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The Senate confirmed various Biden administration nominees, including a new ambassador for Haiti (as the country faces a major crisis). The House passed a bill that would require TikTok’s parent company to sell the app within six months or face a US ban (see below), a bill to consolidate underused federal office space and a resolution to denounce the Biden administration’s immigration policies.

The Senate and House will continue to work on the final six government funding bills as the March 22 deadline approaches (see below).

Big Deadline Next Week.

While six of the 12 government funding bills were signed into law last weekend, six bills still remain. They must be resolved by March 22 in order to avert a shutdown in the agencies and functions covered by the bills. Most of those bills (including defense spending) appear to be in good shape for passage by March 22, but two separate bills relating to the Department of Health and Human Services and the Department of Homeland Security are not close to being resolved as of today. Lawmakers continue to tangle over abortion policies in the health care funding bill and over border protections and immigration reforms in the homeland security bill. The delicacy of these issues in the presidential campaign only adds to the tension and makes it more difficult to find common ground. We would be impressed if the House and Senate could pass all six of these bills by next Friday, but we suspect that one or two of them will still be unresolved, which could trigger a shutdown of some of those functions beginning next weekend.

TikTok in the Spotlight.

The House passed a bill to require ByteDance, the Chinese owner of TikTok, to sell the popular application or forfeit its ability to operate in the US. For numerous reasons, this is a big issue that triggers many serious questions. Would the Chinese Government permit such a sale? Are TikTok’s First Amendment rights (freedom of speech) being violated or does the bill safeguard those rights by preventing possible Chinese Government intrusion into TikTok’s operation? Would passage of the bill survive legal scrutiny (a Montana state court struck down a state law banning TikTok in that state last year)? These are all theoretical questions until the Senate decides how to address the bill. Our sense is that the Senate will slow down the process and likely pass a different bill that will provide the President with authority to ban a broader range of social media entities that can be linked to foreign adversaries but not name TikTok in the bill. Given TikTok’s popularity with its users in the US, primarily younger people whose votes Biden needs in November, the bill may be delayed in the Senate until after the election.

Funding for Ukraine.

Once the House passes its government funding bills, it likely will turn to the military aid bill to Ukraine, Israel and Taiwan. We believe the House will craft a different bill than what passed in the Senate in February. Rather than providing $61 billion of direct aid to Ukraine (out of the $95 billion for the entire Senate bill), funds may come in the form of loans or through the use of Russia-owned funds held (and now frozen) in the US. The price tag also will be lower than that of the Senate bill. House Republicans still want to add immigration reforms to the bill, but they would likely not be accepted in the Senate. The bill is also complicated by growing support from many lawmakers, particularly in the Senate, to condition the aid to Israel in an effort to limit Israel’s military operations in Gaza (the Senate bill presently has no such conditions). The takeaway here is that we are confident that some form of additional US aid will get to Ukraine and other allies fairly soon. Support for the aid is bipartisan enough that a final deal could emerge in the upcoming month or two although more debate, political posturing and compromising on the issues mentioned above will occur before we get there.

Tax Deal Soon?

As we have mentioned before, the House passed a limited and bipartisan tax deal in early February that is now pending in the Senate. The package combines an expansion of the child tax credit (CTC) with various corporate tax incentives for research and development, interest deductibility and full expensing. There was hope among some lawmakers that the tax bill could be added to one or all of the spending bills scheduled for votes next week, but that is now no longer in play. A number of Senate Republicans have concerns over the bill’s CTC provisions and are exploring options to try to makes changes. However, Senate Democrats led by Majority Leader Chuck Schumer (D-NY) want to vote on the House-passed bill without any changes. Leader Schumer needs 60 votes to pass the bill and may try to vote on the bill after the government shutdown threat subsides. That is a risky strategy since the bill appears to lack the needed 60 votes as of today. The prospects for this bill should be clearer in the next few weeks, but we are more pessimistic than optimistic about its chances of passing in the Senate anytime soon.

Biden Budget and Taxes.

The headline news is that President Biden’s 2025 budget proposal contains $5 trillion in tax increases that focus on corporations and individuals who earn over $400,000 per year. This is our annual reminder that a president’s budget is almost always aspirational when it comes to taxes, and these provisions will not be passed into law this year. These ideas will get serious consideration next year if Democrats manage to win the White House, House and Senate following this year’s elections.

Digital Currency.

We sometimes get questions on whether the US is likely to pursue a central bank digital currency (CBDC). One challenge with this question is the lack of a clear definition of what a CBDC actually is. The Federal Reserve already has digital central bank money at the wholesale level in the form of reserves that banks hold with regional Fed banks. What’s controversial is the notion of a retail CBDC, which would be a form of digital money issued by the central bank that is widely available to individuals (whether through accounts with the central bank itself or through private banks). Other jurisdictions, notably China, have been experimenting with a retail CBDC. While Republicans have expressed serious concerns about personal privacy from having a retail CBDC, the Biden administration and some Democrats have touted its potential benefits for financial inclusion. The final arbiter of a CBDC is the Federal Reserve. Chairman Jay Powell has expressed skepticism about the need for a retail CBDC (particularly with ongoing efforts to implement faster payment speeds in bank transactions) and has said that any action by the Fed would need to be preceded by Congressional authorization. While there won’t be any meaningful action on CBDC for the foreseeable future, it will continue to be an area of significant debate.

Government Surveillance.

Should the government have significant authority to monitor phone calls, e-mails and text messages in order to identify and address national security threats? Congress provided the FBI expanded power to monitor such communications when one party is outside the US as part of legislation enacted after 9-11. However, this authority will lapse on April 19 if Congress doesn’t act. Privacy advocates oppose the extension of this authority, while those in the intelligence and national security sectors are supportive. A Senate bill with some bipartisan support, sponsored by Intelligence Committee Chairman Mark Warner (D-VA), would extend the authority with some limitations. In the House, progress has been made on a bipartisan approach as well and we believe this bill could be considered in that chamber in the next few weeks.

32-Hour Work Week.

Senator Bernie Sanders (I-VT) introduced legislation to require a four-day, 32-hour work week in the US without any reduction in pay. The bill also would lower the threshold for workers to receive overtime pay (from 40 to 32 hours) and increase overtime pay more broadly. Senator Sanders held a hearing on the bill yesterday in the Senate Health, Education, Labor and Pensions Committee, which he chairs. Senator Sanders plans to tout the bill nationally in a promotional campaign, and it has already attracted the support of the United Auto Workers. It will be interesting to see if younger people rally to the bill as part of the Senator’s campaign. If they do, there will be pressure for President Biden to support it in this year’s campaign. The bill won’t move forward in the Senate (or House) this year and is likely years away from being seriously considered. However, it offers an interesting debate question about the future of work in the US.

The Effectiveness of Self-Funding.

With the presidential primary elections soon ending and both candidates looking ahead to the general election, the biggest remaining question for the next few months will be what Congressional candidates advance from their primary elections. As the cost to mount a campaign continues to grow, many new candidates have attempted to jump-start the process by using their own personal fortunes to help fund their campaigns. To date, at least four swing-state Republican Senate candidates have already chipped in a million dollars each to their campaign. Additionally, Congressman David Trone (D-MD), who is hoping to become Maryland’s next Senator has already given his campaign over $23 million of his own money. All of these eye-popping numbers raise the question of the effectiveness of self-funding. While 2022 saw congressional candidates pour over $300 million of their own fortunes into their campaigns, few of them were ultimately successful. Of the 44 candidates who spent more than $1 million self-funding their campaign, only seven ended up getting elected. While the amount of money required to run for Congress continues to be a challenge, self-funding does not appear to be a magic bullet.