capitol building

This Week:

The Senate approved several Biden administration judicial nominees (see below). The House passed a bill to enable the Treasury Department to revoke the tax-exempt status of US nonprofits that support designated foreign terrorist groups and ensure that American citizens who have been taken hostage or wrongfully detained abroad do not incur penalties for late tax payments. It also passed a bill to increase the frequency of energy development leases. Both chambers continued work on government funding legislation (see below).

Next Week:

The Senate and House will not be in session. Lawmakers will return home to celebrate Thanksgiving and return to Washington the week of December 2.

The Lead

Trump and His Team.

President-elect Trump continued this week to choose individuals to potentially serve in his administration. We assess some of his picks and the process ahead for confirming them below.

  • Some Will Not Make It. No recent administration has a perfect record in getting all of its nominees confirmed in the Senate. The new Trump administration will be no different. Historically, if nominees prove to be too contentious or do not appear to have adequate Senate support, their nominations are usually withdrawn before a Senate vote to avoid a public defeat. This was the path taken yesterday by Attorney General selection Matt Gaetz after it became apparent that the Senate would not confirm him. Defense Department Secretary-designee Pete Hegseth鈥檚 chances for Senate confirmation also appear questionable for many reasons, but he is not the lightening rod that Gaetz was. Tulsi Gabbard, the President鈥檚 pick to serve as director of national intelligence, will also face tough questioning and may not pass muster with the Senate. The bigger unknown is to what extent will Trump promote his more controversial nominees and insist on their confirmation. He has significant political capital to use and may use it to threaten the re-election prospects of certain Senators whose votes he needs. Indeed, it was a relief to many Republican Senators that he didn鈥檛 go to the mat for Gaetz and insist on a vote. The remaining fights over Hegseth and Gabbard will test the relationship between the President-elect and the new Senate Majority Leader, John Thune.
  • Robert F. Kennedy, Jr.聽RFK Jr. has some controversial views, but he is also viewed as smart and experienced. He also has subject matter expertise on areas where the Department of Health and Human Services (HHS) has jurisdiction. We think RFK Jr. will be opposed by all Senate Democrats but will be given the benefit of the doubt by most or all Senate Republicans (some of whom are skeptical). As such, we think he will ultimately be confirmed. What an interesting journey the last two years have been for RFK Jr. 鈥 from a primary opponent of President Biden鈥檚 to a major third-party candidate to potentially the HHS Secretary in a Trump administration.
  • Senate Confirmation. President-elect Trump will become president after his inauguration on January 20. Those officials who will require Senate confirmation are undergoing vetting now but can鈥檛 be voted on until the Trump presidency begins. The Republican-controlled Senate will move as fast as it can to approve nominees in the most important positions first (State, Treasury, Attorney General, Defense). Each nominee will undergo a separate committee hearing (maybe more than one for some), a committee vote and then a vote in the full Senate. Senate Democrats will try to slow the process through procedural maneuvering. Most of those selected by Trump so far for cabinet or near-cabinet roles that require Senate confirmation likely will get their votes throughout February and into March.
  • Recess Appointments. Some have suggested that the Senate could expedite the process of these confirmation votes through the use of 鈥渞ecess appointments,鈥 which allow some nominees to bypass the standard Senate confirmation process. However, there are strict rules around their use. The appointees approved via this process do not get paid, and their appointments only extend through the end of the legislative session (in this case, the end of 2026). Past administrations have used this process to temporarily hire key officials, but not those at the level of a cabinet secretary. We know new Senate Majority Leader John Thune (R-SD) would prefer not to use this approach, but if the confirmation process runs into logjams early next year, it is possible we could see some recess appointments.听 聽聽

Other Issues

Government Funding.

Congress now appears more likely to extend current federal funding from December 20 (when it is currently scheduled to expire) to March 30 of next year. The alternative is to pass a full funding bill for the remainder of the fiscal year (until September 30), but lawmakers aren鈥檛 presently close to a full-year agreement. A shorter extension will make it easier for Republican lawmakers and the new president to pass a bill more to their liking. Further relief for victims of hurricanes Helene and Milton likely will be included in the extension. President Biden has asked for $98.6 billion for not only relief from those hurricanes but other weather-related disasters over the last year. That request will be pared back in any final bill. Taxpayer funding for individual and business recoveries from natural disasters are usually supported by a bipartisan majority in Congress, and new relief funding will be a part of the pending funding bill, though some will try unsuccessfully to offset the funding with federal spending cuts in other areas.

Judges for Life.

As we often mention in these reports, the Senate this week passed a number of Biden judicial nominations. The White House and Democratic-controlled Senate have maintained a steady pace of judicial nominations and confirmations that have allowed President Biden to build a strong record of seating judges on the federal bench. This week, the Senate confirmed Biden鈥檚 221st lifetime appointment to the federal judiciary. During Trump鈥檚 first term, the Senate confirmed 234 federal judges, a tally Senate Majority Leader Chuck Schumer (D-NY) and the Biden administration would like to surpass in the final days of 2024. Senate Republicans are trying to slow this process down in the hopes of giving the President-elect the opportunity to fill these posts next year, but Democrats currently have the votes to pass them. Over the next few weeks, we expect Senate Democrats to push past 234 before they lose power in the new year.

Regulators Face the Music.

When federal banking regulators appeared before a House committee this week, Republicans sent them a clear message that they did not want to see any major rules finalized before the Trump administration takes office in January. These regulators broadly agreed. This is important because the Biden administration has many pending financial regulatory proposals. The regulators wanted to issue a re-proposal of major changes to bank capital requirements before the election, but that will face more extensive revisions in a Trump administration. The SEC has close to 30 pending proposals that likely will fall by the wayside in a Trump administration. The CFPB has several significant proposals outstanding (including a contentious one to limit overdraft fees), and its head could be more active in finalizing rules before he departs in January. The bottom line is that most of these regulators will be replaced and there will be a seismic shift on the regulatory front (though it will take time to reverse or adjust rules that actually were put in place during the Biden administration).

Tariffs.

We are getting a lot of questions about President-elect Trump and tariffs. The easy observation is that there will be more tariffs in Trump鈥檚 second term than in his first. However, we still believe they will be used on a selective basis rather than broadly applied across the board on all imports for two reasons. First, a broad application would likely limit how Trump can personally use tariffs as negotiating leverage on broader issues. We think he will want to pick and choose targets himself and engage personally in those negotiations. Second, he and his administration are facing strong resistance to a broad application of tariffs by many in his own party and economic policy circles. We have already seen the tariff issue play out in the lack of selection of a Treasury secretary. Some of the candidates aren鈥檛 on the same page as Trump and have been passed over. We will write more about this as we get closer to January and outline his first 100 days, but we envision selective tariffs rather than broad-based tariffs.

The Final Word

2026 Senate Map.

While there are still several outstanding House races that haven鈥檛 been finalized, Washington is already looking ahead to the 2026 mid-term elections. As things stand today, Republicans have a 53-47 majority in the Senate. Mid-term elections typically punish the party in power, and leadership from both parties are already studying the 2026 Senate races to determine their likely standing over the last two years of the Trump administration. Democrats will be defending seats in Georgia and Michigan (states just won by Trump), while Republicans will be defending a seat in Maine (won by Harris). Democrats will need a net gain of four seats to reclaim a majority given that Vice President-Elect Vance will be the tiebreaking vote in a 50-50 Senate. Republicans are also defending a seat in North Carolina, a purple state that is Democrats鈥 perpetual white whale, but the number of expected competitive races dwindle from there. Florida and Ohio will have special elections for vacated Senate seats (Vance as Vice President, and presumably Rubio as Secretary of State), and Republicans are defending seats in Alaska, Iowa, and Texas which they should hold. It鈥檚 early, but Democrats will have a tough time winning a net of four seats unless Trump and congressional Republicans perform badly over the next two years and don鈥檛 meet voter expectations.