Is it a bird? Is it a plane? Is it . . . the Wizard?
At this writing, it’s hard to know how seriously to take the Chinese surveillance balloon that’s currently hovering at 60,000 above the center of the continental United States. It is, of course, an unacceptable violation of US airspace, as Air Force Brigadier General Pat Ryder said earlier today. And it’s already caused Secretary of State Antony Blinken to cancel his plans to visit Beijing. But there appears to be no truth to the rumor that it belongs to Rep. George Santos (R-NY). We’re reasonably certain the balloon did not originate from the Emerald City. And we know that 60,000 feet is well beyond shotgun range, so don’t even think about it.
The return of regular order
We’re already seeing the effects of the Republican majority’s new rules in the House of Representatives, as committees organize and start to schedule hearings. One big change: more subcommittee hearings, as legislation works its way up from the ground level. Subcommittees are (obviously) smaller than the full committees, so subcommittee hearings tend to be shorter; but working through issues this way can offer more opportunities for stakeholders to provide information and feedback on legislation. In the short term, we’ll be scrambling.
All about infrastructure
The hearings we covered this week were all about infrastructure, in one form or another.
On Wednesday, the House’s largest standing committee, Transportation & Infrastructure, met to discuss “The State of Transportation Infrastructure and Supply Chain Challenges” with witnesses from the American Trucking Associations, the Association of American Railroads, Associated General Contractors of America, Port Houston, and the Transportation Trades Department of the AFL-CIO. The Committee has oversight responsibility for the $660 billion the Department of Transportation will administer under the Infrastructure Investment and Jobs Act (IIJA); Chairman Sam Graves (R-MO), who did not support the IIJA, said he was determined to make sure that these funds are spent responsibly.
The T&I hearing ran for more than five hours — if you’d like the full report, we’re happy to send it to you — as witnesses told lawmakers about the need to clarify Buy America rules, reform the permitting process, and invest in creative approaches to workforce development. California’s new law on independent contractors was a topic of contention, as were the Biden Administration’s ambitious climate goals.
On Thursday, we saw Deputy Secretary of Energy David Turk testify before the Senate Committee on Energy and Natural Resources on the Department’s implementation of the IIJA, which has so far made $37 billion available around the country for projects to support development of batteries and alternative fuels, improvements in the electrical grid and energy efficiency, and carbon capture and storage initiatives. A new Office of State and Community Energy Programs (SCEP) within DOE has been created to help state and local governments find and apply for funding opportunities. Committee Chairman Joe Manchin (D-WV) sees the IIJA and the Inflation Reduction Act (IRA) more as laws designed to increase the nation’s energy security than as laws designed to promote clean energy, and he said he planned to discuss this with the White House and Energy Secretary Jennifer Granholm. A full report on this hearing is available for anyone who wants it.
The China Question
US-China relations were already going to be a major issue for the 118th Congress, even before the rogue balloon. This week House Minority Leader Hakeem Jeffries (D-NY) named 11 Democratic members to the Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party, joining 13 Republicans appointed by Speaker Kevin McCarthy (R-CA). Committee members are:
Mike Gallagher (R-WI), Chair
Rob Wittman (R-VA)
Blaine Luetkemeyer (R-MO)
Andy Barr (R-KY)
Dan Newhouse (R-WA)
John Moolenaar (R-MI)
Darin LaHood (R-IL)
Neal Dunn (R-FL)
Jim Banks (R-IN)
Dusty Johnson (R-SD)
Michelle Steel (R-CA)
Ashley Hinson (R-IA)
Carlos Giménez (R-FL)
Raja Krishnamoorthi (D-IL), Ranking Member
Kathy Castor (D-FL)
Andre Carson (D-IN)
Seth Moulton (D-MA)
Ro Khanna (D-CA)
Andy Kim (D-NJ)
Mikie Sherrill (D-NJ)
Haley Stevens (D-MI)
Jake Auchincloss (D-MA)
Ritchie Torres (D-NY)
Shontel Brown (D-OH)
Chairman Gallagher said Wednesday that he was “thrilled to have Rep. Krishnamoorthi as my partner on this critical bipartisan effort,” and yesterday, the two legislators issued a joint statement saying that the Chinese balloon over US soil “demonstrates that the CCP (Chinese Communist Party) threat is not confined to distant shores.”
Meanwhile — because everything this week is “meanwhile” — House Financial Services Committee Chairman Patrick McHenry (R-NC) announced a full committee hearing on “Combatting the Economic Threat from China” for next Tuesday, to collect testimony on seventeen (17) different legislative proposals to protect US interests from malign Chinese interests. And the Senate Foreign Relations Committee will hold its first hearing next Thursday on “Evaluating US-China Policy in the Era of Strategic Competition.”
Crypto asset regulation is a bipartisan priority for Senate
Both the Chairman and the ranking member of the Senate Banking Committee have put developing a regulatory framework for digital assets near the top of their agendas for this Congress. Senate Banking Committee Chairman Sherrod Brown (D-OH) announced today that the Committee will hold hearings this month on the state of the nation’s housing, the need for federal guardrails for digital assets, and the use of sanctions, export controls, and other tools to advance national security and foreign policy. The Committee’s new ranking member, Senator Tim Scott (R-SC) published his own set of priorities yesterday, which include reducing regulatory barriers to credit and capital formation, reining in regulatory overreach, and developing a bipartisan framework “that accounts for both the rapid growth in the use of cryptocurrencies and the concerns raised by high-profile failures.”
Huizenga will lead Republican working group on ESG proposals
House Financial Services Committee Chairman Patrick McHenry (R-NC) announced today that Rep. Bill Huizenga (R-MI), chair of the panel’s Oversight and Investigations Subcommittee, will head a nine-member working group “to combat the threat to our capital markets posed by those on the far left pushing environmental, social, and governance (ESG) proposals.” Huizenga cited the Securities and Exchange Commission’s proposed climate disclosure rule as an example of regulatory overreach. The working group will include Reps. Ann Wagner (R-MO), Barry Loudermilk (R-GA), Bryan Steil (R-WI), Andrew Garbarino (R-NY), Byron Donalds (R-FL), Monica De La Cruz (R-TX), Erin Houchin (R-IN), and Andy Ogles (R-TN).
CFPB proposes, McHenry blasts rule on credit card late fees
As expected, the Consumer Financial Protection Bureau (CFPB) published a notice of proposed rulemaking this week that would reduce the safe harbor dollar amount for credit card late fees to $8, eliminate the safe harbor for higher fees for subsequent violations, and cap late fee amounts at 25% of the required payment. House Financial Services Committee Chairman Patrick McHenry (R-NC), who has already warned CFPB Director Rohit Chopra to expect more stringent oversight, said the proposed rule would force borrowers in good standing to foot the bill for delinquents. “Under my leadership,” he said, “the House Financial Services Committee will not allow Director Chopra to punish consumers solely to placate progressive activists.”
The Week Ahead
These are the hearings and events on our radar, but by no means a complete schedule of what’s happening in Washington next week. You’ll notice that two House Financial Services subcommittees have hearings at the same time on Wednesday — see what we mean by regular order?
February 6 at 11:00 a.m. House Committee on Ways & Means holds a field hearing in Petersburg, West Virginia, on the state of the US economy for workers and families in Appalachia.
February 7 at 10:00 a.m. House Financial Services Committee holds a hearing on “Combatting the Economic Threat from China.”
February 7 at 10:00 a.m. The Securities and Exchange Commission’s Small Business Capital Formation Advisory Committee holds a public meeting. The agenda includes a discussion of alternatives to traditional financing, the SEC’s proposal on private fund reforms, and the role for equity research for smaller public companies.
February 7 at 9:00 p.m. President Biden delivers the State of the Union address to Congress. Arkansas Governor Sarah Huckabee Sanders will deliver the Republican response immediately afterward.
February 8 at 10:00 a.m. House Financial Services Subcommittee on Financial Institutions & Monetary Policy holds a hearing on “Revamping and Revitalizing Banking in the 21st Century.”
February 8 at 10:00 a.m. House Financial Services Subcommittee on Capital Markets holds a hearing on “Sophistication or Discrimination? How the Accredited Investor Decision Unfairly Limits Investment Access for the Non-wealthy and the Need for Reform.”
February 8 at 10:00 a.m. House Transportation Subcommittee on Water Resources and the Environment holds a hearing on “Stakeholder Perspectives on the Impact of the Biden Administration’s Waters of the United States (WOTUS) Rule.”
February 8 at 10:00 a.m. House Ways and Means Committee holds a hearing on “The Greatest Theft of Taxpayer Dollars: Unchecked Unemployment Fraud.”
February 8 at 2:00 p.m. House Financial Services Subcommittee on Capital Markets holds a hearing on “Empowering Entrepreneurs: Removing Barriers to Capital Access for Small Businesses.”
February 9 at 10:00 a.m. Senate Committee on Banking, Housing, and Urban Affairs holds a hearing on “The State of Housing 2023.”
February 9 at 10:30 a.m. Senate Committee on Foreign Relations holds a hearing on “Evaluating US-China Policy in the Era of Strategic Competition.”
February 10 at 9:20 a.m. The Brookings Institution and Boston University School of Law host a joint forum on the future of the Federal Home Loan Bank System.
The Ellis Insight - Jim Ellis on political news
PRESIDENT
Michigan The Michigan House of Representatives approved a measure this week to move the state’s primary to the fourth Tuesday in February, just ahead of the Super Tuesday voting primaries. Michigan was one of the states that President Biden outlined in his suggested primary schedule changes. Dropping Iowa and adding Georgia along with the Wolverine State and keeping South Carolina, New Hampshire and Nevada as the five states with permission to vote before Super Tuesday recaps the President’s recommendations.
The Michigan Senate has already approved the primary election measure, which means the bill will head to Gov. Gretchen Whitmer (D) for her signature.
Republicans opposed the legislation because moving the primary would cause them to violate the GOP party rules that only allow Iowa, New Hampshire, Nevada, and South Carolina to vote early. Such penalties could mean the forfeiting of 90% of a state’s delegate votes.
Expect the parties and states to come to a scheduling agreement in the near future. The first votes are scheduled for this time next year.
South Carolina Presidential state polls are beginning to surface, and a recently released Moore Information South Carolina survey (1/18-24; 450 SC likely Republican primary voters; live interview) finds former President Donald Trump leading the GOP field in one of the top early primary states while Florida Gov. Ron DeSantis follows. The surprise result is that both South Carolina Sen. Tim Scott and the Palmetto State’s former Governor and ex-UN Ambassador Nikki Haley who is prepared to announce her own presidential run, fare poorly on the ballot test question.
According to the MI numbers, Mr. Trump holds a 41-31-12-5-4% advantage over Gov. DeSantis, Ms. Haley, Sen. Scott, and former Vice President Mike Pence, respectively. While the two South Carolinians don’t score well on the ballot test, their favorability ratings among the Republican faithful are on par with the two leading candidates. Mr. Trump has a positive rating of 83% and Gov. DeSantis 82%, while Ms. Haley and Sen. Scott score 79 and 78%, respectively. Mr. Pence is also viewed positively with a 70% favorable rating.
SENATE
Arizona The Normington Petts survey research firm conducted a poll (1/18-23; 800 AZ registered voters) for three progressive left Arizona organizations testing Rep. Ruben Gallego (D-Phoenix) opposite Independent Sen. Kyrsten Sinema, and both 2022 Arizona gubernatorial nominee Kari Lake (R), who has not closed the door on running for the Senate, and former Gov. Doug Ducey (R), who says a Senate race is not even a point under his consideration.
While the poll sponsors were highlighting Gallego’s performance, it is Sinema’s standing that has greatly improved since previous polls were made public. In the configuration with Rep. Gallego and Ms. Lake, Sen. Sinema, while still running in third place, improves her standing to 24% as opposed to 14 and 13% in December and early January polls from Public Policy Polling and Blueprint Polling. Rep. Gallego and Ms. Lake were tied at 36% apiece.
When Normington Petts tested Sen. Sinema with Rep. Gallego and former Gov. Ducey, the Congressman held a 37-31-27% advantage over the GOP ex-state chief executive, and Sen. Sinema, respectively. The progression suggests that Sen. Sinema is coming into a competitive position as the prospective candidates begin to prepare for a three-way race.
California Rep. Nancy Pelosi (D-San Francisco), the veteran former House Speaker, said yesterday that she will support Rep. Adam Schiff (D-Burbank) in the 2024 US Senate race so long as Sen. Dianne Feinstein (D) decides to retire. An additional 14 California US House members also publicly pledged their support to Rep. Schiff. This, even though Rep. Katie Porter (D-Irvine) is already in the race, and Rep. Barbara Lee (D-Oakland) is a virtual certainty to also enter. The March 5, 2024 California jungle primary is likely to advance two Democrats into the general election.
Indiana Former Indiana Gov. Mitch Daniels (R), who was considering entering the 2024 open US Senate race from his state, this week said he would not become a candidate. The announcement is good news for Rep. Jim Banks (R-Columbia City) who had previously declared his own Senate candidacy. Immediately after the Daniels announcement, National Republican Senatorial Committee (NRSC) chairman Steve Daines (R-MT) heaped praise upon Rep. Banks, whom he described as one of the party’s “top recruits.”
Incumbent Sen. Mike Braun (R) is not seeking re-election in order to run for Governor. Republicans are prohibitive favorites to hold the seat in the general election.
Michigan Three-term US Rep. Haley Stevens (D-Birmingham) who defeated then-Rep. Andy Levin in a redistricting forced Democratic primary pairing last August, said this week that she would not pursue a race for Sen. Debbie Stabenow’s (D) open seat next year. Rep. Stevens believes she “can best serve Michigan’s working families, manufacturers, students, and small businesses in my current role.”
It had been expected that Rep. Elissa Slotkin (D-Lansing) was preparing an official announcement to enter the Senate race, but has yet to move forward. Despite a flurry of early activity among Democrats examining the open race, no one has yet formally declared their intention to become a Senate candidate.
Former US Rep. Mike Rogers (R), who chaired the House Intelligence Committee during part of his seven-term congressional career, confirms that he is considering making a return to elective politics with a potential US Senate run. The move would give the Republicans a strong contender in a state that routinely produces close statewide elections.
New York Former Long Island US Congressman Lee Zeldin (R), who held Gov. Kathy Hochul (D) to a highly competitive 53-47% statewide re-election victory in November, sees his name being bandied about for many potential positions. Some Republican leaders want him to challenge Sen. Kirsten Gillibrand (D) next year, which would likely be a political suicide run in a presidential year from one of the Democrats’ strongest states, while others are talking up the possibility of him running for Suffolk County Executive.
This latter election will occur later this year and is an open race since Democratic incumbent Steve Bellone is ineligible to run for a third term. Considering Mr. Zeldin carried his home county by a 59-41% margin in the Governor’s race and represented Suffolk in Congress for eight years, he would clearly be the Republicans’ strongest candidate for such a position. At this point, Mr. Zeldin has been quiet about what future political plans, if any, he may be contemplating.
Texas Former US Housing & Urban Development Secretary and ex-San Antonio Mayor Julian Castro (D) is reportedly considering entering the Texas US Senate race to challenge two-term incumbent Ted Cruz (R). US Rep. Colin Allred (D-Dallas) is also discussed as a possible candidate, but the Congressman has yet to confirm that he has interest in running statewide.
HOUSE
AZ-3 Arizona state Senate Minority Leader Raquel Teran (D-Phoenix), also a former Arizona Democratic Party chair, confirms that she is considering entering the open primary to succeed Rep. Ruben Gallego (D-Phoenix), who is now officially running for the Senate. With the downtown Phoenix 3rd District voting overwhelmingly Democratic – the FiveThirtyEight data organization rates the seat D+44 – the August 2024 party primary will determine the next Representative. A crowded field featuring a number of local and state elected officials is expected to form.
CA-30 Rep. Adam Schiff (D-Burbank) running for the Senate has already led to a field of four viable 2024 candidates with two more announcements subsequently coming. State Senator Anthony Portatino (D-La Canada) and former Los Angeles City Attorney Mike Feuer (D) announced that they will run for the congressional seat next year.
Already in the field are state Assemblywoman Laura Friedman (D-Glendale), Los Angeles Unified School District board member Nick Melvoin, actor Ben Savage, and businessman John Bocanegra (D). The California jungle primary will be scheduled for Super Tuesday, March 5, 2024. It is likely that two Democrats will advance into the general election from this D+45 rated CD.
IN-3 Former Republican US Congressman and ex-Indiana state legislator Marlin Stutzman confirms that he is considering running for his previous position since Rep. Jim Banks (R-Columbia City) has declared for the Senate. At this point, the only formidable announced candidate in what will be an open safe Republican congressional seat anchored in the Ft. Wayne area is state Sen. Andy Zay (R-Huntington). Rep. Banks’ successor will come from the May 2024 Republican primary.
NY-3 While the fate of beleaguered freshman US Rep. George Santos (R-Long Island) continues as a daily media story, Democrats are beginning to position themselves for what could be a special election if Santos is eventually forced to resign or in next cycle’s regular election. Some local Democratic leaders are reportedly attempting to convince former Rep. Tom Suozzi (D), to make a political comeback for his former position.
Mr. Suozzi left the House last year to make a head-scratching run for the Democratic gubernatorial nomination, a race he had scarcely little potential to win. So far, the former Congressman has been non-committal about a future District 3 race. On the other hand, the man who Rep. Santos defeated in November, George Zimmerman (D), is preparing for another run. Nassau County Legislator Josh Lafazan (D), who lost the congressional nomination to Mr. Zimmerman in 2022, has already announced that he will run for the seat in the next election.
NY-22 Manlius Town Councilmember Katelyn Kriesel (D) declared her congressional candidacy at the beginning of the week. She will challenge freshman Upstate New York Rep. Brandon Williams (R-Syracuse) in what promises to be another close election.
In November, Rep. Williams succeed retiring US Rep. John Katko (R) with a 51-49% victory over former US Intelligence analyst Francis Conole (D) in a seat that the FiveThirtyEight data organization rates as D+2. We can expect further Democrats to come forward for this race, possibly including Mr. Conole for a re-match. NY-22 will likely be a national top Democratic target in 2024.
GOVERNOR
Mississippi Just before candidate filing closed in Mississippi, former state Supreme Court Chief Justice Bill Waller, Jr. (R) decided not to challenge Gov. Tate Reeves in this year’s Republican primary. In 2019, the two faced each other with Reeves prevailing, 54-46%.
At the end of last week, Secretary of State Mike Watson, another potential Reeves’ primary opponent, also said that he would not run. This leaves physician John Witcher as the Governor’s lone GOP primary challenger. Obviously, these developments enhance Gov. Reeves’ political standing. It is likely he will face Public Service Commissioner Brandon Presley (D) in the general election, in what should be a competitive race.
North Carolina Despite his name being added to ballot test questions from some pollsters surveying the impending open North Carolina Governor’s race, Sen. Thom Tillis (R) made a definitive statement saying that he will not be a candidate for the state’s chief executive post. Sen. Tillis did say, however, that he expects a contested GOP primary to evolve. At this point, the leading Republican candidate appears to be Lt. Gov. Mark Robinson. Democratic Attorney General Josh Stein is the lone major announced contender in his party.