Washington Weekly: One Year in, Again

The Senate was out of session. The House passed four fiscal year 2026 government funding bills (see below) and rejected a resolution directing the removal of US military forces from Venezuela that have not been authorized by Congress. It also passed two bills to support organizations promoting alternatives to abortion and to overturn a Biden-era Interior Department order to ban mining on federal forest lands in Minnesota.

The Senate will confirm Trump administration nominees and vote on the House-passed government funding bills. The House will be out of session.

Government Funding.

With just eight days until the shutdown deadline, Congress has been hustling to pass the remaining fiscal year 2026 funding bills. Six bills have been signed into law at this point. The House last week passed two bills (Financial Services and National Security-State), and this week passed the remaining four (Defense, Labor-Health-Education, and Transportation all passed as one package, while Homeland Security passed as a standalone measure). Despite the positive result, the process was not without drama. Some Midwestern House Republicans made a successful push on the expansion of the sale of E15 fuel (an ethanol-based biofuel that benefits farmers). Additionally, the Homeland Security measure needed to be separated from the broader package of spending bills. Many Democrats objected to it given ongoing concerns over Immigration and Customs Enforcement (ICE) enforcement actions across the country. Only seven Democrats voted for the bill. The efforts on funding now will move to the Senate where the upper chamber may struggle to pass the remaining six bills before Friday’s deadline.

Foreign Policy.

At the World Economic Forum in Davos, Switzerland this week, President Trump was primed to deliver a speech on his economic agenda and on proposals to address affordability concerns. Though he touched upon those issues, his discursive speech was more focused on foreign policy and more specifically on his interest in acquiring Greenland. While President Trump indicated that the US would not use military force to acquire Greenland, he did threaten tariffs and other measures. Subsequent discussions between Trump and NATO Secretary-General Mark Rutte seem to have produced some sort of framework for an accommodation of US interests in Greenland and the Arctic region. While that is still in flux, Trump walked back threats of tariffs on various European nations. President Trump also met with Ukrainian President Zelensky in Davos, while US envoy Steve Wifkoff and Jared Kushner traveled to Moscow to meet with Russian President Putin. Trump’s attention continues to be drawn more to foreign policy.

Housing Measures.

The Trump administration this week issued an executive order attempting to address housing affordability. The order, which could be followed by further executive action, would restrict federal financing and other support for institutional investors buying single-family homes. This restriction is mostly symbolic since applicable limits on federal housing programs already effectively limit institutional investors’ participation in them. A more blanket ban that President Trump has called for likely would require legislation and would be difficult to implement. Some Republicans are working on legislative proposals to implement this idea, but those proposals will have challenges gaining traction because the concept of a ban is opposed by many Republicans. There is interest in Congress in doing something on housing affordability, but the measures likely to pass are more incremental ones with bipartisan support.

Retirement Alternatives.

Last summer, the Trump administration issued an executive order aimed at expanding access to alternative assets (e.g. private equity, infrastructure, digital assets) in retirement plans. The underlying premise is that exposure to alternatives could offer retirement savers diversification and higher returns over the long term. The order directed the Department of Labor (DOL), which has responsibility for overseeing investments permissible for retirement plans, to reevaluate its position with respect to alternative investments. The DOL’s proposal to implement the executive order is currently under review by the administration and is expected to be released very soon. That proposal is likely to include some form of safe harbor for the offering of alternative assets in retirement plans. The details of any applicable safe harbor will be meaningful in determining the appetite of plan sponsors for expanding access to alternatives in retirement plans.

Crypto Impasse.

After months of negotiations and work, the Senate Banking Committee was poised last week to mark up a bill to establish rules for the trading of crypto assets. The plug was pulled at the last minute after a major crypto exchange pulled its support for the bill. Even before this action, Senators were divided on key issues, including rules around conflicts of interest and payment of interest on stablecoins. Reflecting some of these divisions, the Senate Agriculture Committee this week issued a version of market structure legislation only supported by Republicans. That committee, which also has jurisdiction, plans on marking up the bill on a partisan basis next week. While there is still hope that bipartisan negotiations can come back on track, there is little momentum at this point.

Wealth Tax.

We have been skeptical about the likelihood of a wealth tax being instituted on the federal level. Californians could vote later this year on a ballot measure that would impose a one-time 5% wealth tax on the roughly 200 billionaires that reside in California. While the effort is being led by the health care workers union and is popular among many progressives, it is opposed by California Governor Gavin Newsom and much of the state’s tech industry and business community. Given the opposition and given that the logistics of getting the needed signatures are difficult, it’s possible that it may not come up for a vote. The debate in the Golden State will bring renewed energy to efforts to advance a wealth tax on the federal level, but that won’t be enough to change the prospects of passage over the next few years. Washington remains nowhere near ready to impose a wealth tax.

Cap Gains Exclusion for Home Sales.

Under current law, there is an exclusion for capital gains taxes for the sale of a primary residence ($250,000 for individuals and $500,000 for married couples). The exclusion has been in place since 1997 and has not been adjusted for inflation. As lawmakers try to address housing supply challenges, this issue is garnering some attention. There are now bipartisan bills in both the House and Senate to double current exclusion levels with future adjustments based on inflation. This would serve as an incentive for some homeowners to put their houses up for sale, which could alleviate housing supply pressures. While we are skeptical of the proposal moving forward at this time, its underlying bipartisan support will keep it in ongoing discussions in Congress on housing affordability.

Prediction Markets Under Scrutiny.

The widely reported story of an anonymous trader who took home over $400,000 after betting on the ouster of Venezuelan leader Nicolás Maduro has put prediction markets on Congress’s radar. Rep. Ritchie Torres (D-NY) has introduced legislation that would make it illegal for members of Congress, Hill staff and executive branch officials to bet on government outcomes on prediction markets. Lawmakers already had been quietly examining the growth of political prediction markets, which operate in a regulatory gray zone. While prediction market companies tepidly support Rep. Torres’ bill, they also have been positioning themselves to be more assertive in Washington. Earlier this month, their trade group (the Coalition for Prediction Markets) named former Congressman Sean Patrick Maloney (D-NY) as CEO and former House Financial Services Chairman Patrick McHenry (R-NC) as Senior Advisor. Until recently, prediction markets have been a back-burner issue, but the optics of the Maduro market trade have pushed it into the headlines and to Congress’s attention.

One Year in, Again.

President Trump this week marked the completion of the first full year of his second term. Based on recent polling, it seems that the public has similar views to those they had at this point in his first term. With an approval rating in the high 30s or low 40s depending on the poll, Trump’s approval is nearly identical to where it was in January 2018. While an underwater approval rating a year in is a bit of a rarity for a first-term president (though former President Biden found himself in the same position), it’s fairly common for recent presidents in their second terms. At this point in their second terms, both former presidents Bush and Obama found their approval ratings dipping into the low 40s. In an environment of more tribal politics, it takes a lot for the president’s own party to turn against them while the opposition party is virtually impossible to win over. Instead, the swings come among independent voters who trend anti-establishment and have usually soured on the president by this point. Based on recent history, including Trump’s first term, it seems unlikely that the president will be able to turn his approval rating around before voters begin casting their ballots later this year.