RUNNING IN PLACE: What passed the House and Senate yesterday is precisely what the House passed over a week ago with the exception of a February 8 deadline to fund the government (as opposed to Feb 16) and an assurance by Senate Majority Leader Mitch McConnell to proceed with debate and consideration of an immigration bill (more on that below) in the Senate should negotiators not reach a deal by then. So there’s a very good chance Congress will be back here in 17 days confronted with the fifth deadline to fund the government with many of the same issues looming. We’ll point out that a handful of contentious issues, the Children’s Health Insurance Program (extended for six years) and FISA have now been resolved. In addition, a moratorium on the Medical Device Tax has been extended for two years, the implementation of Obamacare’s Cadillac tax is delayed by two years, and a one-year moratorium on the health insurance fee (HIF) was imposed. That still leaves a laundry list of other issues ranging from the debt ceiling, spending caps/sequester and the defense budget to promised health care votes for Senator Susan Collins, disaster funding, flood insurance and opioid funding. The House is in recess until next week...
DACA DREAM: With Republicans now proclaiming victory and progressive Democrats furious with Senate Minority Leader Chuck Schumer, we’re trying to find the path forward for an immigration fix. There is a very good chance the Senate will find a compromise on DACA in the coming weeks resulting in legislation that would pass that Chamber. To put it mildly, the House won’t be considering whatever compromise comes out of the Senate give the very real potential that it would more than rile up their conservative base. The House may not even move forward with an immigration vote but may feel the pressure to do so once the Senate acts and public opinion mounts. The best case scenario for DACA/immigration proponents is that bills with different approaches pass both Chambers and the differences will be dealt with in a conference committee. But even then, it’s hard to see an outcome that bridges the existing gulfs without President Trump exerting focused influence into the debate.
ANOTHER GERRYMANDER CHALLENGE: The Pennsylvania political map was upended by the state’s top court throwing 18 Congressional districts into limbo and ordering a new map be drawn by February 9. Republicans hold 13 of those districts in the purple electoral state and, similar to challenges in North Carolina, Wisconsin and Maryland, opponents of the current map charge that the lines were drawn on a partisan basis. The U.S. Supreme Court is considering the Wisconsin and Maryland cases (and potentially North Carolina as well) and will issue a ruling at some point in June with huge implications for the midterms in November.
REVERSAL OF FORTUNE?: We wrote a few weeks ago that an already resource-strapped IRS could meet the budget ax just as tax season was kicking in and with the implementation of hundreds of new regulations to issue and guidance to provide. The Obama years were a lean period for the embattled agency and the rollout of the ACA was fraught with disaster at every turn. Republicans have changed their tune over the past few weeks and realize that a smooth rollout and execution of their signature piece of legislation is critical to the success of their effort and we're hearing that budget increases for the first time in years may be on the short list when (if) Congress deals with the 2018 budget. Just like that.
DEFENSE QUARTERLY EARNINGS: Pentagon Outlays Up 11.4% Y/Y, 6.4% Q/Q Auspicious for LMT, BA, RTN, et al. Our Senior Defense Analyst General Emo Gardner writes DoD investment outlays Oct-Dec were up 11.4% Y/Y and 6.4% Q/Q, auguring excellent Q4 defense company earnings reports. Read his piece here.
PART II: GOVERNMENT SHUTDOWNS JUST AIN'T WHAT THEY USED TO BE | NEXT STEPS. Our Senior Health Policy Analyst writes that Medical Device and Insurance Taxes get another reprieve; CHIP funded for six years; but what about Medicare extenders? Read her note here.
PAKISTAN AND THE U.S.: AT THE FORK? Read General Dan Christman's latest missive on the U.S. state of play in Pakistan here.
SAUDI MINISTER TALKS ABOUT KEEPING PRODUCTION CUT BAND TOGETHER IN 2019 AMID RISING U.S. PRODUCTION: Our Senior Energy Analyst Joe McMonigle believes this U.S. production narrative will dominate the discussion at least through 1H 2018 and weigh on prices. Read his note here.
