This Week:

The Senate confirmed various Biden administration nominees. The House passed seven bills to address gun violence (see below). It also passed a bill to reauthorize the Food and Drug Administration’s user fee programs through 2027 and a bill to authorize numerous water infrastructure projects and studies.

Next Week:

The Senate is expected to vote on a House-passed bill to address health care benefits for veterans exposed to toxic substances. The House plans to vote on a Senate-passed bill to bolster security for the families of Supreme Court justices and a Senate-passed bill to overhaul ocean shipping laws. It also is expected to vote on a bill to compel financial institutions and federal banking regulators to disclose their diversity practices and a bill to establish an Agriculture Department investigative office to examine competition in the meat and poultry industries.

The Lead

Gun Control/School Safety.

A bipartisan group of Senators tasked with crafting a bill to respond to recent mass shootings made quiet progress this week by identifying specific policy areas that could be addressed in a compromise bill. The hope is that the Senate could vote on a final bill in the upcoming weeks. While the House passed seven separate gun control measures this week, they mostly did so on a party-line basis. Those bills are non-starters in the Senate where 60 votes will be needed for passage. Hence, the focus on the Senate discussions. While there is no Senate bill yet, we think the following provisions that were covered in the bipartisan negotiations have a good chance of being included in an eventual bill.

  • Incentives for States to Enact Red Flag Laws.
    Nineteen states already have established red flag laws that allow law enforcement authorities to remove guns from individuals deemed to be unsafe or unfit to have them. These laws have had different degrees of successes and challenges in those 19 states. The emerging Senate bill would not mandate states to pass such laws but instead would encourage them through federal grant assistance to help implement them and establish strong due process protections if they chose to enact them.
  • Background Check Enhancement.
    The federal background checks that individuals are subject to as a part of most gun purchases would be enhanced by requiring more information on applicants’ juvenile history (from before they turned 18 years old). Such background is presently excluded. Applicants with troubled juvenile histories would have to overcome a more difficult process to purchase a gun, which may disqualify some individuals from purchasing one. This will likely be the only change made to background checks on gun purchases.
  • Federal Funds for Mental Health.
    A federal program to fund community behavioral health clinics that has shown signs of success in recent years will be enhanced. This provision is likely to be a focal point and is still evolving.
  • Federal Funds for School Safety.
    Past federal efforts to strengthen school safety has been aimed at high schools, but new funds would be allocated to target elementary schools as well. Local schools would compete for federal funds to enhance safety at their schools in a variety of ways.

What Will Be Left Out?

An assault weapons ban, lifting the age to 21 to purchase certain guns, more expansive background check requirements, mandatory minimum sentences for individuals using a gun in the commission of a crime, and restrictions on social media. Remember that states also can enact their own measures, including raising the age to purchase more complex and powerful guns.

January 6 Select Committee.

A year after House Speaker Nancy Pelosi (D-CA) first announced its formation, the committee held its first public hearing this week. Those who watched this first hearing and the others to follow throughout this month will have to decide for themselves on the meaning and importance of the hearing, which concerns questions about who was at fault for the violence, the adequacy of security at the US Capitol and how seriously our democracy was threatened on January 6, 2021. New polling next month will reveal whether these hearings have put the January 6 issues on voters’ minds vis a vis other major issues like inflation, Roe v. Wade, gun control, the war in Ukraine, and immigration. The issues from the hearings will clearly put many Republicans on the defensive, but they seem positioned to win the majority in the House in the mid-term elections and will be able to hold similarly high-level oversight hearings on issues that may embarrass Democrats next year.

Other Issues

Comprehensive Crypto Bill.

A bipartisan pair of lawmakers – Senator Cynthia Lummis (R-WY) and Senator Kirsten Gillibrand (D-NY) – released the first comprehensive bill on the regulation and taxation of digital assets this week. Reflecting their emphasis on innovation, the lawmakers take somewhat of a light regulatory touch. Importantly, the bill would presume digital assets to be commodities (unless they clearly have debt or equity features) and would give the Commodities Futures Trading Commission primary authority over these markets. This sets up an inevitable turf fight, with SEC Chair Gary Gensler having argued for months that most digital assets are securities, and as such the SEC should have authority. The bill also would establish regulatory requirements for certain stablecoins (digital assets issued by private entities and backed by other assets, including fiat currencies like the dollar), though it stops well short of federal regulators’ calls for stablecoin issuers to be regulated as banks. While the bill is an important marker in the ongoing debate, it has no chance of becoming law anytime soon. Given the complexity of the issues and the aforementioned turf fights, a comprehensive bill likely will be too much of a lift even in the next session (although a targeted bill on a key issue like stablecoins would have a better chance).

Equity Market Reforms.

Following last year’s market volatility in Gamestop and other “meme” stocks, both Congress and the SEC have been reviewing equity market rules with an eye to potential changes. In a speech this week, SEC Chair Gary Gensler outlined potential reforms his agency is considering. Though retail investors have benefitted from low transaction costs and strong liquidity, Chair Gensler has expressed concern about market concentration and about the small number of wholesalers filling retail orders. In response, he posits having auctions for retail orders on an order by order basis, a complicated and already contentious idea that could be difficult to implement. Other ideas put forward include allowing exchanges to execute trades at smaller tick sizes than a penny, greater transparency on order routing, and a firming up of the meaning of best execution. Chair Gensler did not propose a ban on payment for order flow and exchange rebates, though he said that the SEC is looking at ways to mitigate potential conflicts and increase transparency. While the SEC’s thinking on many of these issues is preliminary, the agency likely will begin issuing initial proposals (which will be subject to a lot of feedback and likely pushback from market participants) in the coming months.

Statehood for Puerto Rico?

House Natural Resources Committee Chairman Raul Grijalva (D-NM) held a public forum in Puerto Rico over this past weekend to get input from Puerto Ricans about the territory’s political status. As expected, the forum drew a wide variety of opinions, including supporters for Puerto Rico to become the 51st state of the US. The forum focused on the draft Puerto Rico Status Act, which provides the island with a binding vote over its status. Three options would be put forward: statehood, independence, and sovereignty in free association with the US. If statehood prevailed, it would not be automatic and would still require approval from Congress. House Democrats have not scheduled a vote on this bill yet but seems to be heading in that direction soon. Joe Biden and other 2020 Democratic presidential candidates supported statehood for Puerto Rico during the campaign. While a bill approving statehood could advance in the House later this summer or fall, it has no successful path forward in the Senate. Over the next few years, it is hard to envision a path forward for statehood for Puerto Rico.

The Final Word

Lost Seniority.

Following the recent announcements from several Members of Congress that they would not seek re-election, it has become guaranteed that the 118th Congress (for 2023-2024) will lose more than 1,000 years of seniority compared to the current session of Congress due to retirements, deaths and primary election defeats. This number will only grow following the general elections in November when more incumbents will lose. While a high turnover rate in Congress is not unusual, it is rare that so many members with vast tenure depart in such a concentrated manner. This “changing of the guard” will provide new opportunities for many members who have been waiting in the wings for their opportunity to move into more senior positions, but it also means that a lot of the institutional knowledge in Congress will be gone at the start of next year. For better or worse, this will inevitably lead to new outlooks in Congress about how to govern, as well as changes in ideology and temperament. Our sense is that newer members have a stronger desire to shake things up and change the system, but whether that is a positive or negative dynamic will remain to be seen.