• Products
  • Insights
  • Practice Management
  • Resources
  • About Us

Our prediction that the legislative gears on Capitol Hill would come to a grinding halt is holding firm. As the first quarter comes to a close, there’s really nothing significant moving in Congress, but some effort is being made to get a head start on the debt-ceiling debate. That being said, there are a few measures worth watching, including rail legislation in response to the train derailment in East Palestine, Ohio, and its aftermath; a ban on TikTok moving through various committees; and, given recent events at home and abroad, China.

 

Red Storm Rising

In one of the few areas in which Congress agrees, the bipartisan consensus on China has been evinced in the creation of the Select Committee on Strategic Competition. The committee, which will focus on economic and security competition between the US and the Chinese Communist Party, held its first hearing in February and is working to build a foundation for future legislative action. Despite the committee’s overall agreement on curbing China’s economic and military power and targeting synthetic-drug manufacturing, fissures still exist on an approach. The Chinese spy-balloon takedown, China’s potential support of Russia in the Russia-Ukraine war, and the origins of COVID-19 have only served to turn up the heat in the halls of Congress.

 

Supreme Court Spotlight

While Congress ambles, we’re watching a handful of actions across the street in the hallowed chambers of the Supreme Court. While the first months of the current Supreme Court session were quiet, decisions due early this summer are shaping up to have significant economic, regulatory, and political consequences.

 

Questions … in Question

Arguments on the Biden administration’s student-loan forgiveness plan began at the end of February. Several states, including Missouri and Nebraska, argued that the program exceeds Congressional authority, invoking the Supreme Court’s “major questions” doctrine. The doctrine constrains regulatory action, demanding that agency actions with major economic and political impacts require clear Congressional authorization.

Typically, major-questions cases challenge a federal agency’s unusual or unprecedented attempt to stretch its statutory powers, beyond its normal or routine expertise, to achieve substantial and widespread policy goals.

For example, the alert was sounded when the CDC issued regulations over tenant evictions or when OSHA mandated COVID-19 vaccinations. Actions such as these may suggest political expediency, i.e., jamming “square peg” policy goals into “round hole” statutory provisions to bypass a reluctant Congress. The Supreme Court ultimately struck down these agency mandates.

 

Student Loans Hang in the Balance

In the student-loan forgiveness case, the Justice Department maintains the student-debt cancellation plan falls squarely within the statute, empowering debt relief in a national emergency. To ensure a borrower’s ability to pay isn’t impaired due to a declared national emergency (in this case the economic challenges of the COVID-19 pandemic), the law allows the waiver or modification of any statute or regulation that applies to student financial-assistance programs. Although the statute has been used to postpone or suspend loan payments, it hasn’t been deployed to cancel student debt.

Some justices, though, question the scope and impact of the program, namely Chief Justice John Roberts and Justices Clarence Thomas and Samuel Alito. The program’s value is also up for debate as some are asking why we might cancel the higher-education debt of students who now make more money in their careers than those who forwent college in an effort to avoid such debt or those who have already paid it off.

The program, estimated to cost the government $430 billion, would potentially serve 43 million borrowers—half of whom have already applied. Beyond that, the Supreme Court decision could have broader implications for the Biden administration’s regulatory strategy over the next 20 months as they aim to fill the policy vacuum created on Capitol Hill.

 

Denting the Internet’s Shield?

Section 230 of the Communications Decency Act, aimed at promoting internet innovation and growth, has been in effect for three decades and has largely insulated online platforms from liability stemming from third-party content. Under this law, an online platform won’t be deemed the publisher of content posted by users, providing a shield against defamation and other legal claims arising from such content. In addition, even when objectionable or harmful content does slip through a platform’s content moderation or other filtering measures, the platform doesn’t forfeit this liability protection.

In another case now before the Supreme Court, Gonzalez v. Google, an American studying in Paris was killed in an ISIS terrorist attack. The family sued Google (parent company of YouTube), claiming the platform allowed ISIS recruitment and propaganda videos on its site and, based on user data, affirmatively recommended these videos to users vulnerable to radicalization and violence. The lawsuit was brought under the Anti-Terrorism Act, asserting that Google effectively aided and abetted terrorism.

The Supreme Court will consider whether Section 230’s statutory liability protections extend to the content that the platforms’ algorithm recommends to users. A decision against social media and other digital platforms could compromise an important user-engagement tool and impact digital-advertising revenues.

We wouldn’t be surprised if the Supreme Court struggles with the outcome, leading to a fragmented decision and multiple opinions. The court’s conservative members have questioned the reach of Section 230 in other unrelated cases.

Advocates for a more sweeping interpretation of Section 230, however, suggest that a ruling against Google would expose platforms to liability for any organizational and navigational tools needed to make the chaos of the internet manageable and useful. According to the US Chamber of Commerce, which filed a brief in this case, more than 500 hours of video are uploaded to YouTube every minute. Arguments could provide additional insights, but the potential outcome is a major concern for the tech industry.

 

Timing Is Everything

Decisions in these cases are expected around the end of June, as the Supreme Court wraps up its term. June is also when the Treasury Department is expected to reach the end of its ability to deploy “extraordinary measures” on national-debt payments. It’ll be crucial for Congress and the Biden administration to come to an agreement in the next few months regarding the debt ceiling, or Capitol Hill could be headed toward one of the longest and hottest summers on record.

 

Talk to your financial professional to help 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.

POLWP011 2776504

About The Author
Author Headshot
Senior Policy Analyst, Hedgeye Potomac Research

The material on this site is for informational and educational purposes only. The material should not be considered tax or legal advice and is not to be relied on as a forecast. The material is also not a recommendation or advice regarding any particular security, strategy or product. Hartford Funds does not represent that any products or strategies discussed are appropriate for any particular investor so investors should seek their own professional advice before investing. Hartford Funds does not serve as a fiduciary. Content is current as of the publication date or date indicated, and may be superseded by subsequent market and economic conditions.

Investing involves risk, including the possible loss of principal. Investors should carefully consider a fund's investment objectives, risks, charges and expenses. This and other important information is contained in the mutual fund, or ETF summary prospectus and/or prospectus, which can be obtained from a financial professional and should be read carefully before investing.

Mutual funds are distributed by Hartford Funds Distributors, LLC (HFD), Member FINRA|SIPC. ETFs are distributed by ALPS Distributors, Inc. (ALPS). Advisory services may be provided by Hartford Funds Management Company, LLC (HFMC) or its wholly owned subsidiary, Lattice Strategies LLC (Lattice). Certain funds are sub-advised by Wellington Management Company LLP and/or Schroder Investment Management North America Inc (SIMNA). Schroder Investment Management North America Ltd. (SIMNA Ltd) serves as a secondary sub-adviser to certain funds. HFMC, Lattice, Wellington Management, SIMNA, and SIMNA Ltd. are all SEC registered investment advisers. Hartford Funds refers to HFD, Lattice, and HFMC, which are not affiliated with any sub-adviser or ALPS. The funds and other products referred to on this Site may be offered and sold only to persons in the United States and its territories.

© Copyright 2023 Hartford Funds Management Group, Inc. All Rights Reserved. Not FDIC Insured | No Bank Guarantee | May Lose Value