in 1922 in a New York House seat, while the second occurred in an Indiana House seat in 1984. There have not been any House or Senate elections that have been decided by 20 or fewer votes since that time, but there appear to be two this election cycle. The first is Iowa’s 2^nd Congressional District (the declared winner has a lead of 6 votes out of 400,000 votes cast), while the second is New York’s 22nd Congressional District (the challenger has a lead of 12 votes out of 300,000 votes cast). The vote counts in both races face ongoing legal challenges, and both races could still go either way. These races remind us that every single vote can still make a big difference.