Washington Weekly: A DHS Deal

The Senate confirmed Trump administration nominees, including Senator Markwayne Mullin (R-OK) as the Secretary of the Department of Homeland Security (DHS). It also passed legislation to fund and reopen DHS (see below) and continued debate on a voting reform bill (see below). The House passed bills to fully fund DHS, to establish a federal commission on public safety in Washington, DC, and to authorize the president to deny entry to vessels that use ports in certain Western Hemisphere countries where US property has been seized. It will likely also pass the Senate-passed DHS funding bill before the end of the weekend.

The Senate and House are out of session and will return the week of April 13.

Iran.

With the war in Iran nearing a month, there was a volleying of ultimatums between the US and Iran along with continued attacks between the two sides. While Iran’s military capabilities have been substantially degraded by sustained attacks by the US and Israel, the threat it poses to the Strait of Hormuz continues to have a negative impact on global energy prices. With these crosscurrents, the Trump administration has engaged in efforts to bring Iran to the negotiating table while also mobilizing additional US forces. Meanwhile, Congress continues to seek greater clarity on the administration’s strategic objectives. With no end in sight, Members of Congress head towards a two-week recess during which they will hear concerns from constituents on the impact of the war. When Congress returns, it also will be confronted with a growing tab from the war. It already is costing tens of billions of dollars and could rise into the hundreds of billions of dollars for a protracted war of expanding scope. Republican leaders will have to decide on whether to try to pass the funding through regular order with Democratic support (which may be conditioned on certain concessions around greater Congressional oversight) or a partisan reconciliation process (procedurally challenging and not clear if there is enough Republican support). These tactical decisions will be determined in part by the duration (and therefore cost) of the war and on public sentiment.

A DHS Deal.

After 41 days, with pressure building from significant airport delays, the Senate voted early this morning to fund most of the Department of Homeland Security (DHS). Throughout the week Senate Republicans and Democrats traded offers and counteroffers with no avail. On Thursday evening, President Trump declared a national emergency in order to direct DHS to pay TSA employees. Following the Trump administration’s announcement and after a late night of negotiations, a deal was finally met. The Senate passed a modified bill that would fund DHS except for Immigration and Customs Enforcement (ICE) and most of Customs and Border Protection (CBP). ICE and CBP are the two agencies that have been at the center of the partisan standoff over immigration enforcement practices. Republicans likely will try to address funding for those two agencies through reconciliation, which is procedurally challenging but allows budgetary measures to advance in the Senate with only a simple majority. The House will begin considerations of the Senate-passed bill today and is expected to pass the bill before the end of the weekend. Once the House passes the DHS funding bill, it will join the Senate in a two-week recess.

SAVE America Act.

The Senate entered its second week of debate on a controversial election bill known as the SAVE America Act. The bill would require proof of citizenship to register to vote in federal elections and a photo ID to be presented at the polls. With President Trump pressuring Senate Republicans to pass the bill, Senate Majority Leader John Thune (R-SD) began debate on the bill last week and kept the Senate in session throughout last weekend to debate the bill. The bill does not have enough support to clear the Senate’s 60-vote threshold. The presidential pressure has Republicans talking about including the bill in a possible second reconciliation package, but this election bill would not meet strict Senate rules that require provisions in reconciliation bills to have a primarily budgetary impact. The Senate will continue debate on the SAVE America Act the week of April 13.

Crypto Compromise Efforts.

After the Senate Banking Committee needed to pull the plug on a planned mark-up of a crypto market structure in January, the White House has held meetings with various industry stakeholders to try to find a way forward on a key remaining sticking point - whether interest can be paid on payment stablecoins (digital assets backed by dollars or other fiat currencies). A stablecoin bill signed into law last year has a nominal prohibition, but it does not prohibit payment of interest or other rewards programs paid by affiliates and partners. Banks would like to tighten this restriction because of the loophole’s potential implications for bank deposits. Senators Thom Tillis (R-NC) and Angela Alsobrooks (D-MD) have worked on a potential compromise, but it remains to be seen whether there will be sufficient consensus on it. There also are other remaining issues left to resolve, including ethics provisions aimed at addressing potentially conflicts of interest from the Trump family’s and administration officials’ crypto ventures. There are plans to have a mark-up when the Senate gets back from its recess in April, but efforts to pass a crypto market structure bill face headwinds in a legislative calendar that continues to get shorter.

Retirement Alternatives.

Last summer, the Trump administration issued an executive order aimed at expanding access to alternative assets (e.g. private equity, private credit, infrastructure, digital assets) in retirement plans. The underlying premise is that exposure to alternatives could offer retirement savers diversification benefits and higher returns over the long term. The order directed the Department of Labor (DOL), which has responsibility for overseeing investments permissible for certain kinds of retirement plans, to reevaluate its position with respect to alternative investments. The agency is responsible for rules governing employer-sponsored retirement plans, including the scope of fiduciary duties for plan sponsors and managers and the types of permissible investments. The DOL’s proposal, which is expected to offer some form of safe harbor for the offering of alternative assets in retirement plans, has completed the administration’s review process and should be released very soon. The proposal will come at a time in which there has been a spike in redemption requests in private credit funds. 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.

Social Security.

The Senate Budget Committee held a hearing earlier this week on Social Security. This hearing included testimony from Senators Bill Cassidy (R-LA) and Sheldon Whitehouse (D-RI) on their proposals to save Social Security from going insolvent. While there was some partisan bickering, we also saw lawmakers from both parties showing interest in solutions that the other party typically champions. While the hearing was a step in the right direction, actions to fix Social Security remain years away and a few Senators recognized that reality.

Renter’s Tax Credit.

As lawmakers delve more into the issue of affordability, housing is an issue that has garnered attention from both Republicans and Democrats and propelled lawmakers to work together on a package of initiatives to help with housing. A recent proposal from Rep. Jimmy Gomez (D-CA) would provide a refundable tax credit to households earning up to $100,000 who spend over 30% of their income on rent and utilities. We do not expect this proposal to advance in a Republican-controlled House, but this is one that could get enough support to pass if Democrats take the House.

Airline Safety Legislation.

Following the tragic crash at LaGuardia Airport earlier this week, aviation safety is back at the forefront of the legislative agenda. Last year’s fatal mid air collision near Reagan National Airport generated bipartisan interest in revisiting existing laws, with a focus on such issues as the efficacy of collision avoidance technology, airspace congestion, and the resilience of the nation’s air traffic control system. While a reform bill narrowly failed to pass the House earlier this year, Congress reacted quickly to the latest crash by calling for new hearings on the issue. While lawmakers remain divided on issues like the appropriate scope of exemptions for military and general aviation flights, the LaGuardia tragedy underscores the cost of deferring action. High profile accidents put pressure on Congress to advance safety legislation and fund FAA staffing and technology upgrades even if there isn’t consensus on some specific policy approaches.

Mail Voting Heads to the High Court.

The Supreme Court is poised to issue a consequential ruling on whether states may continue counting mail in ballots that are postmarked by Election Day but arrive afterward. It’s a decision that could reshape the mechanics of federal elections both this year and beyond. At issue is a Mississippi law that is similar to policies in more than a dozen other states. It provides a short grace period for receiving mail ballots after election day. During oral arguments, the Court’s conservative majority appeared skeptical of those laws, signaling openness to a ruling that would require ballots to be received by Election Day to count. If adopted, such a standard could force many states to rapidly overhaul election procedures ahead of the 2026 midterms, potentially affecting turnout, vote counting timelines, and postelection litigation. More broadly, the case carries long term implications for future presidential elections, as mail voting has become a central feature of the modern electoral system, particularly for rural voters, military families, and those overseas. A decision narrowing states’ flexibility not only would alter how votes are counted but also intensify the political and legal battles that increasingly surround close elections at every level.