This Week:

The Senate confirmed various Biden administration judicial nominees and passed a resolution to overturn recent changes to Washington, DC’s criminal code (see below). The House passed a bill to prohibit federal officials from censoring speech on social media platforms, a bill to require the Director of National Intelligence to declassify information on COVID-19 origins and a measure to overturn a Biden administration rule that expands environmental protection (and regulation) for bodies of water throughout the US. It also rejected a resolution to remove all US military troops from Syria (see below).

Next Week:

The Senate will confirm Biden administration nominees and may consider the House-passed measure to block a federal rule expanding environmental protection for bodies of water. The House will be out of session.

The Lead

House Republicans Score.

Republicans have a long list of bills they want to pass now that they have a majority in the House. An early focus has been trying to undo measures put into effect by the Biden administration or by Democrats over the past two years. Last week, the House (and the Senate) passed a resolution to object to a rule by the Department of Labor allowing ESG investments to be included in retirement accounts, though President Biden is expected to veto that measure. The House also voted to reject revisions to the criminal code that the city council in Washington, DC enacted last year. Those changes included reduced maximum sentences for a wide range of offenses (including murder and carjackings) and a greater right to jury trials for misdemeanors. After the House passed this measure, President Biden surprised many by announcing that he would sign it into law if the Senate also passed it. The Senate then passed it this week on an overwhelming basis (33 Democrats joined all voting Republicans in support). This was the first instance this year in which a House Republican bill prompted a Senate vote to reverse a Democratic initiative. Politics was a big motivating factor given that the President and Senate Democrats don’t want to be seen as soft on crime as the 2024 elections near.

Biden vs. Progressives.

In addition to irritating some Democrats with his surprise decision to acquiesce on the reversal of the Washington, DC criminal reform bill, the President also annoyed some Democrats this week by stating that he would detain more migrants seeking to enter the US southern border through the asylum process. This followed comments in the last few weeks on his intent to limit the number of migrants seeking asylum. These new positions on immigration reflect a significant policy switch by the President and are a sign to us (particularly in combination with the action on the DC crime bill) that the President is indeed running for re-election next year. Immigration problems and crime in big cities have both been political liabilities for the President, and his actions this week are designed to address them. President Biden will engage in a delicate dance between maintaining his strong support from his party’s faithful while also looking for occasional spots to adopt more moderate positions. We witnessed some of that this week.

Biden Budget and Debt Ceiling.

As expected, President Biden released his budget proposal for the federal government for fiscal year 2024. The submission is required by law, but also is a way for the President to highlight his federal tax and spending priorities. The budget’s proposed tax increases on wealthier individuals and businesses and significant increase in spending for a wide range of domestic programs draws a sharp contrast with Republican priorities. Any budget from Republican lawmakers would lay out a plan to eventually balance the federal budget through federal spending cuts (not tax increases). The contrast between higher taxes and more spending on the one side and spending caps and reductions on the other will set the stage for the debate over how to extend the debt ceiling later this year. Whichever side can market its views most effectively to voters will have an upper hand in that debate.

Debt Ceiling Breach Prevention.

A key House committee passed legislation that would modify the Treasury’s debt authority to allow payments for principal and interest on the public debt and payments for Social Security and Medicare benefits if the debt ceiling is not extended on time. It also prioritizes the payment of benefits for veterans and certain Defense Department personnel, while de-prioritizing other payments (including congressional salaries). This is a Republican-only bill to limit the impact of a failure to pass the debt ceiling extension on time but is a non-starter with Senate Democrats and President Biden. Some Republican lawmakers will tout the bill as a way to try to alleviate the debt ceiling crisis, but financial markets won’t view this action as meaningful.

Other Issues

Bank Capital Pushback.

Federal Reserve Chairman Jay Powell appeared before House and Senate committees this week as part of his semi-annual testimony. Beyond plenty of discussion and questions about inflation and the Fed’s monetary policy response, Chairman Powell received an earful from lawmakers, particularly Republicans, about the Fed’s consideration of changes to bank regulatory capital rules. Last year, not long after being confirmed by the Senate, Fed Vice Chairman for Supervision Michael Barr indicated that the agency would conduct a “holistic review” of existing bank regulatory capital requirements. Republicans this week questioned the need for such a review and the need to increase capital requirements given that capital adequacy was strong throughout the pandemic and that increases in capital requirements could negatively raise the cost of borrowing for businesses and households. They also warned the Fed on the need to tailor regulatory requirements for banks based upon their risk profiles in accordance with legislation passed into law in 2018. Chairman Powell made no commitments other than to support tailoring. The hearings amounted to a shot across the Fed’s bow with the Fed and other banking regulators continuing to finalize work on a major proposed update of capital rules over the coming months and with Vice Chairman Barr scheduled to make his own appearance before lawmakers later in the spring.


Washington is in an uproar over the murder of two Americans just over the border in Mexico this week. Beyond the expressed outrage, a few legislative proposals have come forward that will generate attention. The first is to designate the Mexican drug cartels as “foreign terrorist organizations (FTOs),” which would allow the US to more aggressively pursue them in the US justice system. The other proposal is to engage the US military in dismantling the cartels’ facilities. Clearly, this latter option is fraught with risk and isn’t embraced by a bipartisan majority, at least now. The FTO designation has bipartisan support, but it’s not yet clear whether it will be enough for the bill to advance. The Biden administration would prefer to deal with the problem through diplomatic channels without any congressional mandates, and we believe this outcome is most likely for the time being.

More Southwest Airlines Problems.

Yet another problem this week with Southwest Airlines (this time regarding its treatments of passengers on a flight headed to Raleigh, NC) is giving lawmakers an opportunity to reconsider an airlines passengers “bill of rights” that was floated last year but not enacted. The bill primarily addresses the burdens on fliers from unreasonable flight delays and cancellations. Airlines would have to compensate fliers under certain circumstances for delayed or cancelled flights. This bill is likely to be folded into a reauthorization of the Federal Aviation Administration that expires on September 30 but could move sooner if passenger woes continue to mount.

US Military Troops in Syria?

The House rejected a resolution this week calling for the removal of all US troops from Syria within six months. If you had forgotten that US troops were still in Syria, you weren’t alone. The US has about 900 troops in Syria working primarily with Kurdish troops to defeat remnants of ISIS in certain parts of the country. Russia, Turkey, Iran and Israel also have troops in Syria. The House resolution may be the first of many that calls for the withdrawal of US troops from other foreign lands. This resolution reflects a sentiment among some Republican lawmakers that the US should be engaged in less US interventionism abroad (beyond key NATO responsibilities and curtained targeted responses to aggressive actions by adversaries).

The Final Word

Presidential Primary Debates.

While most Americans probably aren’t ready for another election season, the reality is that it’s not far off. This time next year we will have just finished “Super Tuesday,” the date in which the greatest number of states will hold primary elections or caucuses. At that point, it’s likely that we’ll have a much better idea of who will be the nominees of the two major parties. The Republican Party announced that its first presidential primary debate will take place in Milwaukee this August. While August is only five months away, it’s not out of line with modern precedent for contested primaries. During the 2016 presidential election, which did not have an incumbent for either party, Republicans held their first debate in August 2015, while Democrats held theirs in October 2015. Neither of those were as early as the 2020 Democratic debates, which began in June of 2019. The combination of larger budgets for presidential campaigns, the ease of accessing large swaths of the population through social media, and a lack of certainty around who will be the nominee have all led to presidential primaries kicking into high gear earlier and earlier. Ready or not, the 2024 presidential election is right around the corner.