Washington Weekly: Stagnant Polling

The Senate approved various Biden administration nominees and failed to pass legislation that would codify the right to access fertility treatments. The House passed the annual defense authorization bill for fiscal year 2025 (see below). Both chambers competed in the annual bipartisan tradition of the Congressional Baseball Game (Republicans beat Democrats 31-11).

The Senate will vote on Biden administration nominees. The House will be out of session until June 25.

Stagnant Polling.

The presidential election is still a few months away, but one thing that has stood out is how little has changed in polling for both President Biden and former President Trump over the past few months. Trump continues to lead nationally and in most of the seven swing states. Biden’s polling has improved slightly after Trump was convicted two weeks ago. It is too soon for quality polling to have been conducted in the aftermath of Hunter Biden’s conviction. The presidential debate on June 27 or Trump’s sentencing on July 11 could shake things up, but for now, it seems that the vast majority of voters have fixed impressions of both Biden and Trump that haven’t changed despite some pretty significant developments. Unlike past races, where large swaths of voters begin as undecideds, voters know the two candidates well and seem to have already decided who they will vote for (have you?). Unless that changes, the election will come down to a fight for a very small number of undecided voters in a few states and the campaigns’ ability to turn out voters who have already made up their minds.

Annual Defense Authorization Bill.

The House this week passed a $883 billion defense authorization bill for fiscal year 2025. This bill doesn’t provide actual funding for defense programs, but it does make funding eligible through the subsequent appropriations process and broadly sets policy for the Pentagon for the upcoming year. The House bill contains a number of provisions dealing with controversial social policy issues and their intersection with Pentagon employees and contractors. These will be removed in the Senate. However, there is bipartisan support for most of the core provisions dealing with national defense, including strengthened international partnerships, a stronger missile defense and replenishment of weapons systems. Another primary focus of the bill is to provide a 19.5% increase in pay for junior enlisted servicemembers and a 4.5% raise for all other servicemembers. The raises are a response to military recruiting challenges, especially at the entrance level. The House-passed bill will now go to the Senate, where a different and more bipartisan version will be crafted. A final version should be reconciled in the fall.

Ongoing AI Focus.

Both the executive branch and Congress have been hyper focused on artificial intelligence (AI) in the last year. The Biden administration issued an executive order in October that called for agencies across the government to assess the opportunities and risks of AI. Just last week, the Treasury issued a request for comment on how the financial industry uses AI. In Congress, there have been dozens of hearings across House and Senate committees and lawmakers have introduced an even greater number of legislative proposals. Last month, a bipartisan Senate working group issued a long-awaited report that has been billed as a policy roadmap across such broad areas as national security, US competitiveness, jobs and the future of work, data security, intellectual property, and democracy and governance, among others. However, the report is more of a placeholder. Senate Majority Leader Chuck Schumer (D-NY) acknowledged that the Senate will not take up a comprehensive AI bill this year. And, developing consensus even in discrete policy areas (like addressing use of AI deepfakes in elections) will be difficult. Two areas where there is greater agreement currently is on funding AI innovation and broadening its application to national security.

Social Security Expansion.

There was significant attention this week to a rule change made by the Social Security Administration to increase Social Security (SS) benefits to some individuals beginning on September 30. Specifically, the rule change will boost benefits under the Supplemental Security Income component of SS, which primarily assists disabled individuals. Most lawmakers will support this action or acquiesce to it. However, some lawmakers are frustrated that the expansion will make reforms of SS in the future as a means of stabilizing growing entitlement spending and lowering the budget deficit more challenging. It’s politically difficult for elected officials to criticize any expansion of SS, and we believe this rule change will become a long-term feature of SS policy going forward.

Corporate Tax Rate Under Threat?

Battle lines are being drawn for next year’s fight on a major tax bill that could substantially change key individual and corporate tax provisions. The Senate Budget Committee held a hearing this week that touched on tax issues relevant to Wall Street, such as carried interest, a financial transaction tax and capital gains. It also addressed a broader range of other issues, such as the corporate tax rate, climate risk, CEO pay and the appropriate tax rate for high-income earners. As Senate Budget Committee Chairman Sheldon Whitehouse (D-RI) noted at the hearing, it is currently projected that extending the 2017 tax cuts would cost $4.6 trillion over the next decade. This projection has led some Republican lawmakers to consider a corporate tax rate increase paired with spending cuts as a means of paying for an extension of lower 2017 rates for individuals. While Republican lawmakers are loathe to increase taxes in general (and former President Trump proposed a 1% reduction in the tax this week), they may have to if a bipartisan deal is required. A small increase in the corporate tax from 21% to perhaps 25% may be their best option to raise needed revenue in the bill among other worse options. While we expect a tax bill to move forward next year, its contents will not only be shaped by the winner of the election, but also by deficit/debt concerns, which is why an increase in the corporate tax rate is in play.

Hotel Prices.

A few weeks ago, we wrote about legislation to increase transparency over the costs associated with buying tickets to sporting events, concerts and similar events. The House followed up on that bill with the introduction of a bipartisan bill that seeks to bring better price transparency when booking hotel rooms. This bill, known as the “No Hidden Fees Act,” is supported by the hotel industry and aims to have a single standard for transparent and mandatory fee displays across the lodging industry – from short-term rental platforms to online travel agencies and hotels. This legislation was largely spurred by consumer frustration over the variety of additional fees charged by hotels and resorts. This bill passed the House this week with strong bipartisan support and also has a good chance to advance through the Senate later this year.

Chevron Doctrine’s Demise?

Nearly 40 years ago, the Supreme Court ruled in Chevron v Natural Resources Defense Council that courts should defer to a federal agency’s interpretation of ambiguous statutes passed by Congress. Since then, agencies have had a long leash in interpreting laws and developing resulting regulations. The “Chevron Doctrine” has been a fundamental doctrine in administrative law and has been invoked in over 18,000 judicial opinions. However, detractors argue that Chevron gives agencies too much latitude in pursuing their own regulatory policy agendas. In January, the Supreme Court heard two cases that challenged the authority provided by the Chevron Doctrine. Based on the justices’ lines of questioning, it seems plausible that the court will abolish the Chevron Doctrine or significantly modify it. This will be a significant blow to federal agencies who are bracing for court challenges to many current regulations. The Supreme Court will issue many important opinions over the next few weeks, but the Chevron decision has the most potential to impact the business sector and the current state of regulation.

Debate Prep.

With the first presidential debate less than two weeks out, both campaigns are deep into their preparation work for what will be the earliest presidential debate in modern history. The late June timeline clearly reflects the two campaigns’ uncertainty over how the debate will go for their nominees. The reasoning is that if anything goes wrong, there will be plenty of time to recover. That’s not to say that the debate won’t have high stakes. Both President Biden and former President Trump will be under the microscope as they try to assuage voters’ concerns about their mental and physical fitness for office (whoever is elected will become the oldest president in history). Biden and Trump will also have to clearly answer questions on the economy, immigration, abortion, and foreign policy, all topics which are high priorities to voters. In addition to the known knowns, there are several known unknowns, including how a debate without a live audience will impact the candidates and if RFK Jr. will somehow defy the odds and appear on the debate stage. It’s impossible to predict how this debate will play out, but with a television and social media audience in the tens of millions and news coverage that will reach hundreds of millions, it will mark a beginning of the general election contest.