Washington Weekly: Government Open for Business

The Senate passed a resolution to overturn a US Department of Agriculture rule to end a longstanding ban on beef imports from Paraguay. The House passed bills to repeal emission reduction programs, bar the president from banning fracking without congressional consent, withdraw a Biden administration rule on oil and gas leasing and reform the Clean Water Act permitting process. It also passed a resolution to denounce Biden administration energy policies and a resolution to oppose a carbon tax (see below). Both chambers are expected to pass later today the final six government funding bills (see below).

Both the Senate and House will be out of session and return to Washington the week of April 8.

Government Open for Business.

Facing a deadline at the end of today, the House and Senate are on the verge of passing six funding bills for a wide range of federal agencies and functions for the rest of the current fiscal year (through September 30). With the passage of these bills and President Biden’s expected signature, there no longer will be a threat of a government shutdown that has hung over Washington since October of last year when this fiscal year began. Most Democratic and Republican lawmakers are satisfied with the outcome. The bills were the result of bipartisan compromise -- really the only course in a divided Congress -- and required each side to give on some of their priorities. This action means the public won’t hear about potential government shutdown threats until the beginning of the next fiscal year (October 1). Congress will not have all of its 2025 funding bills enacted by October 1, but today’s expected resolution could serve as a blueprint for success in this regard.

House Speaker Mike Johnson.

Speaker Johnson has acquired a few new gray hairs since he became speaker in October. He performs his role knowing that one unhappy House Republican lawmaker could call for a vote to replace him (as was former Speaker Kevin McCarthy’s fate). He is under great pressure to accommodate the Republican majority in the House, but that has proven to be an extremely difficult and sometimes impossible task given the fractures among House Republican lawmakers. Out of practical necessity Speaker Johnson took a decidedly bipartisan approach with the passage of the funding bills this week and two weeks ago. In the process, he resisted the demands of Freedom Caucus members for more spending cuts and policy changes at various agencies. While those requests were palatable to the Speaker’s political philosophy, they would never have been acceptable to the Democratic-controlled Senate. We don’t believe there will be an effort to replace Speaker Johnson, and we think his confidence in his ability to play the lead role in the House and to manage the disparate Republican factions was buoyed this week by the passage of these funding bills.

Carbon Tax?

As part of House Republicans’ “energy week” this week (as mentioned above), the House approved a non-binding resolution to oppose a carbon tax. This was a symbolic exercise to highlight the differences between the positions of House Republicans (in opposition to a carbon tax) and House Democrats (in support). Republicans will tout this vote in the coming months and argue that a carbon tax would only make it harder for many Americans who are struggling with higher costs (including energy costs). There is no serious conversation at this time about implementing a federal carbon tax in the US, and we don't expect the idea to gain any traction in the foreseeable future. Nonetheless, it was noteworthy that 196 House lawmakers showed support for the concept in this week's vote.

Social Security in Focus.

Hints by some Republican lawmakers and former President Trump about the need for reforms to Social Security have given Democrats and President Biden a political gift. Until recently, both sides had defended the current state of Social Security and had not suggested any possible reforms or related benefit cuts even though the financial strains in the system are well understood by all policymakers. Trump commented last week that there are potential significant cost savings from cutting entitlements. That comment was made around the time a group of conservative House Republicans proposed to increase the retirement age for Social Security beneficiaries. These two developments have opened the door for political attacks by Democrats about Republicans' support of Social Security. While this will generate some political buzz this year, there won’t be changes to Social Security this year or anytime soon. Reforms to the system are inevitable, but they won't occur until closer to its insolvency date, which is about a decade away. Also, we believe that changes that are enacted at that time will impact future recipients, not current enrollees.

Biden Impeachment Effort Fading?

Two House committees held another hearing this week to examine possible links between Hunter Biden’s past business activities and President Biden. Some House Republicans believe these links, if they exist, serve as a basis for the President's impeachment. Some of these claims were undermined late last month when a former FBI informer was charged with lying about a tie between the Bidens as part of Hunter's dealing with Ukraine energy company Burisma. Other claims, however, were reinforced by the testimony this week of a former Hunter Biden business associate, Tony Bobulinski, who said he sat in meetings with both Bidens and the President's brother, James, to coordinate such business activities. It has been speculated for several months that the House would schedule a vote to impeach the President, but proponents still seem to lack the "smoking gun" evidence that would ensure such a resolution would pass in the House. Until then, the issue will remain subject to an occasional committee hearing but not subject to a vote in the full House.

Housing Push.

In recent weeks, President Biden has outlined a $258 billion plan to address the rising cost of housing. It includes a variety of different spending and tax credit proposals, including a new $10,000 tax credit for first-time home buyers. While one tax credit (to incentivize the development of affordable housing) is part of a broader bipartisan tax bill that passed the House, many of the other proposals are more contentious and dead on arrival in a Republican House. The Biden administration’s primary legislative achievement on housing was rental and home ownership assistance included in the American Recovery Act of 2021. Key drivers of higher housing costs in recent years have been limited supply and rising mortgages rates. While the Biden plan has some proposals on addressing the former, its more noteworthy ones are subsidies to new home buyers. Mortgage rates, meanwhile, are impacted by the Federal Reserve’s monetary policy and have backed up as the Fed has sought to respond to inflationary pressures. President Biden’s pronouncements on housing policy have been more about political messaging on a salient issue than they are about near-term policy changes.

SOTU Bump?

While opinions on President Biden’s State of the Union address last week vary widely, more people (29%) said his speech exceeded expectations compared to the 12% who said he underperformed their expectations. With over 32 million people having tuned into the speech (an 18% increase from 2023), it seemed like now would be as good an opportunity as any for Biden’s low approval ratings to rebound. However, ten days after the State of the Union, it’s clear that there has been no discernable impact from the speech for Biden. Recent polling that was conducted after Biden’s remarks found that his approval remains in the high 30s (percent) and low 40s, the same range they’ve been in since last fall. There are few remaining opportunities for Biden to speak directly to such a large audience before the election, and the remaining chances will be in much tougher environments such as the general election debates, if they happen. The State of the Union appears to provide another data point that the public’s perception of Biden has already solidified. The election in November will be a referendum on which candidate most voters are able to live with as opposed to which they believe in.