. . . And we’re out

At least Congress is out, until after Labor Day. The last week has been hectic. Here’s where we are, after three frenzied weeks:
 
Both houses have passed a defense reauthorization bill, but significant differences remain 
Yesterday the Senate voted 86-11 to approve the National Defense Authorization Act, which looks a lot more like S. 2226 than like H.R. 2670, the House bill that passed on a 219-210 vote two weeks ago. The House and Senate need to agree on this legislation before September 30.
 
The House approved FAA reauthorization 
H.R. 3935, the Securing Growth and Robust Leadership in American Aviation Act, passed the House last Thursday on a bipartisan vote of 351-69. The Senate received this bill on Tuesday. FAA reauthorization is another piece of legislation that must pass before September 30.
 
House Republicans’ proposal for digital asset regulation passed both the Financial Services Committee and the Agriculture Committee, but without the ranking Democrats’ support. Financial Services Committee Chairman Patrick McHenry (R-NC) said he’d hoped to reach agreement with Rep. Maxine Waters (D-CA) before yesterday’s markup, but the White House had been unwilling to compromise on “a few small, but nonetheless important, provisions.”

Military appropriations passed the House, agriculture got postponed
Yesterday the House passed the first of 12 appropriations bills needed to keep the government running, this one to fund Military Construction, Veterans Affairs, and Related Agencies, on a partisan vote of 219-211. Plans to vote on the bill for Agriculture, Rural Development, Food and Drug Administration, and Related Agencies got pushed back to September. Meanwhile, the Senate Appropriations Committee approved the last four of its 12 bills, setting them up for floor action. Chair Patty Murray (D-WA) and the Committee’s ranking member, Senator Susan Collins (R-ME), said their work showed that bipartisan agreement was possible: “There’s simply no reason for chaos or gridlock when it comes to making sure our government is funded.”

Senate Commerce approved a bipartisan bill on space junk
While the House held a hearing on the possibility of extraterrestrial life this week, the Senate Commerce Committee approved the bipartisan Orbital Sustainability (ORBITS) Act, which would create a demonstration program to reduce the amount of space junk in orbit. As an increasing number of private companies put satellites and vehicles into space, these objects not only contribute to the amount of metal that could destroy lives and property by falling back to earth, they also face risk of damage from the approximately 8,000 metric tons of space junk currently in orbit. Commerce Committee Chair Maria Cantwell (D-WA) cosponsored the bill with Senators John Hickenlooper (D-CO), Cynthia Lummis (R-WY), Roger Wicker (R-MS), Kyrsten Sinema (I-AZ), and Dianne Feinstein (D-CA).

The IRS and lawmakers warned of ERTC scams
The Employee Retention Tax Credit (ERTC, to Congress, or ERC, to the IRS) was a fully refundable fully refundable tax credit created by the CARES Act to encourage employers to keep people on the payroll during the pandemic lockdown. The program was extended and expanded by the Relief Act and the American Rescue Plan, then tweaked again by the Infrastructure Investment and Jobs Act. Changes to the program and the IRS’s lack of resources to process claims quickly or update guidance created confusion and backlogs, and now both the IRS is warning business owners and nonprofits against unscrupulous marketers that claim to be able to get clients thousands of dollars in refunds. The IRS held a webinar earlier this week to explain the ERTC program and warn practitioners against filing false claims, and the House Ways and Means Oversight Subcommittee held a hearing yesterday to discuss the problem. Small businesses and nonprofit organizations that mistakenly filed for ERTC refunds will have to return that money, possibly with penalties and interest, and witnesses asked legislators to create some system of amnesty for victims of ERTC scams.

Meanwhile, away from Capitol Hill . . .

Federal regulators proposed new capital rules for large banks 
As expected, the Federal Reserve Board, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) issued a notice of proposed rulemaking this week to bring US capital rules for large banks in line with the Basel Committee’s international standards, and the Fed issued a notice of proposed rulemaking on the capital surcharge for Global Systemically Important Bank Holding Companies (GSIBs). Federal Reserve Board Governors Michelle Bowman and Christopher Waller voiced objections to these proposals, and all the regulators urged stakeholders to submit their comments, which are due by November 30.
 
Bankers asked the Fed for supervisory models, stress scenarios
Earlier in the week, the Bank Policy Institute and the American Bankers Association filed petitions for rulemaking with the Federal Reserve Board in an effort to get the Fed to publish the models, formulas, and other data behind its calculations of the stress capital buffer requirement imposed on large banks. They also asked the Fed to define by rulemaking “any and all scenarios used in any stress test exercise on which stress capital buffer requirements will be based.” They argue that the Fed’s failure to disclose its methodology violates the Administrative Procedures Act, and that the proposed new rule will make the Fed’s opacity even more harmful to the industry.
 
The SEC finalized its rule on cybersecurity disclosures
A new SEC rule will require public companies to disclose any cybersecurity incident they deem to be material within four business days of determining the incident’s materiality, unless this disclosure would present a substantial risk to national security or public safety. Public companies will also have to describe their processes, if any, for assessing and managing material risks from cybersecurity incidents. SEC Chair Gary Gensler said that many companies were already providing this information, but the new rule will make those disclosures “more consistent, comparable, and decision-useful.

The Week Ahead

The House and Senate are in recess for the entire month of August — and unless something truly unexpected happens, so is The Golden Apple. We’ll be back on September 1, most likely. The Senate is scheduled to reconvene on Tuesday, September 5; the House will not vote again until Tuesday, September 12.

The Ellis Insight - Jim Ellis on political news

PRESIDENT

Gov. Doug Burgum:  North Dakota Gov. Doug Burgum’s campaign team announced late this week that the candidate has qualified for the first Republican debate on August 23rd in Milwaukee. Gov. Burgum is showing an uptick in backing from both Iowa and New Hampshire and has attracted enough small dollar contributions and polling support to qualify for a podium on the debate stage. 

Gov. Burgum is the seventh debate participant joining former President Donald Trump, Florida Gov. Ron DeSantis, Sen. Tim Scott (R-SC), ex-UN Ambassador Nikki Haley, former New Jersey Governor Chris Christie, and businessman Vivek Ramaswamy. Ex-Vice President Mike Pence remains the most well-known candidate who has not yet qualified.

Arizona:  Public Opinion Strategies, polling for the Citizen Awareness Project (7/22-24; 500 AZ likely general election voters; live interview), finds President Joe Biden and former President Donald Trump in a dead heat tie at 46% apiece within the critical state of Arizona. The Grand Canyon State is one of the four swing entities that will likely determine the outcome of the 2024 presidential election. 

The numbers are clearer if Florida Gov. Ron DeSantis were to become the Republican nominee. In the pairing with he and President Biden, the Governor posted a rather strong nine point lead, 49-40%. It is unlikely, however, that Mr. DeSantis will win the party nomination. 

Third Party Polling:  A great deal of media attention has been paid to the possibility of an independent or minor party presidential candidate taking a significant vote share in the 2024 election. According to a Daily Kos/Civiqs research organization poll (7/22-25; 1,154 US registered voters; online), 66% of the respondents, including 78% of Democrats, 68% of Republicans, and 50% of Independents would not vote for such a candidate. 

As the Civiqs analysis pointed out, in their January 2023 national survey, 62% said they did not want to see President Biden run again, and 59% said the same about former President Donald Trump. Though we may see ancillary candidates emerge, it is likely that this election will follow the same pattern as almost all others, that is, the race will come down to a decision between the two major party nominees.

SENATE

Michigan:   Mitchell Research conducted a new poll of the Michigan electorate (7/11-13; 639 MI likely voters; SMS text) and finds Rep. Elissa Slotkin (D-Lansing) recording a 44-38% lead over former Rep. Mike Rogers (R) and an even larger 41-28% advantage over ex-US Rep. Peter Meijer (R). Both are potential Senate candidates. The accuracy level of this poll could be questioned, however. The sample number of 639 is low for a purely electronic poll, and the all-text questionnaire did not accept any respondent who failed to answer all of the survey’s 22 questions.

Additionally, two-term US Rep. Lisa McClain (R-Bruce), who represents the region commonly referred to as “the thumb” since the state’s Lower Peninsula configuration resembles a human hand, said yesterday that she will not enter the open Senate race next year. The move presumes that she will seek re-election to the House in 2024.

Rep. McClain had been mentioned from time to time but was not considered as having a serious desire to run for the Senate, so her decision to pass on the statewide run is unsurprising. As the Republican Conference Secretary, Rep. McClain is part of the GOP majority leadership team.

Montana:  The Club for Growth leadership several months ago said they would back US Rep. Matt Rosendale (R-Glendive) to the tune of $10 million if he decided to challenge Sen. Jon Tester (D), as he did five years ago. In the 2018 election, Mr. Rosendale, then the state Auditor, lost to Sen. Tester, 50-47%. 

Now CfG president David McIntosh, himself a former Republican Congressman, is hedging on such a support level, saying that retired Navy SEAL and aerospace company CEO Tim Sheehy is an impressive candidate and Rep. Rosendale is needed in the House. Mr. Rosendale has long been a presumed Senate candidate but has yet to come forward and formally announce his political plans.

HOUSE

Alabama:  The Alabama legislature passed a new congressional map as directed, but the controversy appears far from over. The US Supreme Court decision that there could be another minority seat drawn on the Alabama map was addressed in the special session that Gov. Kay Ivey (R) called to comply with the SCOTUS ruling.

Assuming the Governor signs the new legislation creating the map, the Democratic plaintiffs have already said they will object to the new plan. The initial challenge to this new map will be before a three judge panel where the original Alabama draw was first declared unconstitutional. 

It will be up to three Republican judges to determine if this plan meets the guidelines that the SCOTUS ruling outlined. We can expect detailed and possibly contentious arguments to occur when attorneys from both sides again appear before the judicial panel. The Alabama primary is being held concurrently with Super Tuesday, March 5, 2024, so expect the new lawsuit to be quickly filed.

CA-9:  Pastor Brett Dood, who had previously declared his congressional candidacy to compete against Rep. Josh Harder (D-Tracy), announced during the week that he will end his campaign. Mr. Dood then said he would support Stockton Mayor Kevin Lincoln (R) who recently became a congressional candidate. 

Republicans now appear to be uniting behind Mr. Lincoln, meaning they will have a credible challenger against Rep. Harder in a district that can become competitive. 

In 2021 redistricting, Rep. Harder fared poorly and moved into the 9th District to run after veteran Rep. Jerry McNerney (D) announced his retirement. Though Rep. Harder had less than 28% of the crossover population from his previous 10th District, he still recorded a 55-45% victory over San Joaquin County Supervisor Tom Patti (R) but needed to outspend him by a 6:1 ratio in order to do so. 

The FiveThirtyEight data organization rates CA-9 as D+8. Though in an underdog position, this is the type of seat Republicans need to put in play to protect their small majority.

CA-22:   In November, Golden State Rep. David Valadao (R-Hanford) defeated then-state Assemblyman Rudy Salas (D), 51.5 - 48.5%, in a district the FiveThirtyEight data organization rates as D+10. Mr. Salas, who many regard as the Congressman’s most difficult opponent from the group of candidates he faced during his five victorious federal campaigns, has already announced that he is returning for a rematch. 

Now, however, further competition looms on the horizon. State Senator Melissa Hurtado (D-Sanger/Bakersfield) has formed a congressional campaign committee and intends to enter the March 5, 2024, all-party jungle primary. 

While Ms. Hurtado’s Senate district covers just over 96% of the 22nd Congressional District, she was only re-elected in November by just a 22-vote margin from more than 138,000 ballots cast. Therefore, it appears that Mr. Salas should still be favored to advance into the general election against Rep. Valadao.

FL-9:   Former state Rep. John Quinones (R), who ran for the 9th District seat in 2012 but lost soundly (63-37%) to then-Rep. Alan Grayson (D), is returning to run again in 2024, this time hoping to challenge incumbent Rep. Darren Soto (D-Kissimmee). The 9th District, which contains the south Orlando area, was the most over-populated of the 27 Florida congressional districts prior to reapportionment and redistricting. It has 30% different territory from when Mr. Quinones ran the first time. 

Rep. Soto was re-elected to a fourth term in November with a 54-46% margin, which was much lower than expected against an opponent who spent less than $600,000. The FiveThirtyEight data organization rates FL-9 at a substantial D+16, with a partisan lean calculation from Dave’s Redistricting App of 58.8D – 39.2R.

NY-4:  There was no doubt that freshman Rep. Anthony D’Esposito (R-Island Park) was going to face a major re-election battle in 2024. He was the 2022 election cycle’s big upset winner in defeating former Hempstead Town Supervisor Laura Gillen (D) in a district that the FiveThirtyEight data organization rates as D+10. Now, however, it appears that Ms. Gillen, who has announced she is returning for a rematch, will face her own major challenge in the Democratic primary. 

Two-term state Senator Kevin Thomas (D-Levittown) has filed a congressional committee with the Federal Election Commission and entered the race. Expect this contest to draw significant national political attention from beginning to end.

NC-9:  A conservative North Carolina blog site is reporting that US Rep. Dan Bishop (R-Charlotte) is planning to announce a statewide campaign for the state’s open Attorney General position in August. Should he follow through, his Charlotte anchored 9th District would become open. With the legislature committing to redrawing the congressional map, an open seat in the Charlotte area could be configured in a much different manner than the current 9th CD.

UT-2:  One of the special election Republican candidates who lost the Utah Republican Party’s 2nd District endorsing convention and did not file petition signatures to continue his candidacy, has now filed a lawsuit challenging the officially endorsed candidate, Celeste Maloy who is resigning Rep. Chris Stewart’s (R-Farmington) legal counsel. 

Two weeks ago, objection to Ms. Maloy’s voter registration status arose since she last cast a ballot in Utah during the 2018 election. She moved to the Washington, DC area to work for Rep. Stewart, thus explaining her absence from the state. Lt. Gov. Deidre Henderson (R), who is the state’s chief elections officer, approved her petition, thus allowing her candidacy. Now, however, former candidate Quin Denning (R) is filing an official legal challenge to her status. He is claiming that Maloy reactivated her Utah voter registration at her sister’s house three days after filing her candidacy documents. 

Former state Rep. Becky Edwards and ex-Republican National Committee chairman Bruce Hough have qualified via petition for the September 5th special primary election. The Democrats have nominated state Sen. Kathleen Riebe (D-Cottonwood Heights). Rep. Stewart is scheduled to resign on September 15.

GOVERNOR

Kentucky:  The Republican State Leadership Committee released a new Public Opinion Strategies survey (7/19-20; 500 KY registered voters; live interview) showing a closing of the 2023 Governor’s race between incumbent Gov. Andy Beshear (D) and Attorney General Daniel Cameron (R). The ballot test finds the Governor holding only a 49-45% edge. The poll counters another POS poll from late June for a public interest group that posted Gov. Beshear to a 52-42% lead. The election is scheduled for November 7. 

New Hampshire:  Former New Hampshire Senator Kelly Ayotte (R), who won a landslide 2010 victory with a 60-36% spread but lost her seat six years later to current incumbent Maggie Hassan (D) in a razor-thin 49-48% margin, announced that she will return to active politics with a run for Governor. Four-term incumbent Chris Sununu (R), who is not seeking a fifth two-year term, leaves behind what promises to be a hotly contested general election as well as two competitive party primaries.

In addition to Sen. Ayotte entering the Governor’s race, former state Senate President and 2022 US Senate candidate Chuck Morse is also an announced Republican candidate. The Democrats already feature a race for their party nomination between Manchester Mayor Joyce Craig and Executive Councilor Cinde Warmington.