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• Democratic Senator Ben Ray Lujan (NM) out for several weeks after suffering a stroke leaving Senate margin 49(D) to 50(R).
  
• Senator Lujan expected to make full recovery and return in 4 to 6 weeks, but during his absence bipartisanship will be in high demand.  Budget and confirmations top of list.
  
• February 18 deadline for new spending bill approaches: Republicans and Democrats talks continue to find compromise for Omnibus Spending Bill but one more Continuing Resolution seems likely this week.
  
• Budget compromise likely to split increases between Defense and Nondefense programs.
  
• Fed Chair and new Members to have Senate Banking Committee vote February 15, test of bipartisanship in Senate with one D absent.
  
• Russian threat to Ukraine has potential to dominate DC news.

Last week Washington was shocked when Democratic Senator Ben Ray Lujan from New Mexico had a stroke that required surgery to relieve pressure on his brain.  In a 50/50 Senate, having one Member out for several weeks complicates the math and strategy for Majority Leader Schumer. 

Senator Lujan, who had served in the House before running for the Senate, is well liked on both sides of the aisle.  What made the illness surprising is the Senator is one of the younger Members of the Senate at age 49.  His staff and family have reported he is making good progress and he hopes to return to the Senate in 4 to 6 weeks assuming there are no complications.

However, it does leave the Senate with 49 Democrats and 50 Republicans, complicating Leader Schumer’s task of getting legislation passed and nominations approved. The most important legislative item in the coming days is getting government funding passed by the February 18 deadline in order to avoid a government shutdown.

The bipartisan leaders of the House and Senate Appropriation Committees have been meeting regularly in an effort to find a bipartisan agreement on spending for the fiscal year that began five months ago on October 1.  Since the beginning of the new fiscal year the government has been funded with a Continuing Resolution (CR) that keeps funding unchanged.  Leaders at the Department of Defense are telling Congress that they need new funding and new spending priorities to deal with changing threat in China and Russia; and a yearlong CR would have negative implications for Defense.

While there is considerable support for giving DoD more money; Democrats are demanding the nondefense spending get at least as much money as defense. With the Senate temporarily divided 49D to 50R the need for compromise is more urgent than ever.
  
All the major participants in the budget talks agree that progress is being made and the goal is to have an Omnibus Spending Bill; but there is real doubt that an agreement can be reached by February 18, and the House has a long planned break the week of February 14.  With all this in mind leaders are now talking about a three week CR that will keep pressure on negotiators to reach a deal; but avoid the threat of a shutdown.  House leaders have talked about a short term CR going to the House floor this week.

Leader Schumer has been proud of the record of accomplishments the Democratic Senate has achieved in approving Biden nominations, and especially new judges. To date the Senate has approved 40 federal judges nominated by President Biden, the highest number since Ronald Reagan, but some of these nominees required a tie breaking vote by the Vice President. With Senator Lujan temporarily missing votes any Judge will need some Republican support to get confirmed.  The same is true for Ambassadors and cabinet officials.  A handful of moderate Republicans and Republican Leader McConnell will be key figures as the White House works to navigate the next few weeks with only 49 Democratic Senators available to vote.


Fed

The Senate Banking Committee has announced that on February 15 the Committee will vote on the nomination of Jay Powell to serve a second term as Fed Chair, and also the nominations of Sarah Bloom Raskin, Lisa Cook, and Philip Jefferson to fill vacancies on the Board.  With the expected Fed rate action at the meeting of the FOMC on March 15/16 much attention will be focused on these nominees.  While Senator Lujan doesn’t sit on the Banking Committee, his absence won’t impact the Committee vote; if any of the nominees generate party line votes, obviously a missing Democrat raises issues for the Administration.  The Committee vote will be a good indication of where the votes lie for the Chair and the three new members.  


Ukraine

The threat of a Russian invasion of Ukraine continues to overhang global politics.  The US has been sending strong messages that a Russian invasion is inevitable despite Russian claims to the contrary.  With the role the US$ plays in global trade, the ability to block US$ payments is a potent tool that is always available to the US government.  Having served on the US State Department Advisory Committee, I know this step isn’t taken lightly, but at times it can be one of the few policy options available.

The blocking of Russian assets raises difficult issues for Europe and world energy markets, considering the large role Russia plays in energy.  The rapid increase in the price of oil would only be exacerbated if Russian energy is lost to global energy markets due to a US$ blocking order.  In the middle of a cold winter, Europe has few policy options if Russia decides to cut off supplies to nations that partner with the US in its position on Ukraine.