Washington Weekly: The Speaker Survives

The Senate passed a bill to reauthorize aviation programs and policies within the Federal Aviation Administration (FAA) over the next five years (see below). The House voted to table Congresswoman Marjorie Taylor Greene’s (R-GA) motion to oust House Speaker Mike Johnson (R-LA) from his job (see below). It also passed bills to restrict home appliance energy efficiency standards, to require the inclusion of a citizenship question on the decennial census and only allow citizens to be counted when reapportioning House seats.

The Senate will vote on several Biden administration nominees. The House will vote on the Senate-passed FAA reauthorization bill and immigration-related bills.

The Speaker Survives.

In a strong bipartisan vote, the House rejected a move by Congresswoman Greene to oust House Speaker Johnson from his position. Congresswoman Greene had been threatening this action for weeks given her frustration with Speaker Johnson for taking up and passing foreign aid legislation. She and a small group of likeminded colleagues had met with the Speaker earlier in the week to make demands with respect to the policy course going forward (including no more aid for Ukraine) but when the Speaker made no commitments on those issues, Congresswoman Greene put the vote in motion. The Congresswoman’s effort to oust the Speaker seemed doomed last week after many House Democrats indicated that they too would reject the effort. There is simply no viable option to Speaker Johnson at this point, a reality understood by the strong bipartisan group that rejected the motion. This development should end the drama over the Speaker’s future this year, but it’s always possible other unhappy House Republicans could threaten the Speaker if they don’t like his decision-making or otherwise value the political turmoil that would follow.

Aviation Bill.

The Senate yesterday passed a bill to reauthorize federal aviation programs and policies within the FAA over the next five years. It also approved a one-week extension of these programs (it was set to expire today) so the House could vote on the Senate bill next week. The bipartisan FAA bill broadly enhances airport safety and funding, as we noted last week. To lawmakers, it will be a bipartisan win in an otherwise divided Washington. It also is the last remaining measure that has to be addressed because of a pressing deadline in the near future. Over the past couple of months, Congress has been mired in urgent and deadline-driven matters like government funding and foreign aid. With those bills out of the way and the FAA bill soon to be resolved, Congress doesn’t face strict deadlines on major legislation until the end of September when it will need to pass (or extend) government funding and a farm bill. Until then, a more relaxed Congress can pick and choose its priorities rather than being driven by nail-biting deadlines.

Social Security and Medicare News.

The annual Social Security and Medicare Trustees report was released earlier this week. It stated that the insolvency dates for these two bedrock programs are respectively 2035 (for Social Security) and 2036 (for Medicare). The projections are slightly improved relative to last year’s report. While this may be welcome news to retirees and many lawmakers, it could reduce the urgency around the need for reforms to ensure the long-term viability of these programs. Lawmakers are well aware of the structural challenges currently facing both programs and of the possible remedies that could fix them. The problem is that those changes are generally not politically popular, so lawmakers will likely defer action on them. At the same time, a growing number of lawmakers are focusing on deficit reduction as a top policy goal, though they also know that meaningful deficit reduction can only occur through reforms to Social Security and Medicare. This week's report likely will have the effect of delaying any serious reforms to both programs. This means for current and soon-to-be retirees, the two programs are unlikely to have any significant changes to their benefit structures until a decade from now.

The Speaker, Biden and Israel.

There was significant bipartisanship over the recent passage of the foreign aid bill that contained military funding for Israel and other countries. While the bill has been signed into law, the Biden administration has significant discretion in when it sends the military aid to Israel and the other countries. This week, the President said he was holding certain military aid to Israel to see how the country prosecutes the war in Gaza and in particular the city of Rafah where the last Hamas militants are believed to be. This has frustrated House Speaker Johnson and other Republican lawmakers who supported the aid in part because it was deemed so urgent by the administration. The bill passed by Congress included no such conditions on the delivery of the aid, including a delay, at the request of the administration. While there was major focus on the college protests last week, the new focus in Washington over the war in the Middle East will be a demand, possibly in the form of a House vote, to release the aid to Israel immediately. While that position will generate news, the Biden administration holds the cards in when it will release the aid and will continue to use its delay to try to leverage its influence over Israel’s ongoing military activities.

Regulatory Fireworks.

Congress next week will have the banking regulators testify in hearings in the Senate and the House. A major focus will be regulators’ proposed changes to bank capital requirements (called Basel 3). Lawmakers on both sides of the aisle have been vocal in expressing concerns about the potential impact of the proposed changes on the cost and availability of credit for consumers and businesses. At testimony earlier this year, Federal Reserve Chairman Jay Powell indicated that the pushback against the proposal has been unlike anything he has seen and that the Fed is seriously considering a re-proposal (which would delay finalization of the rule). Separately, FDIC Chairman Martin Gruenberg is on the hot seat following the release this week of an independent special counsel report that validated previous news reports on misconduct and a toxic work environment at the FDIC. There have been strong calls from Republicans for his resignation, though most Democrats have stopped short of doing so. His performance next week will be important in determining whether it is politically tenable for him to stay in his role. If Gruenberg resigned, the FDIC would be split between two Republicans and two Democrats. Current Vice Chairman Travis Hill (a Republican appointee) would become acting chair and would have control over the agency’s agenda. The FDIC effectively would be deadlocked on major policy matters (including Basel 3).

Economic/Inflation Reports.

We leave the economic forecasting to our great economists at UBS who know a lot more about it than we do. That being said, we are paying more attention to certain economic reports now as the presidential election looms closer. One is the monthly inflation reports (the next one, which will cover April, will come out next week). As reflected in national polls, many voters remain concerned about persistent inflation in the price of gas, groceries and housing. The Biden campaign is looking for signs of improvement in these numbers. The improvement has to occur and be sustained months in advance for unhappy voters to feel better. They’ll need time to digest the improvements and see them applied to their personal lives. Improvements in the data that occur closer to the election may be touted by the President, but they may not yet be felt by voters to make them feel better. Early voting begins in some states in late September, so these reports need to show signs of meaningful improvement soon or Biden will continue to play defense with voters who feel that the economy is not working in their favor.

Baltimore Bridge Collapse.

Other events have overrun media coverage of the late March collapse of the Francis Scott Key Bridge in Baltimore. The Baltimore Harbor has since been partially reopened, and work on the specific bridge span that collapsed has begun. The project will need funding that Congress is expected to provide in the near future. Part of the delay in providing the funds is an ongoing assessment of what exactly is needed to restore the bridge and harbor to its former state. The estimate that we hear is still $2 billion. A House committee will flesh all of this out in a hearing next week, where we possibly will learn new details of the mishap at the bridge. Once a final figure is known and requested, this funding should get priority in Congress and pass on a bipartisan basis.

Haley’s Voters.

Earlier this week, former presidential candidate Nikki Haley won 22% of the vote in the Indiana presidential primary, despite having dropped out of the race two months ago. Since she declared she was no longer running for president back in March, Haley has garnered nearly 1.2 million votes in the presidential primary elections and has won between 12-15% of the vote in many of those states. This is a large enough portion of the Republican electorate that has caused alarm bells to ring in former President Trump’s campaign, especially with exit polling showing that nearly half of these Haley voters plan to vote for Biden in November. In 2020, Biden won 6% of Republican voters which played a critical role in his narrow victory. Since then, his approval rating among Republicans has drastically fallen. How Republican voters who don’t like either Trump or Biden end up voting in November may decide who’s being sworn in on January 20th next year.