The House of Representatives was extremely busy this week
The House of Representatives was extremely busy this week, packing in hearings before a two-week break that begins as we write this. The Senate (traditionally a more deliberative body — just ask them) also held hearings this week, but they’ll be a little busier next week. The Chinese weather balloon remained a topic of conversation and even legislation, as the House unanimously approved a “Resolution condemning the Chinese Communist Party’s use of a high-altitude surveillance balloon as a brazen violation of United States sovereignty” yesterday.
The President delivered the annual State of the Union address at an unusually raucous joint session of Congress on Tuesday, but has not yet delivered the budget proposal that traditionally accompanies it. The public conversation about the debt ceiling continued, with President Biden asking Congress to raise it in Tuesday’s speech, and Speaker of the House Kevin McCarthy (R-CA) tweeting “No more blank checks for runaway spending” today.
Whose economy is it, anyway?
The hearings we covered on (and off) Capitol Hill this week were more focused on policy than on politics — mostly, anyway. Our major takeaways? 1) The parties agree on many elements of the economic and social challenges that need to be addressed; 2) they differ in important ways on fundamental questions about how to address those challenges, and specifically on how best to promote economic growth and capital access; and 3) Republican leaders would like to move quickly on legislation where bipartisan consensus is possible.
The House Ways and Means Committee took a trip to Petersburg, West Virginia on Monday for a hearing to collect testimony about how inflation, supply chain issues, and high energy costs are affecting small businesses, workers, and families. Most of the Committee’s Republican members attended, while only one Democrat, Virginia’s Rep. Don Beyer, did. Witnesses said that high energy costs were at the root of most of their problems, but also said they were having trouble filling jobs. Committee Chairman Jason Smith (R-MO) called for Congress to prioritize the needs of the working class over “those of the Washington political class,” while Rep. Beyer argued that the bipartisan infrastructure law and the Inflation Reduction Act offered valuable opportunities for small businesses. Rep. Greg Murphy (R-TN), a physician, predicted that the end of the federal public health emergency in May, which will end expanded access to Medicaid, will drive more people back into the workforce. Let us know if you’d like the full hearing report.
The House Financial Services Subcommittee on Capital Markets held not one but two hearings on Tuesday to talk about capital access for small businesses. The day’s first hearing focused on whether and how to redefine “accredited investor” in order to make it easier for experts and others to invest in emerging growth companies at a point where both risks and potential rewards are greatest. Republicans and Democrats agreed that wealth alone is not a reliable measure of sophistication. While Chairwoman Ann Wagner (R-MO) and other Republicans are proposing to lower or even eliminate income thresholds for accredited investors, Rep. Brad Sherman (D-CA), the panel’s ranking member, said the limits should be “rationalized” rather than reduced. Witnesses included two angel investors, Eli Velasquez and David Olivencia, who made the case for emphasizing standards for education and expertise over minimum wealth requirements.
The afternoon hearing broadened the policy discussion to consider the appropriate balance of private vs. public capital markets, especially as the approval rate for small business loans dropped sharply between 2019 and 2021. Chairwoman Wagner and other Republicans on the Subcommittee criticized Securities and Exchange Chairman Gary Gensler’s stated plans to impose new limits on private markets, while Democrats argued that too many large companies are taking advantage of exemptions meant for small businesses, with too little transparency and accountability. Tuesday’s hearing sought testimony to support consideration of ten bills, and Ranking Member Sherman said he expected this number to grow to 30 by the time of the Subcommittee’s third hearing on this topic, planned for March. Most of those bills will have Republican primary sponsors, but Sherman said he’d be reintroducing a bill, and Chairwoman Wagner said she would welcome Democratic cosponsors on Republican-led legislation.
Senate Banking turns to housing
Yesterday we covered the Senate Banking Committee’s first hearing of this Congress, which focused on the state of the nation’s housing. Chairman Sherrod Brown (D-OH) said that housing would be the Committee’s top priority in this Congress; Senator Tim Scott (R-SC), the Committee’s new ranking member, said the issue was personal to him, as he’d grown up seeing his mother struggle to keep their family housed. Scott believes that federal subsidies and burdensome regulations have driven up costs and made homeownership impossible for too many Americans, while Brown noted that federal programs such as the USDA’s 515 program are often the best or even the only source of funding to house the most vulnerable Americans, who would never be able to pay market rates. Witnesses and Committee members discussed the acute need to address housing shortages in rural areas and the disappearance of “starter homes” from the market. Witnesses said that expanded tax credits could be powerful incentives, but labor shortages, supply chain issues, and local zoning restrictions are all limiting new construction.
Focusing on China
Everyone on both sides of Capitol Hill agrees that China is the United States’ greatest global rival, both economically and politically. How much of a threat, the nature of the threat, what the US can and should be doing about it . . . those are areas of extreme contention, especially after last week’s weather balloon incursion. During a nearly six-hour-long hearing on Tuesday, House Financial Services Committee Chairman Patrick McHenry (R-NC) said the US must underline its commitment to “free people and free markets,” and insist that China comply with international rules and norms for investment and lending. Committee Democrats warned that the risk of defaulting on sovereign debt, as will happen if Congress does not raise the debt ceiling, far exceeded any risks China might pose to the US position in the global economy. At yesterday’s hearing of the Senate Foreign Relations Committee, Chairman Bob Menendez (D-NJ) demanded a “full and frank assessment” of the US-China relationship from Deputy Secretary of State Wendy Sherman and Assistant Secretary of Defense for Indo-Pacific Security Affairs Ely Ratner. Senator Jim Risch (R-ID), the Committee’s ranking member, said he was concerned that the Biden administration still didn’t consider Congress a true partner on China.
The return of antitrust
If you watched Tuesday night’s action-packed State of the Union address, you might be forgiven for having missed a few details. Among them was a call for “bipartisan legislation to strengthen antitrust enforcement and prevent big online platforms from giving their own products an unfair advantage.” This didn’t come from nowhere, and interest in breaking up market dominance is truly bipartisan, although it’s all about which markets we’re talking about. The White House issued a Fact Sheet last week to promote President Biden’s broader “competition agenda,” of which antitrust enforcement is only one piece. The Consumer Financial Protection Bureau (CFPB), Department of Transportation, and Federal Communications Commission (FCC) are individually pursuing regulations that will require financial services providers, airlines, and broadband providers to increase disclosures and/or limit fees. The President is asking Congress to pass legislation that would limit “junk fees” in concert ticketing, airline fares, technology services, and hotel/resort bills. “While antitrust enforcement agencies have the authority to investigate and address anti-competitive conduct in the industry, the President urges Congress to act now,” the Fact Sheet says.
Treasury report assesses opportunities, risks of cloud services for financial institutions
As financial services companies increase their use of cloud-based services, the Treasury Department published a report this week that identified areas of concern about these services. While Treasury acknowledged that cloud services can help institutions become more resilient and secure, they noted that community banks say they don’t always get enough information about cloud service providers’ (CSP) incidents and outages. CSPs need to build their human capital in order to provide more information and support to client institutions. Treasury is concerned about the effects of market concentration among CSPs, including its implications for contract negotiations. The report also notes the lack of a comprehensive global regulatory and supervision structure for CSPs, and the risk that regulatory changes abroad could bring American CSPs under the direct authority of foreign financial regulators. Treasury is launching an interagency Cloud Services Steering Group to improve coordination among US regulators, conduct tabletop exercises with the private sector, and develop best practices for cloud adoption.
The Week Ahead
The House is in recess until February 27. The Senate is in next week, but will be out the week of February 20. The Golden Apple will take next Friday off, but return on February 24.
February 13 at 12:30 p.m. EST (9:30 a.m. PST) The Federal Housing Finance Agency continues its series of roundtables on the FHLBank System at 100 with a session in Las Vegas, NV on CDFIs, community and economic development. Roundtables stream here and are available after the fact on the FHFA’s YouTube page.
February 14 at 10:00 a.m. Senate Committee on Banking, Housing, and Urban Affairs holds a hearing on “Crypto Crash: Why Financial System Safeguards are Needed for Digital Assets.”
February 15 at 10:00 a.m. Senate Committee on the Budget holds a hearing on "Climate-Related Economic Risks and their Costs to the Federal Budget and the Global Economy."
February 15 at 10:00 a.m. Senate Committee on Environment & Public Works holds a hearing on “The Future of Low Carbon Transportation Fuels and Considerations for a National Clean Fuels Program.”
February 15 at 10:00 a.m. The Securities and Exchange Commission holds an open meeting to discuss proposals for shortening the settlement cycle and safeguarding advisory client assets.
February 15 at 10:30 a.m. Senate Committee on Finance holds a hearing on the nomination of Daniel Werfel to be Commissioner of the Internal Revenue Service.
February 15 at 12:30 p.m. EST (9:30 a.m. PST) The Federal Housing Finance Agency holds a roundtable on the FHLBank System at 100 in Los Angeles, CA, focusing on support for affordable housing and community development in financially vulnerable communities. Roundtables stream here and are available after the fact on the FHFA’s YouTube page.
February 16 at 10:00 a.m. Senate Agriculture Committee holds a hearing on the 2023 Farm Bill: Nutrition.
February 16 at 10:30 a.m. Senate Finance Committee hearing on modernizing trade laws and enforcement.
February 17 at 11:30 a.m. EST (9:30 a.m. MST) The Federal Housing Finance Agency holds a roundtable on the FHLBank System at 100 in Boise, ID, focusing on support for emerging high-cost areas. Roundtables stream here and are available after the fact on the FHFA’s YouTube page.
The Ellis Insight - Jim Ellis on political news
PRESIDENT
Gov. Brian Kemp: Georgia Gov. Brian Kemp (R) has hired two national fundraisers to expand his federal political action committee’s financial base. Some believe his strengthening the Hardworking Americans PAC is a prelude for Kemp joining the presidential campaign, but it could also bring long term benefits for a potential US Senate run when Sen. Jon Ossoff (D) next comes in-cycle in 2026. Gov. Kemp was re-elected to a second term over Stacey Abrams (D) with a 53-46% victory margin. He is ineligible to again run for his current position in the 2026 election.
SENATE
Montana: The National Journal is reporting that first-term state Attorney General Austin Knudsen, the former eastern Montana Roosevelt County District Attorney, is considering a US Senate run. Most of the attention, in terms of potential opponents for Sen. Jon Tester (D), has centered around US Reps. Matt Rosendale (R-Glendive) and Ryan Zinke (R-Whitefish). A spokesperson for AG Knudsen did not confirm or deny the report, only to say that “announcements regarding future plans will come at a later date.”
The Montana race will be a top Republican conversion target in 2024. Sen. Tester said he will make a decision about seeking a fourth term before the end of March. Should Mr. Knudsen enter the Senate race, he would risk his current position as his office is also on the ballot in 2024.
Michigan: When Wolverine State Democratic Sen. Debbie Stabenow announced on January 5th that she would not seek re-election in 2024, a spate of speculative activity occurred particularly among Democrats as to who may run to succeed the veteran incumbent. Despite the seemingly heightened interest level, no major candidate has yet to announce. Rep. Elissa Slotkin (D-Lansing) was thought to be on the verge of declaring her Senate candidacy and is still expected to at some point, but she has yet to come forward.
The Republicans were quiet immediately after the Stabenow announcement, which caught many by surprise, but now increased chatter is evident. Last week, former US Rep. Mike Rogers said he is considering running, and this week speculation is surrounding potential Senate bids from Congressman Bill Huizenga (R-Holland), veteran ex-Rep. Fred Upton, and former US Rep. Peter Meijer. The latter man was denied renomination in the 2022 election cycle. The Michigan race promises to be highly competitive, but Democrats will be favored to win a close contest.
Nebraska: Before Cornhusker State Senator Pete Ricketts (R) was appointed to replace resigned Sen. Ben Sasse (R) on January 12th, former gubernatorial candidate Charles Herbster indicated he would consider launching a primary against the eventual appointed incumbent. Now, he appears to be doubling down on that comment, again saying he is seriously considering developing a 2024 Senate campaign.
Mr. Herbster lost the 2022 Republican primary to now-Gov. Jim Pillen largely with then-Gov. Ricketts’ substantial help. Former President Donald Trump supported Herbster in the primary, but the endorsement came before several women came forth to accuse the agribusinessman of sexual harassment. Though Trump did not rescind the endorsement, his support was not enough to overcome the Pillen-Ricketts team.
New Jersey: Two-term Roselle Park Mayor Joe Signorello announced that he will launch a Democratic primary challenge to Sen. Bob Menendez in the New Jersey June 2024 primary election. Sen. Menendez is not expected to have much trouble winning renomination and re-election next year, but he now has at least one opponent who attracts significant media attention even though he is a small town mayor. Roselle Park is a city of approximately 14,000 people within populous Union County.
New York: Four-term Long Island Rep. Lee Zeldin (R), who gave up his congressional seat to challenge Gov. Kathy Hochul (D) in November and lost 53-47%, says he is considering launching a campaign against Sen. Kirsten Gillibrand (D) next year. Mr. Zeldin said “it would be a pretty epic clash” between the two if he decided to make the run.
This would be a tough race for Mr. Zeldin, or any Republican, in a presidential year. New York will surely back the Democratic presidential nominee meaning it would be even more difficult to defeat a sitting incumbent Senator who will be enjoying what should be a favorable turnout model in one of the country’s strongest Democratic states.
HOUSE
CA-13: Fresno area financial advisor and ex-Democratic congressional candidate Phil Arballo (D) says he will return in 2024 to hopefully challenge freshman Rep. John Duarte (R-Modesto) in the general election. The Congressman recorded the 2022 election’s second-closest victory margin nationally, a 565-vote win over then-state Assemblyman Adam Gray (D).
Mr. Arballo first came on the political scene in 2020 when he challenged then-Rep. Devin Nunes (R). He raised over $5 million for that campaign but secured only 46% of the general election vote. He entered the 2022 race in new District 13 but failed to become a November election finalist, placing third in the jungle primary with a 17.4% preference total after raising $1.6 million.
The 13th District race will be a major national Democratic conversion target, so we can expect a large jungle primary field to form. At this point, there is little indication that Mr. Gray will return for a re-match.
CO-3: Veterinarian Debby Burnett (D), who filed to run against Colorado Rep. Lauren Boebert (R-Silt) in 2022 but was disqualified from the ballot, is again filing to run in 2024. Though Ms. Burnett will likely qualify for the Democratic primary in the coming election, she will probably fall well behind 2022 nominee Adam Frisch who came within 546 votes of unseating Rep. Boebert. Mr. Frisch indicates that he is likely to run again and will almost certainly have the local Democratic Party’s support.
IN-5: Second-term Indiana US Rep. Victoria Spartz (R-Noblesville) announced that she will not enter the open US Senate primary, and won’t even seek re-election to the House. Rep. Spartz had previously confirmed that a Senate race was under consideration, but she was not viewed as a particularly strong potential candidate. The surprise decision, however, was her saying that she will retire completely from elective politics when her current term ends. The Congresswoman said she has teenage daughters who need her guidance at home.
The Spartz retirement decision means six seats will already be open in the 2024 election cycle. Aside from the Indiana Congresswoman leaving the House, Reps. Ruben Gallego (D-AZ), Katie Porter (D-CA), Adam Schiff (D-CA), Jim Banks (R-IN), and Alex Mooney (R-WV), have all formally announced their intentions to run for the Senate.
NY-19: We’ve already seen brisk political activity in several New York Upstate districts. Dan Butterman (D), an insurance executive who has three times failed to win a state Assembly seat, says he will join the growing field to challenge freshman Rep. Marc Molinaro (R-Red Hook). Also in the race are Democratic activist Joe Cerullo and Independent marketing executive Hal Stewart. Stronger Democratic candidates are expected to emerge.
In two other Upstate districts, former Congressman Mondaire Jones (D) is contemplating a comeback effort against freshman Rep. Mike Lawler (R-Pearl River) in the Westchester County anchored 17th CD, and a pair of Democrats have announced their candidacies against freshman Rep. Brandon Williams (R-Syracuse) in the 22nd District.
OH-13: Madison Gesiotto Gilbert (R), who lost to now freshman Rep. Emilia Sykes (D-Akron) in a tight 53-47% November contest, is reportedly mulling taking another shot at winning the seat in 2024. Should the Ohio map be re-drawn, which is a possibility before the 2024 election, this district could become more Republican. If not, then Rep. Sykes will be considered a clear favorite for re-election.
GOVERNOR
North Carolina: Former Tar Heel State three-term Congressman Mark Walker (R-Greensboro), who was redistricted out of his 6th District seat and then subsequently lost a GOP US Senate primary, indicated he is now interested in running for Governor next year.
Mr. Walker fared poorly in the 2022 US Senate contest, however, placing a distant third to now-Sen. Ted Budd in the Republican primary. In that race he secured only 9.2% of the GOP vote. In the Governor’s race, Mr. Walker would face Lt. Gov. Mark Robinson (R) and likely several others. Incumbent Governor Roy Cooper (D) is ineligible to seek a third term.
It is probable that a new congressional redistricting map will be drawn to replace the current interim court map before the 2024 election. As has been the Republican map drawers’ past practice, a new plan would reconfigure one of the seats in the Greensboro area to favor a Republican candidate. Therefore, another House run could be an option for Mr. Walker.
STATES
North Carolina: In a continuing game of political football between what was the Democratic controlled state Supreme Court and the Republican legislature, the new Supreme Court voted to reconsider two election-oriented decisions that the previous panel rendered at the very end of its tenure in January. The previous court, a 4D-3R majority, struck down the North Carolina state Senate map as a partisan gerrymander and determined the state’s voter ID law is unconstitutional. The new court, a 5R-2D majority, will now reconsider both rulings.
North Carolina redistricting has been a decade-long battle between the state Supreme Court and the legislature. In the Tar Heel State, the Governor has no veto power over redistricting. Now that the high court is in Republican hands, it is likely the justices will interpret the laws closer to what the Republican majority in the legislature has repeatedly enacted. This, and the US Supreme Court hearing the North Carolina partisan gerrymandering case, is likely to soon stabilize the NC redistricting and election law situation.
LOCALITIES
Chicago: As we approach the February 28th non-partisan mayoral election in Chicago, an independent IZQ Strategies survey (1/27-2/2; 1,040 likely Chicago primary voters; SMS text) sees former Chicago Schools CEO Paul Vallas taking the lead within the crowded candidate field with 25% support.
Cook County Commissioner Brandon Johnson, who US Reps. Jonathan Jackson (D-Chicago) and Delia Ramirez (D-Chicago) support, pulls into second place with 15%, while Mayor Lori Lightfoot and US Rep. Jesus “Chuy” Garcia (D-Chicago) drop into a tie for third position with 12% preference apiece.
The latest survey, however, finds Rep. Garcia rebounding from the previous studies that were showing him trending downward. The new Mason-Dixon Polling & Strategies survey conducted for four local Chicago news outlets (1/31-2/3; 625 Chicago likely primary voters; live interview) returns Rep. Garcia to the lead with 20% support, followed by Mr. Vallas at 18%, and Mayor Lightfoot placing a close third with 17%. From the field of nine candidates, the top two will advance to an April 4th runoff election, assuming no one receives majority support on the 28th.
Philadelphia: The crowded primary to replace term-limited Philadelphia Mayor Jim Kenney (D) has created a national controversy. One of the ten Democrats vying for the position, businessman Jeff Brown, has been running a commercial with film of former First Lady Michelle Obama praising him at an event.
According to an official response statement from Ms. Obama, the film is doctored and she was including both Mr. Brown and another individual as praiseworthy for their business and community efforts at a gathering that occurred several years ago. Ms. Obama further stated that she does not take sides in Democratic primaries, and is supporting no candidate in the Philadelphia race. The field of ten Democrats are competing to win the May 16th primary in order to advance in a heavy favorite’s position to the November general election.