Washington Weekly: GOP Convention on Deck

The Senate passed legislation that would direct the Justice Department’s Inspector General to conduct inspections of all federal prisons and make recommendations to Congress and failed to pass a bill that would express support for restoring a national right to abortion. The House passed a bill that would require proof of citizenship to vote in federal elections (see below), two bills that would block stricter energy efficiency standards for dishwashers and refrigerators and a resolution to repeal the Education Department’s recent Title IX final rule. It also failed to pass a government funding bill (see below) and a resolution to hold Attorney General Merrick Garland in contempt of Congress.

The Senate and House will be out of session for the Republican National Convention in Milwaukee, Wisconsin (see below) and will return to Washington the week of July 22.

Biden Status.

The President’s political status remains extremely fluid. Earlier in the week, he clearly insisted that he plans on remaining in the presidential race. He also managed to maintain the public support of most Democratic leaders. However, his support is tenuous. There is lingering skepticism among many Democrats (including many of those who publicly support him) that he can win in November. Another misstep, misstatement or flub in his public appearances inevitably would fuel stronger concerns from party leaders that the President cannot win re-election. Anything could happen over the next week or so.

25^th Amendment.

If the President drops out of the race for health reasons, some will raise the question of whether he is still able to carry out the duties of president for the next five and a half months. Some Republican lawmakers will make the argument that he should be relieved from his current duties. It’s also likely that some democratic lawmakers would prefer that he resign to give Vice President Kamala Harris a chance to lead and bolster her campaign, if she is the new nominee. There is a process under the 25th Amendment to the Constitution to remove the President, but that requires executive branch action, not legislative action. Specifically, VP Harris and a majority of cabinet members must agree that the President is no longer fit to serve and submit that declaration to the House and Senate. There is clearly no support by the vice president and cabinet officials to trigger this action, so while the issue raises an interesting question, it is not a serious option at this point.

GOP Convention on Deck.

The public spotlight will return to former President Trump and Republicans next week when they hold their convention in Milwaukee. A big focus of the media will be on the selection of a vice presidential candidate this weekend or at the beginning of the convention. There also will be a lot of public attention on Trump’s acceptance speech on Thursday (July 18) and a pared-down Republican platform. The VP pick will be interesting but likely not impactful in determining who wins in November. Voters will focus more on the strong personalities of both Trump and Biden (if still in the race) and less on the nominee for vice president. Yet, the VP pick for the winning side is especially important given the advanced age of both nominees, and since that person will likely be in a pole position to compete for the 2028 presidential race. Separately, Trump has held back in criticizing Biden’s debate performance over the past two weeks, but the gloves will be off for the Thursday speech for those who watch it.

Government Spending Bills.

House and Senate committees this week passed nine government spending bills covering various federal agencies for fiscal year 2025, teeing many of them up for approval later this month. This process is symbolically important for each chamber to show their commitment to the government funding process and approaching deadlines, but none of these specific bills will become law. Rather, the spending plans that are in place now for the government for fiscal year 2024 will in September be extended into December or the first quarter of 2025. With different parties controlling the House and Senate and elections looming, setting priorities for government spending in a bipartisan fashion for next year has been difficult. Last year’s bipartisan budget agreement limiting spending increases only adds to the challenge. Republican lawmakers want more defense spending, while Democratic lawmakers want a larger increase for non-defense spending. How to accommodate that conflict within the parameters of only a 1% increase will be very difficult but is ultimately the puzzle that has to be solved before a final deal is made.

Noncitizens and Voting.

The House passed a bill to put in place additional measures to prevent non-citizens from voting in federal elections in the US. The bill would require proof of citizenship to cast a ballot in a federal election and for states to establish a program to remove non-citizens from their existing voter rolls. The bill also gives states immediate, no-cost access to federal databases with citizen information to use as a part of these duties. Republicans supported the bill, while most Democrats opposed it since they believe that current protections are adequate to prevent non-citizens from voting. The bill will not be considered in the Senate and is more of a symbolic gesture by the House at a time when immigration issues continue to be a high priority with many voters.

NATO Progress.

NATO seems to have made some progress with its member country meetings in Washington, DC this week. Most importantly, the required commitment for each member country to spend 2% of its annual budget on defense has been met or will be met by 24 of the 32 members before the end of the year. That’s still not a perfect record, but it’s an improvement over the last decade. The road to comply with this requirement for the eight laggard countries will be more difficult since the 2% mandate is likely to be raised over the next year. Furthermore, allies Japan, South Korea, New Zealand and Australia were invited to the NATO gathering, though they are not members, underscoring the alliance’s increased focus on China and security in the Pacific. The coalition has needed a wake-up call for a long time to prepare for an increasingly complex world and it seems to be responding, at least for now.

Regulatory Vulnerability.

Almost 40 years ago, the US Supreme Court ruled in Chevron v Natural Resources Defense Council that courts should defer to a federal agency’s interpretation of ambiguous statutes passed by Congress. Since then, agencies have had a wide latitude in interpreting laws and developing resulting regulations. This “Chevron Deference” has been a fundamental doctrine in administrative law and has been invoked in thousands of judicial opinions. Late last month, the Supreme Court rendered a monumental decision that overturned the Chevron case. Many long-existing federal regulations will be subject to legal challenges in the near future, which could have a significant impact on many businesses across different sectors. Regulators, in turn, will need to be more precise and clear in pointing to the statutory underpinnings of their regulatory actions. While the decision could put more onus on Congress to be more explicit in drafting legislation, that is easier said than done given the increasing polarization in Congress and given Congress’s longstanding reliance on regulators’ expertise.

Bank Capital Delay.

Federal Reserve Chairman Jay Powell this week testified in two days of hearings in Congress as part of semi-annual testimony. Beyond the expected focus on the economy, inflation and timing of interest rate decisions, lawmakers had many questions on regulators’ proposed changes to bank capital requirements (called Basel 3). Lawmakers on both sides of the aisle have been vocal in expressing concerns about the potential impact of the proposed changes on the cost and availability of credit for consumers and businesses. Chairman Powell indicated that those concerns have been heard and that regulators are working on and negotiating substantial changes to the rule. The negotiations occur as the Senate considers a Biden administration pick to replace the current chair of the FDIC (given reports of a toxic work environment at the agency). Chairman Powell also made clear that it is his and the Fed’s desire to issue a re-proposal of Basel 3. A re-proposal wouldn’t be ready until sometime in the fall and would be subject to another period of comment and feedback. This would ensure that finalization of Basel 3 would not occur until well into 2025.

Educational Savings Plans (529 Accounts).

With the rising cost of higher education, there are a number of bills in Congress relating to 529 educational savings plans. One bill from Congressman Josh Gottheimer (D-NJ) allows a federal tax deduction for contributions to 529 savings accounts. This bill hasn’t drawn enough interest and attention to move forward at this time. The House Ways and Means Committee advanced a bill this week that would expand 529s and allow for them to be used for additional educational expenses with attendance at K-12, including homeschooling. Also, this bill allows for 529s to be used to pay for expenses related to obtaining or maintaining recognized postsecondary credentials and licenses. This bill is unlikely to advance in the Senate as opposition from the National Education Association (NEA) is strong. There is activity on the 529 space right now, but we don’t see anything moving forward and becoming law before the school year starts.