Washington Weekly: The May Agenda

U.S. Office of Public Policy, 29 April 2022

8 min read

This Week:

The Senate confirmed various Biden administration nominees, including Lael Brainard to serve as Vice Chair of the Federal Reserve (see below). The House passed legislation that would expedite the process for the US to provide further military and other aid to Ukraine.

Next Week:

The Senate will continue to vote on Biden administration nominees. The House will be out of session.

The Lead

The May Agenda.

The House and Senate have a closing window of time between now and Congress’ August recess to pass remaining legislative priorities. In the next month, Congress will try to pass an estimated $35 billion funding bill to increase support for Ukraine. This measure has broad support, though its path forward will be complicated by efforts to combine it with Covid-related spending. More generally, inflation and immigration (particularly the southwest border and the question of whether to continue the Title 42 policy of denying migrants from entry due to Covid concerns) remain flashpoint issues and likely to be in play over the coming weeks. Democrats inevitably will take another stab at trying to revive the Build Back Better (BBB) initiative, which would need to be a slimmed down version of the Biden administration’s plan of domestic spending and tax increases. Congressional negotiators also will try to forge a compromise bill to boost US research in science and technology, including new semiconductor production plants, to enhance competitiveness with China. We are more bullish on the competition bill than the BBB measure, but both will be difficult to move forward. Legislative matters not finalized by the August recess will languish given that Congress is unlikely to pass major bills right before the mid-term elections.

Russia, Ukraine and the US. 

The US and its allies are likely to continue to provide strong military and financial support to Ukraine for the foreseeable future. With Russia escalating its efforts to solidify its control of parts of eastern and southern Ukraine, this conflict appears likely to drag on for a long time. Only decisive military activity on the ground will trigger any serious negotiations for a cease-fire. One key question this week was why it took so long for the US to name a new ambassador for Ukraine? The job has been vacant for nearly three years (spanning both the Trump and Biden administrations) amidst a growing military threat from Russia. The Biden administration’s nominee announced this week, Bridget Brink (who currently serves as US Ambassador to Slovakia), has strong bipartisan support and should be approved by the Senate once her nomination is officially made and a hearing is held. Ambassador Brink’s first duty will be to reinstate US embassy personnel to Kyiv and make sure the US flag is again flying there.

Fed Nomination Limbo.

The Senate this week was able to approve the nomination of current Fed governor Lael Brainard to be Vice Chair. However, a procedural vote on another Fed nominee (economist Lisa Cook) failed because she had no Republican support and there were several Democrats who missed the vote due to having Covid. The situation was a reminder of the challenges that Democrats face with respect to approving President Biden’s nominees in an evenly divided Senate. The Senate will need to come back to Cook’s nomination when all 50 Democratic Senators and Vice President Harris (who also had Covid and whose vote is needed to break a tie) are able to vote. This also pushed back votes on Fed Chairman Jay Powell’s renomination and the nomination of economist Philip Jefferson to join the Fed Board since Democrats want to first approve the more controversial nomination of Cook. The Biden administration also recently nominated Michael Barr for another important Fed post (Vice Chair for Supervision, which is the lead position on bank regulatory policy matters). Democrats are keen on filling this position and will try to quickly move Barr, a veteran of the Treasury Department in prior Democratic administrations, through the upper chamber’s nomination gauntlet.

Other Issues

Elon Musk and Congress.

Elon Musk’s deal to purchase Twitter caught Congress by surprise, and there is little lawmakers can do to influence or affect the transaction. House and Senate committees undoubtedly will hold hearings featuring the new owner of Twitter. While the hearings will be interesting, they are unlikely to accomplish much. Democrats will express concerns, while Republicans will urge censorship reforms at the big tech platform. The Biden administration could slow the deal down by pressing for more information when Musk reports his purchase of Twitter to the Federal Trade Commission and Justice Department,as he is required to do. Beyond that, this transaction puts more pressure on Congress to address legislation regulating big tech, but no such bill is close to passing at this time. 

Senator Manchin and the BBB.

As we have reported before, Democrats’ ability to revive a BBB bill will depend on their ability to gain the support of their colleague Senator Joe Manchin (D-WV). This week, Senator Manchin indicated his support for legislation to provide tax subsidies and other measures to boost production of both fossil fuels and renewable energy sources. Those measures would be paid for by a wide range of personal and business tax increases, including an increase in the capital gains tax from 20% to 28%. Many of his tax proposals, including the capital gains proposal, have been rejected by Senator Kyrsten Sinema (D-AZ) in an earlier version of the BBB. If Manchin’s proposal gains traction – a big “if” – we don’t believe the capital gains tax increase would survive. Instead, a provision in the House-passed BBB bill to impose a 5% surtax on income over $10 million and an additional 3% on income over $25 million would likely be included. These income levels would be based on modified adjusted gross income, which includes capital gains. Movement on a BBB bill in the Senate is very fluid and just beginning, though we still believe there is a low chance of such a bill being enacted.

Southwest Border Confusion.

The influx of undocumented immigrants at the southwest border has turned into a full-blown political and policy headache for the Biden administration that will soon come to a head. While the influx of immigrants has grown steadily over the past year, a bigger concern is the much larger wave of migrants expected to enter the US once (and if) rules currently in place to deny entry to asylum-seeking migrants due to concerns over Covid are rescinded, as planned on May 23. These rules, under the so-called “Title 42,” have sharply limited the number of migrants seeking asylum in the US over the past two years. Congressional Republicans have sought to keep the Title 42 restrictions in place and have demanded a vote on this measure in the Senate. A handful of Senate Democrats, particularly those representing border states or in difficult elections, also support a retention of Title 42, which makes this a tricky issue for Senate Democratic leaders and the administration to navigate. We believe there will be a vote on this issue at some point soon in the Senate and that at least a temporary retention of Title 42 restrictions will prevail.

House Redistricting Update.

Democratic chances to retain their majority in the House following this fall’s mid-term elections suffered a significant setback this week with redistricting developments from two key states. The developments are expected to reverse very modest gains that Democrats had expected from the redistricting process before this week and are likely to give Republicans an advantage in up to eight additional seats. Specifically, developments in New York have resulted in the dismissal of redistricting maps favorable to Democrats and will likely produce final maps more favorable to Republicans. The New York Court of Appeals has forced a re-writing of the New York map by an independent group that is likely to be more favorable to Republicans in five districts. New maps in Florida are likely to net three seats for Republicans. Both of these developments could be subject to further legal action and change, especially in New York, but if they stick, the road for Democrats to retain a majority in the House will be much steeper.

The Final Word

Primary Election Season.

Tuesday, May 3, kicks off what will be a hectic Congressional primary election season across the country. Over the next two months, 30 states are scheduled to hold their federal primary elections for contested House and Senate seats. The topline stories over the next few weeks are likely to revolve around which candidates win their party’s nominations for competitive Senate races in Ohio, North Carolina, Pennsylvania, Georgia and Nevada. These Senate races will test the influence of former President Trump on the Republican side and the progressive wing on the Democratic side. More importantly, the strength of the Republican nominees in these key races likely will determine whether the party can claim the majority in the upper chamber in November. More extreme or controversial nominees from the Republican side will complicate the party’s chances of taking over the Senate.