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LAME DUCK OR BLAME DUCK? - Midterm election cartoon

Congress is back in session and is wrapping up a short work week before taking next week off for Thanksgiving.  When Congress reconvenes the week of November 26, expect things to heat up with a number of major issues left to resolve -  or punt to 2019.

LEADERSHIP ELECTIONS

House Democrats

With the Democrat majority growing every day (there are still six races being counted or contested), the cushion grows for Minority Leader Nancy Pelosi to once again wield the gavel as Speaker in the 116th Congress. While a number of current and prospective House Democrats have said they will not support Pelosi as Speaker (17 to date), she only needs to win a majority vote of the House Democratic caucus on November 28 to be nominated for Speaker. This is a relatively easy hurdle, but she and her fellow Democrats must look down the road to make sure she has enough support in her corner to win a vote by the full House on January 3, 2019.  Pelosi, who served as Speaker from 2007 until 2011, has spent the last eight years as Minority Leader raising millions and amassing political capital in the Capitol. She is formidable and the prohibitive favorite, but with 17 Democrats lining up to vote “no” for her as Speaker, this one will be worth watching. Watch for her to make significant concessions or term limit herself if she's in real danger.

When the full House votes next year, the candidate receiving a majority of the votes cast (excluding those who might vote “present”) is elected as Speaker.  If no candidate receives a majority, the roll call is repeated until a majority is reached. The last time there were several rounds of balloting for Speaker was in 1923. If Pelosi moves up to Speaker - and we think she will - Democratic Whip Steny Hoyer would likely become Majority Leader and Assistant Democratic Leader Jim Clyburn would likely move into the Whip position.  

House Republicans

The current Majority Leader, Kevin McCarthy of California handily won his election over Rep Jim Jordan of Ohio and will lead Republicans as the Minority Leader in the 116th Congress.  Current Majority Whip Steve Scalise of Louisiana will return as Minority Whip and Wyoming Rep Liz Cheney will take over messaging and communications as Chair of the Republican Conference replacing Rep Cathy McMorris Rogers.  Keep your eyes peeled for who ends up as the Ranking Members on the Government Oversight and Judiciary Committees – the Freedom Caucus is vying to place Jordan and one of their own in these spots to counteract promised investigations of President Trump and select Cabinet and sub-Cabinet chiefs.

Senate Republicans

Changes to the Republican hierarchy were set in motion on Wednesday. Republicans have a limit of three two-year terms for members of their Senate leadership, except for Majority Leader Mitch McConnell of Kentucky. John Thune of South Dakota was elected to serve as Senate Republican Whip, the second highest ranking Republican in that chamber who is well-positioned to succeed McConnell in the future. John Barrasso of Wyoming will serve as Senate Republican Conference chairman. Roy Blunt of Missouri will serve as Policy Committee chairman; and Joni Ernst of Iowa was elected vice chairwoman of the Republican conference, making her the top-ranking Republican woman in the Senate.

Senate Democrats

With Republicans maintaining control of the Senate, Democrats haven’t made changes their top leadership – Minority Leader Chuck Schumer of New York, Minority Whip Dick Durbin of Illinois, and Assistant Democratic Leader Patty Murray of Washington are all staying put.

LAME DUCK SESSION OF CONGRESS 

Before Congress left Washington for the midterms, they passed a reauthorization of the Federal Aviation Administration and the Water Resources Development Act and approved a long list of judicial and executive nominations. The current Congressional schedule calls for a Thanksgiving recess the week of November 19, returning the week of November 26 with a targeted adjournment date of December 14, leaving just three weeks to address a full agenda.

The biggest battle in the lame duck will be over how much money to appropriate for the border wall. Neither the full House nor Senate has considered an FY 2019 Homeland Security appropriations bill, but money for border security is included in the measures approved by the two appropriations committees.  The final funding level is expected to be somewhere between the Senate’s $1.6 billion (for “pedestrian fencing”) and the House’s $5 billion. President Trump is fighting for the $5 billion figure, but Democrats will be unwilling to go much above $1.6 billion unless they can bargain for something in return. Sixty votes will be needed for Senate approval, so Republicans will need Democratic support for the final bill. Trump was noncommittal after meetings with top Senate negotiators yesterday.

The Homeland Security bill is one of seven FY 2019 appropriations bills that have not yet been enacted.  Four of the seven – Environment, Financial Services, Transportation/HUD, and Agriculture/FDA – could be wrapped up in an Omnibus not long after Congress reconvenes after Thanksgiving. That would then leave only three bills – Homeland Security, State/Foreign Operations, and Commerce/Justice/Science – to be finalized in the lame duck.  Appropriators will be working to get agreements before December 7, when the continuing resolution (CR) expires.  If there’s no deal by then, Trump could threaten to shut down those parts of the government that don’t have full-year funding.  The threat is unlikely to sway Senate Democrats.

FARM BILL 

One of the top items on the agenda will be legislation to reauthorize agriculture and nutrition assistance programs for five years.  Both the House and Senate passed their versions of the farm bill in June, but negotiators were unable to forge a compromise before Sept. 30, when the 2014 farm bill expired.  While there are actually 56 conferees – 47 from the House and nine from the Senate – the negotiations are in the hands of the Big Four, i.e., the chairmen and ranking members of the House and Senate Agriculture Committees.

Much of the attention has focused on the impasse between House Agriculture Chairman Mike Conaway and the other Big Four members over requirements for food stamp recipients. The House bill, which passed by the narrow margin of 213-211, strengthens the work requirement for the Supplemental Nutrition Assistance Program (SNAP), formerly known as the food stamp program.  House conservatives say a final bill can’t pass the House without these stricter provisions.  Senators say a bill with those requirements won’t get 60 votes in their chamber. 

But SNAP is only part of the problem in the negotiations.  The other hurdle is not so much a partisan issue as a regional battle over money. Conaway of Texas favors provisions that would send more money to cotton growers and other farmers in the South. Senate Agriculture Committee Ranking Member Debbie Stabenow of Michigan wants to ensure that Midwest crops benefit from the final bill.  Minnesota Rep Collin Peterson, the House Agriculture Ranking Member and soon to be Chair, says that he and Senate Ag Chair Pat Roberts just watch Conaway and Stabenow fight. “They want to take money from each other,” Peterson observed, “to pay for what the other doesn’t want.”

Leadership in both chambers would like to pass the farm bill this year (and Senate Majority Leader McConnell is one of the conferees with a specific interest we'll dive into next week on our call), but if an agreement is not reached before Congress adjourns, some form of short-term extension will be necessary to reauthorize federal commodity support programs.

JUDICIAL NOMINATIONS 

There are currently 20 judicial nominees waiting to be voted on by the Judiciary Committee with 32 additional nominees who have cleared Judiciary and are waiting for a floor vote in the full Senate. Senator Jeff Flake (R-AZ) is threatening to withhold his vote for any Trump judicial nominee unless Majority Leader McConnell allows a full vote for Flake’s legislation protecting Special Counsel Robert Mueller. Additional Republicans are expected to support Flake setting up a showdown with McConnell. 

With an expected 53-47 vote margin in the Senate, filling court vacancies will continue to be a top priority of the Trump/McConnell axis in the next Congress.

A number of other issues will be considered including tax extenders and technical corrections to the Tax Cuts and Jobs Act of 2018, IRS reforms, Intelligence Reauthorization and election security. Join us on Monday, November 19 at 2:00 pm for a recap of where these issues and others stand as Congress wraps up two years of one-party control on either a partisan or bipartisan basis setting the stage for 2019.  You can access the call here.

ON THE HORIZON

TRADE | NAFTA 2.0/USMCA

With House Democrats in the majority next year, supporters of the new U.S.-Mexico-Canada Agreement will pay special attention to some 30 to 40 Democrats and whether the labor provisions in the agreement will be enough to get them on board. On October 12, the U.S. International Trade Commission (ITC) initiated its investigation into the likely economic impact of the new U.S.-Mexico-Canada Agreement (USMCA) with the first public hearing taking place yesterday. Public comments on the ITC investigation are due December 20. ITC has indicated the Commission’s report on its findings cannot be issued before then.

According to Trade Promotion Authority (TPA) law, the ITC must issue a report within 105 days of the president signing a new trade agreement. If the president signs the agreement at the end of November, which is the earliest possible date under the TPA timeline, the ITC would have until mid-March 2019 to release the report. USTR lawyers are currently undertaking a “legal scrub” of the USMCA text. Under TPA requirements, the Administration must release a list of required changes to law within 60 days after the agreement is signed.  The leaders of the United States, Mexico, Canada, and other Group of 20 countries convene at their summit in Buenos Aires at the end of November – coinciding with the signing of USMCA. [We will be hosting General Dan Christman for one of our 'spanning the globe' calls post-Buenos Aires on December 6]. Unless an agreement can be reached in the coming days on Section 232 tariffs on steel and aluminum from Mexico and Canada, it is anticipated that the USMCA will be signed by cabinet ministers rather than President Trump and his Mexican and Canadian counterparts.

NAFTA 2.0/USMCA will not be considered in the lame duck.

TRADE | China

Now that U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He have resumed trade talks ahead of a planned meeting between President Donald Trump and Chinese President Ji Xinping at the Buenos Aires summit, which runs from November 30 to December 1. Liu is reportedly considering a visit to the United States soon with the hope of laying the groundwork for a deal. In the event a deal is not reached, the White House is preparing a list of tariffs on an additional $250 billion worth of Chinese goods that could be announced in early December and imposed after a 60-day comment period.

The U.S. has been imposing tariffs on Chinese goods in several tranches, the first of which was a 25% tariff imposed on $34 billion worth of Chinese goods in July. The U.S. Trade Representative’s (USTR) office has calculated that U.S. companies have filed almost 10,000 requests for products to be excluded from that list of goods. Some 9,000 of those requests are still in the review process. The tariffs have been imposed under Section 301 of the Trade Act based on a determination by USTR that China was restricting U.S. commerce because of its intellectual property and technology transfer practices. Inside U.S. Trade reports that USTR is also considering opening a Section 301 investigation against Chinese labor practices. People we spoke to on Capitol Hill believe this could be a political tradeoff to keep Democrats and labor on board for the USMCA vote.

Don't hesitate to call or email with questions.