IT'S THE ECONOMY, STUPID: The immigration debate and corresponding legislation will come to a head in the House next week after Speaker Paul Ryan and his leadership team yanked the bill at the last minute yesterday citing the need for more time for intraparty negotiations with the compromise measure headed for failure - but the specter is likely to linger in the halls of Congress, the courts and the Administration for months. The hard-line Goodlatte bill failed 193-231. After the White House debacle on separating immigrant families consumed Washington for most of the week, it's clear walking the halls of Congress that Republicans want to be talking about anything else. New plans to reorganize the federal government, GSE reform, that long-lost infrastructure bill...THE ECONOMY - anything other than the immigration debate that continues to rage. Members of Congress continue to lament the fact that every day they're not talking about their tax cuts and the economy and about immigration or some other controversy is a wasted day back home in their state or district. To drive that point home, there is also growing fear among party strategists we talked to this week that Trump fatigue has taken a toll in the most purple/targeted districts in the country where control of the House will be determined - and this issue is compounding that sentiment.
QUILL OVERTURNED: The Supreme Court ruled, 5-4, in favor of the states, allowing states to require remote online sellers to collect sales taxes in states where they don't have a physical presence reversing the 1992 Quill Supreme Court ruling that limited states' abilities to require the taxation of online transactions. As our Legal Catalyst Senior Analyst Paul Glenchur noted here earlier this week, we gave a slight edge to the states to win. Justice Anthony Kennedy, who has been the most outspoken member favoring the states in this fight, wrote the majority opinion joined by conservative Justices Clarence Thomas and Neil Gorsuch along with liberal Justice Ruth Bader Ginsburg. Dissenters are concerned about administrative burdens on remote sellers but more importantly, expressed concern that the Court is too easily discarding precedent based on circumstances better addressed in Congress. Internet retailers, as expected, reacted negatively to the news. Wayfair, Etsy and Overstock were down throughout the day; Amazon pays sales taxes but its third-party sellers that use its e-commerce platform generally do not, so there has been a negative reaction for Amazon. We fully expect Congress as well as state legislatures to respond this term or more likely in 2019.
PAGING ELIZABETH WARREN…: Just in case you think Washington was a little light on the news front yesterday, ahem, a federal judge in New York determined that the CFPB's current single-director structure is unconstitutional, putting her in conflict with a separate ruling earlier this year from a Washington, DC appeals court that upheld the agency's structure. In her decision, District Court Judge Loretta Preska said she partially agreed with a separate, 2016 appeals court ruling authored by Judge Brett Kavanaugh that faulted the way the CFPB was formed in the 2010 Dodd-Frank Act and recommended cutting Title X of Dodd-Frank — the section that created the CFPB — "in its entirety." The courts have yet another CFPB issue with which to contend - the challenge to Trump's interim appointment of Mulvaney to head the agency by Leandra English, the CFPB deputy director who was appointed the temporary leader of the bureau by outgoing CFPB Director Richard Cordray in November.
HONEY, I SHRUNK THE GOVERNMENT: Mick Mulvaney has his hands full these days. In addition to running the Office of Management and Budget and serving as Acting CFPB Director, Mulvaney is running point on the Trump Administration's just-released plan to reorganize and, ultimately, shrink the federal government. Merging, streamlining and revamping the federal bureaucracy has been on the perennial conservative wish list for decades and the conservative Heritage Foundation has served as the go-to think tank for many of these ideas. In addition to merging the Departments of Labor and Education, the blueprint seeks to shift programs to agencies where there's continuity (rural housing from the Department of Agriculture to the Department of Housing and Urban Development), consolidate a multitude of other programs and functions and place all social welfare programs under the umbrella of a yet-to-be-named, super-charged Department of Health and Human Services. The blueprint also calls for privatization of GSE's Freddie Mac and Fannie Mae removing them from their current state of conservatorship as well as restructuring and possibly privatizing the U.S. Postal Service. The bulk of the Administration's plan would require approval by Congress - an uphill, but not insurmountable battle in any given year, but currently next to impossible just over four months away from the midterms.
Major changes detailed on pages 17 and 18 of the proposal below– please email us for a copy of “Delivering Government Solutions in the 21st Century - Reform Plan and Reorganization Proposals.
1. Merge the Departments of Education and Labor into a single Cabinet agency, the Department of Education and the Workforce.
2. Move the non-commodity nutrition assistance programs currently in the U.S. Department of Agriculture’s (USDA) Food and Nutrition Service into the Department of Health and Human Services — which will be renamed the Department of Health and Public Welfare.
3. Move the Army Corps of Engineers (Corps) Civil Works out of the Department of Defense (DOD) to the Department of Transportation (DOT) and Department of the Interior (DOI).
4. Reorganize the USDA’s Food Safety and Inspection Service and the food safety functions of HHS’s Food and Drug Administration (FDA) into a single agency within USDA.
5. Move the USDA's rural housing loan guarantee and rental assistance programs to the Department of Housing and Urban Development (HUD)
6. Merge the Department of Commerce's (Commerce) National Marine Fisheries Service with the DOI’s Fish and Wildlife Service.
7. Consolidate portions of DOI's Central Hazardous Materials Program and USDA's Hazardous Materials Management program into the Environmental Protection Agency’s (EPA) Superfund. program
8. Optimize Department of State (State) and U.S. Agency for International Development (USAID) humanitarian assistance to illuminate duplication of efforts and fragmentation of decision-making.
9. Consolidate the US Government's development finance tools, such as the Overseas Private Investment Corporation (OPIC) and the Development Credit Authority (DCA) of USAID, into a new Development Finance Institution.
10. Transform USAID through an extensive, agency-driven structural organization of headquarters Bureaus and Independent Offices.
11. Move the policy function of the Office of Personnel Management (OPM) into the Executive Office of the President, and elevate its core strategic mission while developing certain operational activities.
12. Transfer responsibility for perpetual care and operation of select military and veteran cemeteries located on DoD installations to the Department of Veterans Affairs' National Cemetery Administration.
13. Re-organize the U.S. Census Bureau, the Bureau of Economic Analysis, and the Bureau of Labor Statistics under Commerce.
14. Consolidate the Department of Energy’s (DOE) applied energy programs into a new Office of Energy Innovation.
INTELSAT SPECTRUM CONSIDERED FOR 5G SERVICES (I, VZ, T, TMUS): FCC consideration of a mid-band airwaves allocation to 5G services could boost spectrum values of Intelsat and SES. Read takeaways from Senior Telecom Analyst Paul Glenchur here.
OPEC DISPATCH | SIGNS OF POTENTIAL COMPROMISE FOR NEW PRODUCTION DESPITE IRAN: Iran seems ok with 150 kbd under existing deal. Russia wants 750 kbd with revised country caps. Room for compromise range at 450-500 kbd. Read Joe McMonigle's missive from Vienna here.
2016 ALL OVER AGAIN? AMA AGAINST CVS/AET; CA INSURANCE COMMISSIONER SHARES SKEPTICISM: The horizontal combination of Part D plans, past bad behavior of CVS and promises from Trump make for tough sledding to closing - read Emily Evans' analysis here.
GENERAL DAN CHRISTMAN | GEOPOLITICAL RECAP: Listen to the replay of General Christman top geopolitical concerns here.