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As summer approaches Washington remains deadlocked with several big-ticket policy measures looming (even languishing) on Capitol Hill. With the Senate evenly divided, we turn our attention to efforts that have broad bipartisan support when handicapping legislation that’s in the field of play (the $40 billion in supplemental military and humanitarian aid to Ukraine recently approved is a prime example).

If current predictions and history hold, Republicans have a very good chance of taking control of the House, and possibly even the Senate, in the fast-approaching midterms—effectively marking the end of the Biden agenda in Congress. Should that happen, the 2023-24 focus would then pivot to the annual federal budget and appropriations process and regulatory agencies. For now we’ll keep our eye on the ball and focus on what may be winnable over the course of the summer:


Chip Shot

The US Innovation and Competition Act of 2021 (USICA) is a bipartisan piece of legislation aimed at upping US competitiveness with China. Two different versions of the $250 billion USICA measure passed the House and the Senate (both with $52 billion earmarked for the semiconductor chip industry); the differences must be resolved in a conference committee where it currently stands.

The Trade Adjustment Assistance program (a program aiming to compensate US workers displaced by globalization) is proving to be a major sticking point between the two chambers, as the House included it in their version while the Senate did not.

The goal of the Democratic leadership is to have these negotiations completed around the end of May with a vote scheduled later in June.


Build Back Better 2.0 or Bunt?

Washington insiders have spent months speculating on the release of a scaled-back, party-line spending bill ($700-900B) similar to President Joe Biden’s original version of Build Back Better (BBB). Crunch time is here. Backroom talks between centrist Sens. Joe Manchin (D-WV) and Majority Leader Chuck Schumer (D-NY) have been taking place, but their tight-lipped efforts have yet to bear fruit. We believe that the longer it takes to find a solution, the longer the odds are for passage. That being said, hope springs eternal and we remain cautiously optimistic that a deal can made.

There are several components still being considered in BBB 2.0: taxes, healthcare, climate and energy provisions, and changes to drug pricing and the corporate minimum tax to offset spending. But again, we currently don’t foresee changes to capital gains or personal income-tax rates unless you happen to be in the top 0.01% in the US qualifying for the billionaire’s tax—and even that prospect is slim.


Big Tech Bullseye

Congress continues to work on antitrust legislation designed to limit the market power of the leading digital platforms, particularly Google, Meta Platforms (Facebook), Amazon, and Apple. The Senate and the House have passed major bills through their respective Judiciary committees but neither version has made it to the floor.

Several antitrust bills are in Congress but the two proposals generating the most attention attack the gatekeeping power of the platforms by prohibiting or restricting discrimination or self-preferencing that could disadvantage commercial rivals on such platforms. Amazon is an obvious example of the targeted abuse, often accused of prioritizing its own private-label products over third-party sellers.

Despite overwhelming support in the House and Senate Judiciary committees, we think the legislation isn’t likely to pass Congress this year given the highly charged political climate. Further, some lawmakers who supported the bills in committee may oppose the same bills on the floor (particularly in the Senate). Absent major legislative change, we believe litigation continues to be the proponents’ best hope for attempting a meaningful change in antitrust law.


SAFE at the Plate

With Democrats unable to capitalize on a cannabis federal decriminalization effort in the last two years, the fallback has reverted to passing the Secure and Fair Enforcement (SAFE) Banking Act—making it easier for banks to serve the cannabis industry. SAFE has passed the House five times and has bipartisan support in the Senate, but a handful of Senate Democrats may still insist that SAFE include social-equity or criminal-justice provisions, which would be a dealbreaker for Republicans. About a quarter of the US Senate has been pressing their leadership to keep the SAFE Banking Act in the USICA bill, where it was attached as an amendment earlier this spring.

SAFE itself may not change how the American banking system approaches the cannabis industry, but it could be a catalyst for further change. Seeing as cannabis is still illegal on a federal level, SAFE would give banks more protection from federal interference, but it can’t remove all the possible ways in which federal regulators could make business difficult for banks that choose to serve the cannabis industry. If SAFE passes and the Financial Crimes Enforcement Network can update cannabis regulations, we may begin to see a real sentiment change around cannabis-industry companies.


Penalty Box for Pandemic Preparedness

The White House has been pushing for another round of COVID-19 preparedness funding aimed at reupping the purchase of tests, vaccines, and therapeutics in anticipation of future waves. Democratic leaders have tried repeatedly to pass the funding as a standalone bill or attach it to another piece of legislation to no avail. While this is likely to be tough skating for the White House, we’re expecting another attempt to pass a COVID-19 package potentially coupled with small-business relief.


Swing for the Fences

With President Biden’s poll numbers at a low point, Democrats in swing districts have been pressing Schumer and Speaker Nancy Pelosi to find a compromise for a new spending measure (BBB 2.0) or other messaging initiatives to provide them with political leverage in their tight races back home.

This began recently with Democrats calling oil company executives to Capitol Hill for hearings on price gouging, and will continue with efforts to address baby formula shortages, gun control, and domestic terrorism. Many, if not all, of these attempts are expected to fail in the Senate, but swing district members may be able to make the argument to their constituencies that they are trying to govern under very trying circumstances.

Biden’s low approval ratings, Republican’s prospects of taking over in January of 2023, and current economic conditions have created a perfect storm of malaise in Washington. There’s still time for the White House and Congress to enact meaningful legislation, but this summer is going to make or break the Democratic agenda. For the most part they’re going to have to play ball with the Republicans or go scoreless heading into the midterms.


Full Court Press

Given the recent tragedy in Uvalde, Texas, lawmakers are facing immense pressure to take action on gun control. The House has effectively gotten the ball rolling with several bills already passed and more in the works but all eyes are on the Senate to get something across the finish line.

A bipartisan group of Senators is hard at work on a package they hope could garner support from both sides of the aisle. These talks have largely focused on school safety, “red flag” laws, and improvements to the nation’s mental health apparatuses. The red-flag proposal is essentially a program that would provide federal grant money to incentivize states to set up their own systems to temporarily remove guns from those who are a threat to themselves or others. We’d also expect any potential agreement to focus heavily on the mental-health aspect of the gun-violence equation, including some significant funding for federal programs or grants to states.

While gun-control efforts are front and center for lawmakers right now, there are a lot of other priority items to be tackled, and the looming election clouds it all. We’ve seen this behavior from Congress before—following a horrific mass shooting, a group of lawmakers attempts to strike a deal to curb the availability of guns, only to fall short of actually passing something into law. While there’s some reason to be more hopeful this time around, namely the bipartisan nature of the efforts, we’re not sure there’s a proposal that will get enough Senate GOP support. Time will tell. In the interim, expect gun-control conversations to dominate Washington, putting other priority items further behind schedule in an already limited legislative window.


Talk to your financial professional to make sure your portfolio is prepared for whatever happens in Washington D.C. 

The views and opinions expressed herein are those of the author, who is not affiliated with Hartford Funds. Hedgeye Potomac Research is not an affiliate or subsidiary of Hartford Funds.

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About The Author
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Senior Policy Analyst, Hedgeye Potomac Research

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