Washington Weekly: Trump and His Team

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).

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.

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’t 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’s 221st lifetime appointment to the federal judiciary. During Trump’s 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’s 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’t 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.

2026 Senate Map.

While there are still several outstanding House races that haven’t 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’ 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’s 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’t meet voter expectations.