US Office of Public Policy
Washington Weekly
Under the Dome: The Week in Review
This Week: The Senate approved various Biden
administration nominees. The House debated two fiscal
year (FY) 2024 funding bills (Transportation and Housing
Departments and Financial Services) but did not have
enough support to pass either (see below).
Next Week: Both the Senate and House will work to
try to come to an agreement on a short-term FY-24
funding bill (see below) to avert a government shutdown.
The Lead—It’s All About Government Funding
November 17 Deadline. The House and Senate
have until next Friday (November 17) to agree on
legislation to fund the government in order to avoid a
government shutdown. Both chambers appear to be
inclined to pass bills next week that will extend funding
to either mid-December or mid-January. This would take
the threat of a government shutdown off the table for
more than a month, though the threat would return closer
to the end of the year. Additionally, since the House and
Senate are each expected to pass different bills to extend
the deadline, there will need to be some negotiation
between the leaders of the two chambers to reconcile
those differences. That process will take some time.
The two sides will engage in familiar jostling about the
government spending levels and about whether to include
funding for Israel, Ukraine, Taiwan and the southwest
border to the measure. We expect all of the controversial
issues to be stripped away and for a two-month extension
to be passed late next week or over the weekend.
10 November 2023
Individual Spending Bills. The House this week tried to
pass two more government funding bills, but it lacked the
votes to pass them. These are just two of 12 individual bills
that must pass to fund government operations each year.
Because of challenges passing these bills individually,
Congress over many years has resorted to passing one
large bill containing all 12 measures (an “omnibus”).
Many House Republicans, including Speaker Mike Johnson
(R-LA), don’t like this practice since they believe it doesn’t
foster enough scrutiny of agency spending programs and
results in over-spending. The House so far has passed
seven of the 12 spending bills. Speaker Johnson’s goal
is to finish all 12 bills in the upcoming weeks and
then negotiate each bill with the Senate, but this is a
very unlikely outcome due to strong Senate opposition
(the Senate has passed just three of the 12 spending
bills). This will be the challenge lawmakers face as they
work toward the next deadline, and no one can say now
how the two sides will compromise and avert yet another
government shutdown threat.
What House Republicans Want. In addition to wanting
to pass appropriations bills individually, House Republicans
want lower spending in all of the bills relative to last
year’s funding except for defense and veterans affairs
programs. As we noted last week, House Republicans also
want new spending this year to be offset by reductions
of the same amount in other federal spending so that
there is no impact on the federal budget deficit. So far,
most of the seven bills approved have lower spending
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levels compared to last year. Some House Republicans
have also suggested a “laddering” of the passage
of the 12 spending bills so that some agencies can
receive full-year funding in the short term (and avert a
shutdown of those activities), while others will be subject
to more negotiations (and a potential shutdown). The
Senate will resist this overall approach, but it will have
to accommodate the House in some way if any of the
funding bills are to advance into law.
Other Issues in Play
US-China Leaders are Talking. President Biden and
Chinese President Xi are expected to meet next week in
San Francisco. Cabinet members of both governments
have been meeting for the last two weeks to prepare
for this meeting and identify topics to be discussed and
any agreements to be made. One expected agreement is
a resumption of direct communication between military
leaders from both countries in an effort to avert any
misunderstandings. This communication was suspended
by China last year due to its unhappiness with then
House Speaker Nancy Pelosi’s (D-CA) visit to Taiwan.
Serious economic, trade and national security policy
disagreements exist between the countries, and this visit
will not make any progress on resolving those issues.
Rather, the visit sends a message to the world that the
heads of the two biggest superpowers can maintain a
dialogue and address their differences. More attention
will be focused on Xi than Biden next week, and the
former will use the public platform to reassure investors
over the state of China’s economy and the government’s
openness to more foreign investment (it was reported this
week that China’s economy saw foreign investment go
negative for the first time in decades).
Foreign Pollution Fee? We have received a few
questions about legislation recently introduced by
Senator Bill Cassidy (R-LA) that would place a fee on
imported foreign products that generate more pollution
during production than domestic US alternatives.
Imports from China are a clear target of this bill.
Another focus is to highlight higher US regulatory
standards that curtail pollution. With lawmakers seeking
new ways to generate revenue to reduce the deficit, the
bill will receive heightened attention. However, we do not
expect this proposal to advance over the next 13 months.
Supporters will need time to educate other lawmakers
about its details and potential impacts. Further, it will
face headwinds as it has potential to be the first step
for a pollution tax on domestic products, which most
Republicans would oppose. This proposal is noteworthy,
but it is not ready for prime time yet.
Tax Planning and “Avoidance.” The Senate Finance
Committee held a hearing yesterday titled “Ultra-Wealthy
Tax Avoidance Schemes.” This hearing was designed
to highlight longstanding concerns of Senate Finance
Committee Chairman Ron Wyden (D-OR). As expected,
it covered many familiar and controversial aspects of
the tax code that pertain to investors and wealthier
individuals, including the potential taxation of unrealized
capital gains. Chairman Wyden and others on the
committee believe that not taxing these gains allows
individuals to shelter wealth from taxes indefinitely.
Others believe that taxing unrealized gains would trigger
a number of negative economic consequences and
potentially be unconstitutional. This hearing won’t result
in any new tax laws this year or next. However, we take
the issues brought up at this hearing seriously, especially
if Chairman Wyden remains in his post and has the pen in
2025 when we expect a major tax bill to be written and
passed into law.
Focus on Nonbanks. This week, the Consumer
Financial Protection Bureau (CFPB) issued a proposal
that would subject large technology companies offering
payments apps and digital wallets to direct supervision
by the CFPB. While banks praised the proposal as a
helpful step in trying to level the playing field, some
Republicans in Congress expressed concerns that it would
stifle innovation. In another move late last week, the
Financial Stability Oversight Council, which is comprised
of major financial regulators, finalized a rule to give
itself greater latitude to designate nonbank financial
companies (such as large asset managers and insurance
companies) as systemically important and thereby subject
them to heightened prudential standards. This revises a
more restrictive stance on designations taken during the
Trump administration. While regulators are very focused
on the level of risk in certain segments of the nonbank
financial sector, it is unlikely that the Biden administration
has much appetite at this point for bruising battles on
the designation of individual firms. Financial regulators
continue to grapple with the limits of their existing powers
in trying to regulate non-bank entities while they also
pursue policy proposals (e.g. higher capital requirements
for banks) that could further fuel the growth of the
nonbank sector in many areas.
Labor Focus. The recent worker strikes and resolutions
to most of them have put a public focus on labor
and employee-employer issues in Congress that
we haven’t seen for many years. Not surprisingly,
Congress put forth its own ideas about how to improve
employee-employer relations. On the Democratic side,
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Senator Bernie Sanders (I-VT), the Chair of the Senate
Health, Education, Labor and Pensions Committee, has
pitched several different bills aimed at holding CEOs
accountable for “illegally firing pro-union workers”
though they have yet to attract any bipartisan support.
GOP lawmakers have different ideas and have focused on
legislation supporting a national “right to work,” which
has also failed to attract much bipartisan support. The odds
of any labor-related legislation passing Congress is almost
non-existent, but action is more likely in the individual
states in addressing these issues.
The Final Word
Tuesday Takeaways. Despite Democratic pessimism after
polling showed former President Trump beating President
Biden among a sample of voters, Tuesday’s elections in
several states concluded with solid wins for Democrats.
They split the gubernatorial races in Kentucky (win) and
Mississippi (loss), passed Issue 1 in Ohio (which enshrined
abortion protections in the state constitution) and retook
control of both state legislative chambers in Virginia.
Abortion policy was clearly a driving factor in most of this
success, and Democratic strategists have already begun
trying to determine how to mimic Tuesday’s success
across the country in 2024. It wasn’t all good news for
Democrats, however, since even as they won some key
races, they won with fewer votes than they received in
2019 when Trump was president, a clear sign that voter
turnout was down across the board. Voter turnout will
be important to both Biden and Trump (assuming they
are the final candidates), and the question to ponder
is whether Democratic turnout will increase next year
because Trump is on the ballot or whether it will continue
to be down because of low enthusiasm and poll numbers
plaguing Biden?

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