This Week:

Both the Senate and House passed a continuing resolution to fund government agencies until December 16 (see below).

Next Week:

Both the Senate and House will be out of session until after the mid-term elections.

The Lead

Government Funding Bill.

The Senate was able to pass on a bipartisan basis legislation to extend government funding until December 16 once a controversial energy infrastructure permitting provision was dropped from the package. The House will follow suit today, clearing the way for President Biden to sign the bill into law. Passage of the bill, which temporarily funds government agencies at their current spending levels, averts a government shutdown for the next two and a half months. The bill also contains funds to address various emergencies, including Ukraine, fires in the west and southwest and a lack of drinking water in Jackson, MS. Congress will resume the fight over government funding for the last ten months of the new fiscal year in December. Any final solution will need to be bipartisan. This likely will result in a final bill that will accommodate both parties with higher levels of defense spending (to placate Republicans) and many domestic spending programs (to placate Democrats), although continuing inflation will take a bite out of both

Other Issues

Stablecoin Regulation.

Over the past few months, House Financial Services Committee Chairwoman Maxine Waters (D-CA) has been working with Ranking Member Patrick McHenry (R-NC) to develop legislation to regulate stablecoins, which are digital assets issued by private entities but backed by other assets, including fiat currencies like the dollar. Federal financial regulators have been concerned that stablecoins fall between regulatory gaps and could be subject to runs. A group of regulators issued a report last November that recommended that stablecoin issuers be regulated as banks. Chairwoman Waters issued a bill last week that would have the Federal Reserve regulate stablecoin issuers, but not with the same requirements to which banks are subject. The Chairwoman hoped to pass the bill this week, but committee members on both sides of the aisle balked at various aspects of the bill. Key points of contention include the role of state regulators, the robustness of anti-money laundering protections in the bill and the potential financial stability risks of granting nonbank stablecoin issuers access to the Fed payments system and discount window. The committee leadership may take another shot at passing a bill after the elections, but these are complex issues that will not be easy to resolve. There also will be limited time and competing priorities at that point. While this issue likely won’t be ripe for decisive action this year, a regulatory framework for stablecoins could be a bipartisan legislative achievement in the next Congress.

January 6 Select Committee Final Stages.

The House Select Committee on January 6 will soon wrap up its investigation. The committee’s ninth (and likely last) public hearing was scheduled for this week, but it was postponed due to Hurricane Ian. In the previous eight hearings, the committee has laid out a case that former President Trump played a central role in the violence at the US Capitol on January 6, 2021, with most of the evidence coming from the testimonies of former Trump administration officials and statewide Republican officials. These hearings have slightly hurt the former President’s favorability as registered in national polls. His favorability rating was 43.8% at the start of the public hearings in June and currently stands at 41.5%. The committee is also planning to release an interim report of its investigative conclusions in the coming weeks and a final report before the end of the year. The final report will include testimony from over 1,000 witnesses and conclusions and legislative recommendations to enact new election protections and other reforms. If Republicans regain the majority in the House following the mid-term elections in November, this committee will be disbanded and these recommendations are unlikely to be acted upon.

Social Security Changes.

The House Ways and Means Committee took notable bipartisan action by advancing legislation to repeal the windfall elimination provision (WEP) and the government pension offset (GPO), which each impact certain Social Security recipients. The WEP limits Social Security payments to certain public service workers who have access to a public pension, while the GPO reduces benefits for certain spouses and widows of individuals with government pensions. These restrictions are in place to prevent some retirees from “double-dipping” from both their own public pension plan and Social Security. Changes to these two provisions are estimated to cost almost $200 billion, which would hasten the projected insolvency date (currently 2035) of Social Security. Given the cost and impact, many members are considering alternative approaches. While there appears to be bipartisan interest in crafting a less-costly alternative, we believe this effort will likely falter and not be considered in the December session.

Ruling Class and Stock Purchases.

A bill to prohibit members of Congress, their children, certain congressional aides, Supreme Court justices, the President, Vice President and cabinet members from buying stocks in individual companies has been gaining momentum in the House, but House Democratic leaders pumped the brakes and prevented a vote on the measure this week. Supporters of the bill want to pass it to convince the public that Washington leaders are not engaging in insider trading. The idea has public support, and the House bill sponsors hoped to pass it right before the elections. The delay in the bill's advancement could be a case of Congress not rushing to a political solution. Congress is already subject to insider trading laws, and the prohibition on buying individual stocks seems overly broad, especially as some lawmakers worked in the private sector previously and may still own shares in that company. Bill opponents worry the new restrictions would also make it harder to attract quality candidates to run for office. This bill has significant political appeal, but we don't believe it will be revived anytime soon. 

New Supreme Court Season.

The Supreme Court will begin a new session next week with a caseload that involves a wide range of hot-button political issues, including affirmative action in colleges and universities, voting rights and the creation of minority-dominated congressional districts, the right of state courts to supersede elections laws created by state legislatures and environmental standards. Last year's caseload also featured significant cases. This included the Dobbs decision, which overturned Roe v Wade. That decision dominated political coverage early this summer and remains at the forefront in the minds of many voters. Cases will be heard by the court next week, beginning with a challenge to a major environmental law, but decisions won't be announced until next June. With conservative justices holding a 6-3 advantage on the court, we expect some decisions to generate additional controversy that will no doubt play into voter sentiment around the 2024 elections. 

Congress After the Mid-Terms.

Following the mid-term elections, Congress will return to Washington in November and December to try to wrap up must-pass legislation and other bills that may be close to being finalized. The first order of business will be the extension of government funding beyond December 16, which again will feature some controversial riders and partisan wrangling. The annual defense authorization bill also will be another important priority, and we believe this measure will be approved as well. There also will be interest in addressing legislation relating to consumer privacy protections, new restrictions on the technology sector, a federal right to same-sex marriage, reforms to the electoral college and energy infrastructure permitting reforms (after a controversial provision on that was excluded from the government funding bill this week). Congress sometimes has a stronger bipartisan appetite after elections, and while a small handful of bills other than the extension of the government funding bill and the defense bill have a good shot at passing, most will be kicked over into the new Congress in 2023.

The Final Word

Secretaries of State.

With Congress now out of session and unlikely to accomplish anything else legislatively before November, all eyes have turned to the mid-term elections. The battle for control of Congress is certainly the most notable storyline heading into the elections. One category of important elections that is flying below the radar is Secretary of State races. Only three states do not employ a Secretary of State, and in 38 states, the position is responsible for running the states’ elections. As such, they often have wide latitude for the establishment of election day procedures. This November, the position of Secretary of State will be on the ballot in 27 states, including key swing states such as Arizona, Georgia, Michigan, Nevada and Wisconsin. These races are usually significantly lower profile than their statewide companions, but as we saw following the 2020 elections, the responsibilities of Secretaries of State have an outsized impact. Over the next two years, the Secretaries of State will begin important planning procedures for the 2024 elections, including implementing any new voting laws, determining the location and frequency of polling locations and determining where a state’s finite election resources should be used. While the 2024 elections may be just over two years away, the 2022 elections will shape them.