President submits FY 2024 budget
“Is this a joke?” House Ways & Means Committee Chairman Jason Smith (R-MO) asked Secretary of the Treasury Janet Yellen at a hearing this morning. He was talking about provisions that would provide additional funding for the IRS, but he was no more enthusiastic about the rest of President Biden’s budget proposal, calling it “a $5 trillion tax hike” that would mean more pain for small businesses, family farms, and energy producers.
Rep. Richard Neal (D-MA), the Committee’s ranking member, pointed out that the majority had not yet proposed a budget of its own, and said that additional investment in the IRS, which began with last year’s Inflation Reduction Act (IRA), was already “ushering in a new era of service for taxpayers.”
Secretary Yellen said that while the Administration’s top priority was bringing down inflation, its budget plan sought to lay a foundation for long-term growth bolstered by implementation of the bipartisan infrastructure law, the CHIPS and Science Act, and the IRA. The budget’s major revenue elements would:
Impose a minimum income tax of 25% on taxpayers with wealth above $100 million
Increase the corporate tax rate from 21% to 28%
Assume enactment of the global minimum tax
On the spending side, it would:
Fund free, universal preschool
Restore the pandemic-era expansions of the Child Tax Credit, the Earned Income Tax Credit, and the ACA premium tax credit
Commit more than $175 billion to expand the supply of affordable housing
We never like to be pessimistic, and we’re legitimately not in the forecasting business (March Madness brackets aside). But it’s safe to say that that the House will not pass the President’s budget. In fact, we’d be surprised to see Congress pass a budget at all, although it will have to pass individual spending bills before the end of the year — and raise the debt ceiling well before that.
Oh yeah, the debt ceiling
Federal Reserve Board Chairman Jerome Powell and Democratic members of Congress underlined the urgency of raising the debt ceiling at hearings before the Senate Banking Committee and the House Financial Services Committee this week. In her testimony this morning, Secretary Yellen said that a default would “trigger an economic and financial catastrophe,” and that there was no “short cut . . . that will avoid economic chaos.”
In a letter to Secretary Yellen last week, House Financial Services Committee Chairman Patrick McHenry (R-NC) asked for detailed information and a briefing about how Treasury calculates the “X-date,” the point at which Treasury would not be able to make scheduled payments for operating expenses and maturing Treasury obligations.
News outlets are reporting this afternoon that the House Freedom Caucus has said it will agree to raise the debt limit in exchange for a promise of $3 trillion in spending cuts over the next ten years.
Happy National Consumer Protection Week!
Did you miss it? Strangely, although President Biden issued the proclamation last Friday, and the week doesn’t officially end until tomorrow, it did not come up during the hearing on CFPB reform held yesterday by the House Financial Services Subcommittee on Financial Institutions and Monetary Policy.
Subcommittee Chairman Andy Barr (R-KY) and his Republican colleagues are seeking to bring the Consumer Financial Protection Bureau under the Congressional appropriation process, ending the current funding mechanism, which they argue is unconstitutional. Democrats emphasized the Bureau’s track record in returning funds to consumers, and said that the regulatory capture they’d seen during the 2007-08 financial crisis justified the “double insulation” of exempting the Bureau from appropriations.
Most Republicans would also like to see the Bureau’s governance structure amended from its current single director to a bipartisan board of directors, although former CFPB Deputy Director Brian Johnson reminded the panel that bipartisan boards often disregard minority views.
CFPB Director Rohit Chopra came under fire for what Republicans called “regulation by blog post.” Witnesses told the panel that the lack of formal rulemaking made it impossible for creditors to act with confidence, and would ultimately reduce access to credit. They noted that “junk fees,” a term used by both Chopra and President Biden had no legal definition.
Yesterday’s hearing followed a White House-sponsored gathering of state legislators on Wednesday, where Director Chopra discussed the Bureau’s efforts and the White House distributed a “Guide for States: Cracking Down on Junk Fees to Lower Costs for Consumers.”
Regulating for climate change?
Climate risk was a—er—hot topic all over town this week, as the Financial Stability Oversight Council held the first meeting of its external Climate-related Financial Risk Advisory Committee (CFRAC). CFRAC is an effort to gather information and analysis about climate-related financial from a wide range of stakeholders. “These impacts are not hypothetical,” Treasury Secretary Janet Yellen told the group, noting a five-fold increase in the annual number of billion-dollar disasters between the last five years and the 1980s.
The Federal Housing Finance Agency was also talking about climate risk this week, holding a “Federal Home Loan Bank System at 100” roundtable specifically on the topic on Monday in North Carolina. While some participants said they struggled to see a role for the Federal Home Loan Banks as a resource to help member institutions manage climate risk, participants in another FHFA roundtable held Wednesday in Puerto Rico said the Banks could provide important gap funding for liquidity needs.
Republican members of the House Financial Services Committee, however, were determined to warn Federal Reserve Chair Jerome Powell on Wednesday to stay out of climate-related issues. “It appears the Federal Reserve Board is laying the groundwork for climate policy to be implemented through Fed regulation with an opening salvo of a ‘scenario analysis,’” said Financial Services Committee Chairman Patrick McHenry. It would be a mistake for the Fed to do that, he said, admonishing the Fed to “stick to its knitting.”
Confirmations, Nominations, Departures
Rep. Jennifer McClellan (D-VA) was sworn into office this week, filling the seat left vacant by the death of Rep. Don McEachin (D-VA). She has been assigned to the House Armed Services Committee.
Daniel Werfel was confirmed as Commissioner of Internal Revenue by a vote of 54-42. Doug O’Donnell, a 36-year veteran of the IRS, had been serving as acting Commissioner since Charles Rettig’s term expired last November.
Communications policy advocate Gigi Sohn, whom President Biden had nominated to the Federal Communications Commission in October 2021, asked this week that her nomination be withdrawn.
The Week Ahead
The House is in recess next week.
March 13 at 1:00 p.m. The Federal Housing Finance Agency continues its series of roundtable discussions on “The Federal Home Loan Bank System at 100: Focusing on the Future” with a meeting in Boston, MA on corporate governance and system structure.
March 15 at 10:00 a.m. The Securities and Exchange Commission holds an open meeting to consider Regulation S-P: Privacy of Consumer Financial Information and Safeguarding Customer Information; the Cybersecurity Risk Management Rule; and Regulation Systems Compliance and Integrity (Regulation SCI).
March 15 at 10:00 a.m. Senate Committee on Environment & Public Works holds a hearing on implementing the Infrastructure Investment and Jobs Act, focusing on perspectives on the Drinking Water and Wastewater Infrastructure Act. (This hearing is on the main Senate calendar, but not on the Committee’s website.)
March 15 at 10:15 a.m. Senate Committee on the Budget holds a hearing on the President’s FY2024 budget proposal. OMB Director Shalanda D. Young will be the only witness.
March 16 at 10:00 a.m. Senate Committee on Finance holds a hearing on the President’s FY2024 budget proposal with testimony from Secretary of the Treasury Janet Yellen.
March 16 at 10:00 a.m. Senate Committee on Banking, Housing, and Urban Affairs holds a hearing on “Local Views on Public Transportation, Transit Infrastructure, Operations, and Federal Transit Programs.”
March 16 at 7:00 p.m. The Federal Housing Finance Agency continues its series of roundtable discussions on “The Federal Home Loan Bank System at 100: Focusing on the Future” with a virtual session on access to the Federal Home Loan Bank System for Guam and the Northern Marianas Islands.
March 17 at 4:00 p.m. The Federal Housing Finance Agency continues its series of roundtable discussions on “The Federal Home Loan Bank System at 100: Focusing on the Future” with a virtual session on access to the Federal Home Loan Bank System for Hawaii and American Samoa.
The Ellis Insight - Jim Ellis on political news
PRESIDENT
Gov. Larry Hogan: Last weekend, former Maryland Gov. Larry Hogan said he would not join the Republican presidential field. Mr. Hogan explaining his decision stated, “I have long said that I care more about ensuring a future for the Republican Party than securing my own future in the Republican Party.”
Mr. Hogan had previously expressed his analysis that a crowded Republican field would only help Donald Trump win renomination, something the former Free State Governor wants to see avoided. He also indicated his belief that Mr. Trump and Florida Gov. Ron DeSantis running far ahead of the lesser-known candidates doesn’t leave the lower tier contenders much of an opportunity to compete for the win.
SENATE
Indiana: It appeared for a time that Democratic leaders were attempting to recruit Biden former White House chief of staff Ron Klain into the open Hoosier State Senate race. Incumbent Republican Senator Mike Braun is foregoing re-election to instead run for Governor.
The Klain idea, however, was not met with overwhelming acceptance. The 2022 Indiana Democratic Senate nominee, Hammond Mayor Tom McDermott, for example expressed opposition to Klain, pointing out that the Washington, DC political establishment did nothing to help him in his failed race against GOP Senator Todd Young despite several polls suggesting the race was close early. For his part, Mr. Klain responds saying he has never run for office and, therefore, has no plans to become a Senate candidate in 2024.
Michigan: Both Tudor Dixon, the defeated 2022 Republican gubernatorial candidate, and former Congressman Mike Rogers (R), who chaired the House Intelligence Committee during his tenure in office and was considering a political comeback in the open Michigan Senate race, announced they will not join the forming open US Senate field. Last week, three-term US Rep. Elissa Slotkin (D-Lansing) entered the race, and is widely viewed as the favorite for the Democratic nomination and the seat. In December, four-term incumbent Debbie Stabenow (D) announced that she will retire at the end of this Congress.
We can soon expect more Republican action in this race. Michigan School Board member Nikki Snyder is the only announced GOP candidate. Others reportedly considering the race are US Rep. Bill Huizenga (R-Holland), and former Reps. Fred Upton and Peter Meijer. Of this group, Mr. Meier appears to be making the most moves to organize a campaign.
Montana: The OnMessage Republican polling firm released the results of their latest Montana US Senate poll (2/18-21; 600 MT likely voters with a 100 Republican oversample for GOP primary questions; live interview) and the results provide good news across the board for US Rep. Matt Rosendale (R-Glendive).
Though no one has announced a Senate bid against three-term incumbent Jon Tester (D), OnMessage tested a hypothetical Republican primary consisting of Reps. Rosendale and Ryan Zinke (R-Whitefish) along with former Secretary of State Corey Stapleton. For this question, Rep. Rosendale posted a 36-26-6% lead over Messrs. Zinke and Stapleton. Attorney General Austin Knudsen (R), who has also been mentioned as a possible Senate candidate, was not tested.
In the general election, in a reversal of a previous Political Company survey result, OnMessage finds Rep. Rosendale topping Sen. Tester, 46-41%. There is no report as to whether the pollsters tested the other candidates singularly against Sen. Tester.
Nevada: Nevada’s lone Republican Congressman, Rep. Mark Amodei (R-Carson City), announced during the week that he will not challenge Sen. Jacky Rosen (D) next year. The Nevada race should be one of the most competitive campaigns in the country, just as it was in 2022. In that election, Sen. Catherine Cortez Masto (D) slipped past GOP challenger Adam Laxalt by only a 7,928-vote margin (48.8 – 48.0%), which was the closest raw vote spread of all ‘22 Senate campaigns.
Pennsylvania: 2022 gubernatorial nominee Doug Mastriano, who remains a state Senator, confirms he is considering running for the US Senate next year despite never becoming competitive in the Governor’s race upon winning the party nomination. In November, then-Attorney General Josh Shapiro (D) easily defeated Sen. Mastriano, 56-42%.
At this point, 2022 Senate candidate David McCormick, who lost the party nomination to Dr. Mehmet Oz by just 950 votes statewide, is reportedly considering a comeback. Another ’22 Senate candidate, businesswoman Kathy Barnette who finished in third place, is also mentioned as a possible candidate. The 2024 Republican nominee will challenge Sen. Bob Casey, Jr. (D).
HOUSE
AZ-6: Despite many key Arizona Republicans encouraging freshman Rep. Juan Ciscomani (R-Tucson) to run for the Senate next year, he again issued a statement through his spokesperson reiterating that he is committed to running for re-election to his House seat. Arizona’s southeastern 6th District is politically marginal, so what is likely considered bad news for the National Republican Senatorial Committee is good news for the National Republican Congressional Committee.
CA-11: California state Sen. Scott Wiener (D-San Francisco) is making his political future known. Anticipating that former House Speaker Nancy Pelosi (D) will not seek re-election in 2024, Sen. Wiener has filed a congressional exploratory committee with the Federal Election Commission. He says he will run for the 11th District seat, which covers most of the San Francisco peninsula, if Rep. Pelosi decides to retire.
He could be getting the jump on another scenario, also. Should Ambassador to the Holy See Joe Donnelly (D) resign later this year to mount a race for Governor of Indiana as many believe he will, odds are strong that Ms. Pelosi will be appointed as his replacement. If so, a special election would then be scheduled for District 11. Before his ambassadorial appointment, Mr. Donnelly served both in the Senate and House. He failed in his 2018 Senate re-election effort.
CA-21: Businessman and former FBI agent Michael Maher (R) says he will return to launch another challenge campaign against veteran US Rep. Jim Costa (D-Fresno) in the Central Valley congressional seat that contains most of the city of Fresno along with the Sanger and Exeter communities. Despite only spending $309,000 on his campaign effort, Mr. Maher held Rep. Costa to a 54-46% re-election victory in a district the 538 data organization rates as D+16.
Though it likely remains a stretch that Mr. Maher could come within victory range, it is certain that he will be able to raise more substantial resources in this election cycle to make his effort more competitive.
CA-27: GOP Rep. Mike Garcia (R-Santa Clarita) has won three elections in a seat that favors the Democrats against former state Assemblywoman Christy Smith (D), but he’s almost certain to see a new challenger in 2024.
Franky Carrillo (D) was falsely imprisoned for 22 years, convicted for a murder later proven he did not commit and was awarded $11 million in compensation after winning a lawsuit against the state of California. Since then, Mr. Carrillo was appointed as a Los Angeles County Probation Oversight commissioner. This week, he announced that he will run for the US House next year.
It's clear that the Democrats must change the paradigm against Rep. Garcia, and it remains to be seen if Mr. Carrillo is the type of candidate who can alter the partisan flow of this northern Los Angeles County CD against an incumbent who has proven he can draw crossover votes.
OR-6: Dundee Mayor David Russ (R) announced on Friday that he will return to again run for Congress in 2024. In the previous election, Mr. Russ placed sixth in a field of seven Republican candidates with only 3.8% of the vote, over 30 percentage points behind the GOP nominee, Mike Erickson. The latter man would hold then-state Rep. Andrea Salinas (D-Tigard) to a 50-48% victory margin in the 6th District’s first ever congressional race. Due to population growth, Oregon was awarded a new seat in the 2020 national reapportionment formula.
RI-1: Last week, Rhode Island Rep. David Cicilline (D-Providence) announced that he is resigning his seat on June 1st to accept a position with a non-profit organization. While the list of potential Democratic candidates who might declare for the impending special election to be scheduled later this year is long, the first major contender just announced her plans late yesterday. Lt. Gov. Sabina Matos (D), the former President of the Providence City Council, formally declared her congressional candidacy.
The real political battle for this seat will be fought in the Democratic primary. In a district the FiveThirtyEight data organization rates as D+32, it is a foregone conclusion that Rep. Cicilline’s eventual successor will be a Democrat. Expect a crowded field and a plurality primary victory that will lead to an easy Democratic special general election win.
TX-23: Twice during the week, a Republican has come forward to announce a GOP primary challenge to two-term Rep. Tony Gonzales (R-San Antonio) after the incumbent was censured by the Texas Republican Party for taking certain issue positions. Joining Medina County Republican Party chair Julie Clark in the race is retired ICE officer Victor Avila.
Since Texas is a runoff state, a crowded field does not necessarily help an incumbent. In a non-runoff state, a crowded field splitting the anti-incumbent vote would allow the latter to win with a plurality. The Texas primary is scheduled for Super Tuesday, March 5th with a runoff, if necessary, to be held on May 28th.
GOVERNOR
Louisiana: After much speculation abounded to the contrary, five-term US Rep. Garret Graves (R-Baton Rouge) announced that he will not join the open 2023 Governor’s race this year and will presumably seek re-election to the House in 2024. Mr. Graves said in his released written statement that he looks forward to helping unite the Republican Party behind a candidate “…with a bold, hopeful vision of Louisiana’s promise that is equal to her potential.”
Stephen Waguespack, the President and CEO of the Louisiana Association of Business & Industry and former gubernatorial chief of staff announced his candidacy after Rep. Graves bowed out. State House Speaker Clay Schexnayder (R-Gonzales) is also expected to join a Republican field that includes Attorney General and ex-Congressman Jeff Landry, state Treasurer John Schroder, state Sen. Sharon Hewitt (R-Chalmette), and state Rep. Richard Nelson (R-Mandeville).
For the Democrats, former state Transportation Secretary Shawn Wilson appears to have successfully unified the party behind his candidacy. Gov. John Bel Edwards (D), who publicly supports Mr. Wilson, is ineligible to seek a third term. US Rep. Troy Carter (D-New Orleans), the state’s lone Democratic Congressman, also announced his support of Mr. Wilson.
North Carolina: Raleigh based Public Policy Polling conducted a survey of the North Carolina electorate for the progressive left Forward Carolina organization (3/2-3; 704 NC registered voters) and finds an unsurprisingly tight battle developing between unannounced gubernatorial candidate Mark Robinson (R), the state’s Lt. Governor, and Attorney General Josh Stein (D) who is an official contender.
The poll results find the two locked in a dead heat with Mr. Robinson holding a 44-42% edge. The Lt. Governor’s strong 56-28% showing in the state’s substantial rural areas is what catapults him into the lead.
Mr. Robinson was elected Lt. Governor as a Republican in 2020 despite now term-limited Democratic Governor Roy Cooper (D) winning re-election. Mr. Robinson carried the state 51.6 – 48.4%. Attorney General Stein survived a close re-election battle in the same year, slipping past his Republican opponent with only a 50.1 – 49.9% victory margin. The open NC Governor’s race will undoubtedly feature a tight finish.