House Republicans: With the departure of former Speaker McCarthy and the ouster of Rep. Santos the House Republicans were down to only 220 Members. This number was further reduced when on Friday House Majority Leader Steve Scalise announced that he would stay in Louisiana for stem cell treatment as he fights blood cancer. Additionally, Republican Representative Bill Johnson of Ohio announced that he would depart Congress on January 21 to become President of Youngstown State University bringing the total number of Republicans down to 218 vs 213 Democrats until Leader Scalise can return.
State of the Union: The Constitution requires the President to report to Congress from time to time on the state of the union. While Washington and Adams gave in-person State of the Union addresses, from Thomas Jefferson to Woodrow Wilson the constitutional requirement was met by a written address. Since President Wilson went to the House chamber to give his address in 1913 it has become a traditional obligation for each President. Since the speech is given in the House Chamber it requires a formal invitation from the House Speaker. Speaker Johnson on Friday formally invited President Biden to give his State of the Union on March 7th.
Spending and immigration
Over the weekend Speaker Johnson, Leader Schumer and the White House announced an overall spending agreement for the current fiscal year that began on October 1. The so-called topline number that combines all government spending for the fiscal year amounts to $1.590T which is the number agreed to last year when Speaker McCarthy and President Biden negotiated a deal on both government spending and a two-year suspension of the debt ceiling.
The deal that was announced on Sunday is below spending approved so far by the Democratic Senate but above the sharp cuts in the House spending bills. While the agreement is a step towards avoiding a government shutdown it does not eliminate the risk. Republicans have been working to include conservative policy issues into the spending bills that range from restrictions on abortion policy to government DEI programs. Speaker Johnson when announcing the spending deal reiterated that House Republicans will continue to work to include policy issues in the spending bills.
The spending deal also does not preclude the conservative Freedom Caucus from demanding immigration policies in the spending bills. Last week was a precursor to the upcoming debate on the flow of undocumented immigrants at the Southern border when a delegation of 60 House Republicans, led by Speaker Johnson, went to Texas for a first-hand look at the border issues.
Since before the holidays a bipartisan group of Senators has been trying to negotiate a border package that would be added to the White House request for a Supplemental Spending Bill to provide aid to both Ukraine and Israel. The crisis at the border has become worse by the week with the government reporting over 225,000 illegal crossings in the month of December.
Last year the Republican House passed HR 2, designed to clamp down on illegal immigration. The partisan package passed the House on a party line vote of 219 to 213, without a single Democrat voting in support. Among the key provisions of HR 2 are making asylum claims much harder to be approved, funding the rapid construction of 900 miles of a border wall, and mandating the use of e-verify with tough punishment for the hiring of undocumented immigrants. A group of House Republicans are insisting that these provisions be part of any funding compromise. This would be a tough pill for some Democrats to swallow after the White House issued a veto message when the House considered HR 2.
Congressional leaders must now turn the spending agreement into bills that can pass Congress before the first government funding deadline of January 19th when funding for the departments of HUD, DOT, VA, AG, and VA runs out. The bigger government departments such as HHS and DoD follow with a February 2nd deadline. Bottomline is that a government shutdown is still a possibility.
Bitcoin ETF
Could this be the week when the SEC approves Bitcoin ETFs? The rumor mill has been working overtime that Chair Gensler is ready to approve several Bitcoin ETF applications and the Commission will vote this week, though nothing is done until it’s done – and last week new rumors spread that Gensler remains opposed.
Despite the rumors the consensus view is that applications will be approved and perhaps as early as this week. Several applications have been filed and good government policy would have the Commission approve several rather than give one market participant an early advantage. Sean Farrell and the Fundstrat crypto team will be writing on all regulatory developments.
