Washington Weekly: Dog Days of Summer

The Senate confirmed Trump administration nominees (see below). The House passed a fiscal year 2027 State Department and Foreign Operations government spending bill with the SAVE Act attached. It also passed bills to make daylight saving time permanent year-round and to prohibit credit card companies from using merchant codes to distinguish firearms retailers from general-merchandise or sporting-goods retailers.

The Senate will continue to confirm Trump administration nominees. The House plans to vote on an annual national defense authorization bill, a continuing resolution to extend government funding, and a budget resolution in hopes to pave the path for a reconciliation 3.0 bill (see below).

Dog Days of Summer.

The Senate and House returned to Washington this week with a lengthy to do list and limited time. The House will be in session next week and the Senate for the next three weeks before adjourning for the rest of summer. The House this week was able to pass a spending bill on foreign operations. The legislation included a controversial voter ID bill (called the SAVE Act). This provision was added as a means of placating President Trump and members on the far right, but it is a non-starter in the Senate. Before heading out of town, the House will try to pass an annual national defense authorization bill, a budget resolution in hopes of paving a path for a reconciliation 3.0 bill (see below), and potentially a continuing resolution to extend government funding. The Senate will continue to approve Trump administration nominees and try to find paths forward on a few large items like defense authorization and crypto market structure legislation. The House has four weeks of session while the Senate has three when they return in September. That leaves only a total of 20 legislative days in the House and 29 days in the Senate before the midterm elections in November.

Reconciliation 3.0.

House Republican leadership has laid out its plan on a third reconciliation bill. The House Budget Committee this week advanced a fiscal year 2027 budget resolution that would lay the groundwork for a roughly $95 billion reconciliation package. The resolution instructs four House committees to draft legislation by September 11 to provide $73 billion in defense funding (mostly for the cost of the war in Iran), $12 billion in farm aid, and $10 billion for election security measures (parts of the SAVE Act). House Speaker Mike Johnson (R-LA) intends to have a vote on the budget resolution next week, but he can only afford to lose a few votes. Despite prodding from the White House, many members remain skeptical. Fiscal hawks dislike that the resolution does not currently pay for this spending, while other Republicans want more defense spending. Even if House Republicans are able to pass the budget resolution next week, its outlook in the Senate is dim. With limited session time, moving a substantial reconciliation package across the finish line is an increasingly difficult task and there may not be enough Republican appetite or support to undertake it.

Graham’s Institutional Void.

Senator Lindsey Graham’s (R-SC) passing removes one of the Senate’s few remaining Republicans who could bridge the divide among factions in the Republican party and within the Senate. As Budget Committee chairman and as a senior member of the Appropriations and Judiciary Committees, Graham was a key figure on a wide range of important issues (including defense spending, Russia sanctions, appropriations, and confirmation fights) over many years. Senator Graham also served as a primary liaison between the Senate and President Trump. While his seat has been temporarily filled, it will be hard to replace the relationships, institutional memory, and bipartisan credibility that allowed Graham to move between Trump, Senate leaders, Democrats, and foreign officials. Despite fraught partisan relationships in recent years, Graham’s passing has brought an outpouring of bipartisan sympathy and remembrances and it’s clear that his passing will leave a significant void in the Senate.

Iran.

Last month’s agreement between the US and Iran to extend the ceasefire and reopen commercial traffic in the Strait of Hormuz was short lived, as the two countries traded attacks and reimposed effective blockades of commercial traffic in the Strait. President Trump proposed a 20% fee to compensate the US for its efforts to secure the Strait but quickly dropped that proposal. For its part, Congress has concerns about the impact of the war and about Congressional authorization of military actions, and Democrats will continue to bring up votes on war authorization. There are ongoing efforts to bring peace negotiations back on track, but the renewed military action brings the potential for further escalation. The breakdown in the current agreement underscores how difficult a lasting settlement will be, since the initial deal largely punted many thorny and contentious issues regarding Iran’s nuclear capabilities to future negotiations.

Russia Sanctions.

A bipartisan group of senators this week released a revised version of a long-stalled Russia sanctions bill, a bill that was initially introduced and championed by Senator Graham (alongside Senator Richard Blumenthal (D-CT)). The bill would target senior Russian leaders and a wide range of entities helping Russia evade existing sanctions. It also would impose up to 100% tariffs on the top five countries purchasing Russian oil (likely impacting China, India, the United Arab Emirates, Turkey, and Singapore). The current tariff proposal significantly pares back the original Graham-Blumenthal bill (it would have imposed a blanket 500% tariff on purchasers of Russian energy, which could have affected over 60 countries), but there remain concerns from some members about giving the Trump administration additional tariff authorities. Last month, the House passed a Russia sanctions bill that would require new sanctions and export control authorities on Russia and would authorize new spending to arm Ukraine, but that bill hasn’t gained traction in the Senate. Despite momentum to move this bill in honor of Senator Graham, several fundamental issues remain unresolved.

Senate Nominations.

The Senate held a number of confirmation hearings this week, including Todd Blanche for Attorney General and Jay Clayton for Director of National Intelligence (DNI). Clayton’s nomination initially raised bipartisan hopes of restarting negotiations to reauthorize the intelligence gathering authority under Section 702 of the Foreign Intelligence Surveillance Act (FISA) after President Trump’s decision to name Federal Housing Finance Agency Director Bill Pulte as acting DNI derailed those efforts. At the hearing, Democrats raised concerns about Clayton’s refusal to state directly that Joe Biden won the 2020 election. While Clayton likely will get confirmed, the hearing did not bolster efforts for a quick approval of a FISA reauthorization. At his hearing, Acting Attorney General Todd Blanche told senators that he would support legislation to eliminate a $1.8 billion government weaponization fund, an apparent concession aimed at securing the support of skeptical Republicans. These two nominations (and one for Secretary of Labor) will need to be voted on individually. Before its recess, the Senate also will vote on a large batch of other Trump administration nominations (a change to Senate rules last fall allows the Senate to approve subcabinet executive branch nominees in groups).

Crypto Bill.

There have been active negotiations on a bipartisan compromise on crypto market structure legislation for many months. In May, the Senate Banking Committee passed a bill in a mostly party-line vote. Two Democratic Senators voted for the bill as an expression of goodwill as lawmakers continue to negotiate on a variety of outstanding issues, the biggest of which concerns ethics provisions aimed at addressing potential conflicts of interest from the Trump family’s and administration officials’ crypto ventures. Despite limited progress since the May mark-up, there is an expectation that the Senate will vote on the crypto bill this month and as soon as next week. A late curveball this week came from the Department of Justice which outlined concerns about the current language complicating their ability to prosecute money laundering. Negotiations continue, but the outstanding issues are both complex and contentious and it will be difficult to build the bipartisan support needed to advance the bill.

Shutdown Strategy.

House Republicans are moving toward a stopgap funding bill that would extend government funding through the midterm elections. The approach reflects a calculation that another high-profile funding fight, or even the threat of a shutdown, could create a political quagmire right before the election. While voters are unlikely to be impressed by either party in that scenario, Republicans likely would take the brunt of the blame given they control Washington. It also reflects the reality that a full appropriations process won’t be completed before September 30th, and a lame duck period often leads to better bipartisan compromise. The strategy, however, faces familiar complications. Some Republicans want to attach unrelated and potentially controversial policy priorities, which could hurt its chances in the Senate, where Democrats may be open to a clean extension but resistant to a partisan vehicle. A stopgap through the midterms is the most likely outcome, but the effort is expected to have bumps along the way.

The Money Game.

Democratic Senate candidates posted eye catching second quarter fundraising totals across nearly every top battleground race, in many cases significantly outraising their Republican opponents and reinforcing a familiar pattern of grassroots and small dollar energy favoring Democrats. That advantage, however, is only part of the equation. Republicans continue to hold a meaningful edge through aligned super PACs and party committees, bolstered further by the recent Supreme Court ruling which allows party committees to coordinate directly with candidates. The result is a split financial landscape in which Democrats have an edge at the candidate level and cheaper ad rates bought directly by the candidates, but outside Republican groups will be able to close the gap thanks to their resource advantage. The end result will likely be that neither side lacks the resources they need, and media companies in swing states will do very well for themselves around the election.