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Your Weekly Report on the Discord from Washington, D.C.

In Partnership with the Eris Group

Getting better all the time — No, really, things are. Or at least that’s what last Friday afternoon’s Federal Reserve report tells us: Americans’ overall financial wellbeing improved last year. Not a lot, and less educated Americans didn’t do quite as well as those with more education, but 70% of respondents said that they were “living comfortably” or “doing okay,” a one percent increase from 2015 and an eight percent increase from 2013. Significant financial insecurity remains, however: 23 percent of adults surveyed said they would not be able to pay all of the current month’s bills in full, and 44 percent of adults are unprepared to meet an emergency expense of $400.

Mnuchin cites trade, tax reform, housing finance as priorities — Making his first appearance before the Senate Banking Committee since his confirmation, Treasury Secretary Steven Mnuchin said last Thursday that the department is committed to “rethinking” all trade agreements to make sure they are fair; comprehensive tax reform; reforming housing finance; and fighting terrorism finance networks. Secretary Mnuchin said that Treasury will make recommendations for GSE reform in the second half of the year, but also said that Fannie and Freddie should continue to make dividend payments to the Treasury. FHFA Director Mel Watt told the committee two weeks ago that he thought it might be time for the GSEs to stop making these payments, and instead use the funds to build reserves.

House starts work on tax reform — The House Ways and Means Committee held its first hearing on comprehensive tax reform last week, with testimony from business leaders on the most-needed changes to the tax code. Committee members agreed on the broad essentials of reform: bringing U.S. corporate tax rates in line with international competitors, removing incentives for U.S. companies to move capital and jobs abroad, simplifying compliance, and making permanent rather than temporary changes. Chairman Kevin Brady (R-TX) called this a “once-in-a-generation opportunity,” and most of the hearing’s witnesses stressed the need to move as quickly as possible. The Committee is working from the “Better Way for Tax Reform” proposal unveiled last year, and from the one-page plan announced by the White House last month.

FEMA wants to double flood insurance coverage by 2023 — Roy Wright, Deputy Associate Administrator of FEMA for Insurance and Mitigation, told a National Associations of Realtors meeting last week that the agency wants to double the number of houses insured against flood insurance by 2023. Congress has begun the process of reauthorizing the National Flood Insurance Program, which expires in September; the fund is already $24.6 billion in debt. Wright told the Realtors that he believes the private sector will pick up most of the expansion in flood insurance coverage.

Lighthizer notifies Congress of intention to renegotiate NAFTA — New U.S. Trade Representative Robert Lighthizer sent Congress a letter last Thursday to notify the House and Senate that the President “intends to initiate negotiations with Canada and Mexico regarding modernization of the North American Free Trade Agreement.” The letter follows President Trump’s April announcement that he would renegotiate NAFTA rather than cancel it. “NAFTA was negotiated 25 years ago, and while our economy and businesses have changed considerably over that period, NAFTA has not,” Lighthizer noted.

Treasury nominees promise to cooperate with Senate Banking — Three nominees to Treasury Department posts and one Commerce nominee faced questioning before the Senate Banking Committee last Tuesday. Ranking member Sherrod Brown (D-OH) asked each nominee to commit to reply to every oversight letter or request for information in a timely manner, and Senator Mark Warner (D-VA) said that he could not support the nominations until Treasury responds more completely to a request from Senator Richard Burr and himself for FinCEN information related to Russian interference in U.S. elections. Sigal Mandelker, nominated to serve as Under Secretary for Terrorism and Financial Crimes, said that she believes sanctions on Russia should remain in place, and that she is committed to robust enforcement of all sanctions.

Other nomination news — Last week the President nominated Kevin Allen Hassett, currently Director of Research for Domestic Policy at the American Enterprise Institute, to chair the Council of Economic Advisers; and Brian D. Quintenz to a full term as Commissioner of the Commodity Futures Trading Commission. The President also nominated James H. Donovan, a managing director of Goldman Sachs, to replace Sarah Bloom Raskin as Deputy Secretary of the Treasury, but the White House announced Friday afternoon that Donovan has withdrawn his name from consideration.

This Week in Washington:

May 23
House Energy and Commerce Subcommittee on Digital Commerce and Consumer Protection holds a hearing on “Delivering to Consumers” as part of its Disrupter Series. 10:00 a.m., 2322 Rayburn House Office Building.

May 23
House Committee on Ways & Means holds a hearing on “Increasing U.S. Competitiveness and Preventing American Jobs from Moving Overseas.” The hearing will focus on border adjustment and international tax modernization. 10:00 a.m., 1100 Longworth House Office Building.

May 23
Senate Committee on Banking, Housing, and Urban Affairs meets to vote on the nominations of Sigal Mandelker to serve as Under Secretary of the Treasury for Terrorism and Financial Crimes; Mira Radielovic Ricardel to be Under Secretary of Commerce for Export Administration; Marshall Billingslea as Assistant Secretary of the Treasury for Terrorist Financing; and Heath P. Tarbert as Assistant Secretary of the Treasury. 10:00 a.m., SD-538 Dirksen Senate Office Building.

May 23
House Ways and Means Subcommittee on Social Security and House Oversight Subcommittee on Information Technology hold a joint hearing on “Protecting American Identities: Examining Efforts to Limit the Use of Social Security Numbers.” 2:00 p.m., 1100 Longworth House Office Building.

May 23
House Appropriations Subcommittee on Financial Services and General Government holds a hearing on IRS oversight, rescheduled from May 3. Witnesses will be the Honorable J. Russell George, Treasury Inspector General for Tax Administration, and Nina E. Olson, National Taxpayer Advocate at the IRS. 3:00 p.m. 2358-C Rayburn House Office Building.

May 24
House Ways and Means Committee hears testimony from Treasury Secretary Steven Mnuchin on the President’s Fiscal Year 2018 Budget Proposals. 2:00 p.m., 1100 Longworth House Office Building.

May 25
Senate Budget Committee hears testimony from OMB Director Mick Mulvaney on the President’s FY 2018 Budget Proposal. 9:45 a.m., SD-608 Dirksen Senate Office Building.

May 25
House Oversight & Government Reform Subcommittees on Government Operations and Intergovernmental Affairs hold a joint hearing on “Improper Payments in the Federal Government: Student Aid.” 10:00 a.m., 2154 Rayburn House Office Building.

May 25
Senate Committee on Finance holds a hearing on “FY 2018 Budget Proposals for the Department of Treasury and Tax Reform.” Secretary of the Treasury Steven Mnuchin will be the only witness. 10:00 a.m., SD-215 Dirksen Senate Office Building.

The Ellis Insight. Jim Ellis reports on political news:

> Senate

Alabama:  Candidate filing closed last week, and surprisingly several individuals expected to become candidates chose not to run. The most prominent Republican primary challengers to appointed Sen. Luther Strange are US Rep. Mo Brooks (R-Huntsville), former state Supreme Court Chief Justice Roy Moore, and resigned Alabama Christian Coalition president Randy Brinson. State Rep. Ed Henry (R-Decatur), former state Rep Perry O. Hooper Jr. (R-Montgomery), and state Senate President Del Marsh (R-Anniston) all bypassed the race, but Gulf Coast state Senator Trip Pittman decided to file just as the deadline expired, once he determined that Senate President Marsh was out of the race.

The developments appear to improve Sen. Strange’s chances of retaining the seat. The partisan primaries are scheduled for August 15th, with run-offs, if necessary, on September 26th. The special general election is December 12th. Former US Attorney Doug Jones is favored to win the Democratic nomination and oppose the eventual Republican nominee in the final special vote. The winner serves the balance of the current Senate term, and would next face the voters for a full term in 2020.

Indiana:  Rep. Todd Rokita (R-Brownsburg/Lafayette) formed a US Senate exploratory committee last week, joining fellow Rep. Luke Messer (R-Greensburg/Muncie) who made the same move weeks earlier. Indiana may host the most competitive Senate race in the country next year, and is likely the Republicans’ top conversion opportunity. Sen. Joe Donnelly (D) will have a difficult time holding his seat based upon the strong Republican vote Indianans delivered from the top of the ticket through the lower offices during the 2016 election.

Missouri:  Reports emanating from St. Louis area political activists indicate that Rep. Ann Wagner (R-St. Louis County) will declare her US Senate candidacy in July. The Congresswoman raised over $800,000 in the first quarter, and has over $2.7 million in her campaign account, just short of incumbent Sen. Claire McCaskill’s (D) $3 million-plus. Attorney General Josh Hawley (R) is still a potential Senate candidate, but it is most likely that he will remain in the position to which he was just elected, thus allowing Rep. Wagner a clear path to the Republican nomination. A McCaskill-Wagner race will be highly competitive in a state that has developed a clear Republican voting pattern since the turn of this century.

Ohio:  Rep. Pat Tiberi (R-Franklin County) ended speculation that he was going to enter the US Senate race. Despite engaging in a torrid fundraising pace in the first quarter, an effort that netted him more than $6 million in his campaign account when adding holdover monies from other races, Rep. Tiberi said last week that he will not run for Senate but instead continue his career in the House. He said the healthcare and tax reform legislation moving through his Ways & Means Committee are the major reasons he wants to remain in place. This likely gives state Treasurer and 2012 US Senate nominee Josh Mandel will a clear shot at the Republican nomination. Therefore, he and Sen. Sherrod Brown (D) are likely on tap for a re-match next year. In 2012, Sen. Brown was re-elected to a second term with a 51-45% vote margin over Mr. Mandel.

> House

AL-2:  State Rep. Barry Moore (R), who previously filed an exploratory committee in relation to challenging Rep. Martha Roby (R-Montgomery) in next year’s GOP primary, announced that he will become a congressional candidate. Rep. Roby’s re-election percentage dropped to 49% in November, suggesting political weakness. Mr. Moore will be attacking her from the right. This is a primary race to watch.

AZ-1:  State Sen. Steve Smith (R-Maricopa) announced that he will challenge freshman Rep. Tom O’Halleran (D-Sedona) next year. Sen. Smith was first elected to the legislature in 2010. The marginal 1st District stretches from the Colorado-Utah-New Mexico corner border down the eastern sector of the state before dropping south of Phoenix where Sen. Smith resides. The 1st is one of twelve districts that voted for President Trump but elected a Democrat to the House.

CA-25:  A re-match from 2016 could transpire for next year’s general election. Attorney Bryan Caforio (D), who held Rep. Steve Knight (R-Palmdale/Simi Valley) to a 53-47% victory in a district that Hillary Clinton carried 50-44%, announced that he will run again in 2018. Two other Democrats, non-profit executive Katie Hill and geologist Jess Phoenix, are already in the race. All candidates appear on the same ballot in the June primary, with the top two finishers, regardless of political party affiliation and vote percentage attained, advancing to the general election.

FL-27:  The first poll was released for the now open South Florida seat since veteran Rep. Ileana Ros-Lehtinen (R-Miami) announced her retirement. Front Porch Strategies, polling for a consulting firm associated with Lt. Gov. Carlos Lopez-Cantera (R), went into the field (released 5/16; 805 FL-27 registered voters; 301 likely Republican primary voters) and found their client with a strong early lead in both the Republican primary and general elections. Against Miami-Dade County former school board member Raquel Regalado and Miami-Dade County Commissioner Bruno Barreiro, Mr. Lopez-Cantera opens with a 57-13-3% advantage. Only Mr. Barreiro is currently an announced GOP congressional candidate. Pitted against Democratic state Sen. Jose Javier Rodriguez (D), the Lt. Governor’s margin is 41-34%.

MN-3:  Dean Phillips, CEO of the Minneapolis-based Phillips Distilling Company, announced that he will challenge Rep. Erik Paulsen (R-Eden Prairie) next year. Mr. Phillips is also the grandson of Pauline Phillips, better known as columnist Abigail Van Buren who created the “Dear Abby” syndicated advice series. While this Minneapolis suburban seat can be considered politically marginal, Rep. Paulsen showed major strength in the last election, as he easily defeated a strong Democratic challenger, state Sen. Terri Bonoff, with a 57-43% margin. Still, Mr. Phillips will be able to command the type of campaign resources to make this a competitive contest in 2018.

MT-AL:  While Democratic candidate Rob Quist has excelled in national fundraising, to the point of surpassing the $3.5 million mark for his campaign treasury, outside Democratic and liberal groups have not been as forthcoming. It is estimated only $600,000+ has been expended in Quist’s behalf, as compared to almost $4 million from Republican and right of center organizations who back GOP nominee Greg Gianforte. The special election to replace former Rep. Ryan Zinke (R-Whitefish) is scheduled for May 25th.

NY-27:  Lt. Gov. Kathy Hochul (D), who represented the 27th District for a portion of a term after winning a 2011 special election, says she will not challenge Rep. Chris Collins (R-Clarence /Buffalo suburbs) next year despite Democratic Party overtures to recruit her. As the incumbent Lt. Governor, she stands a strong choice of remaining on the Democratic gubernatorial ticket as Gov. Andrew Cuomo prepares to run for a third term.

OH-16:  State Sen. Frank LaRose (R), who was a likely congressional candidate in the open seat that Rep. Jim Renacci (R-Wadsworth) is leaving to run for Governor, instead announced his candidacy for the open Secretary of State’s position. This still leaves state Rep. Christina Hagan (R) as the only announced candidate for what should be a safe Republican congressional seat.

SC-5:  Republican voters went into a run-off election last week to choose between state House Speaker Pro Tempore Tommy Pope and former state Representative and 2006 congressional nominee Ralph Norman. In the May 2nd GOP special primary, the two candidates were separated by only 135 votes. The run-off proved just as close, but with a different person coming out on top, at least unofficially. With more than 35,000 votes being cast, Mr. Norman is the unofficial winner with a margin of 221 votes. Since the end result is within one percentage point, an automatic recount will now be implemented. Once a GOP winner is finally determined and certified, likely Mr. Norman, a contest between he and Democrat Archie Parnell will culminate on June 20th. Republicans are favored to hold the seat.

UT-3:  It appears that Rep. Jason Chaffetz (R-Alpine/Sandy), who has already announced that he will not seek re-election. That will set the wheels in motion for Gov. Gary Herbert (R) to call for a replacement special election. Since Utah has not held a federal special election in decades, questions remain as to just what type of nomination system will be ordered, and who has such authority to determine the process. Utah employs a nominating convention before any primary, so legal questions surrounding the replacement process will have to be quickly answered after the seat officially comes open.

VA-10:  Yet another Democrat, now the fifth, has come forward to challenge second-term Rep. Barbara Comstock (R-McLean). Last week, retired Navy officer Dave Hansen declared for the Democratic nomination. Already in the race are state Sen. Jennifer Wexton, former Fairfax County Education Association president Kimberly Adams, businessman Dan Helmer, and former Obama Administration Veterans Affairs official Lindsey Davis Stover. Rep. Comstock was re-elected to a second term with 53% of the vote despite President Trump losing this CD by ten percentage points.

> Governor

Kansas:  It appears Kansas Democrats will have a primary battle for Governor. Already in the race is former Wichita Mayor Carl Brewer. Reportedly preparing to join is former state Agriculture Secretary Josh Svaty, also an ex-EPA official and state Representative. Gov. Sam Brownback (R) is term-limited. Republicans will likely see a crowded field for their party nomination. The eventual GOP nominee will be favored, but the Democrats appear ready to compete in the general election in spite of producing poor results over the last decade, though they have elected five of the last eleven Governors dating back to the 1956 election.

New Mexico:  Attorney General Hector Balderas (D), who was thought to be Rep. Michelle Lujan Grisham’s (D-Albuquerque) toughest opponent for the Democratic gubernatorial nomination, will not enter the top statewide contest. Instead, Mr. Balderas will run for re-election to his current position. New Mexico figures to be a prime Democratic conversion target. Rep. Grisham announced her gubernatorial campaign back in December, and has effectively been raising funds to prepare for the open seat campaign. Gov. Susana Martinez (R) is ineligible to seek a third term.

Pennsylvania:  Gov. Tom Wolf (D) looks to be drawing at least three Republican opponents. Already in the race is state Sen. Scott Wagner. State House Speaker Mike Turzai is confirming that he will announce his gubernatorial campaign later in the summer. Declaring last week is wealthy businessman Paul Mango. With Gov. Wolf’s approval ratings suffering, Pennsylvania’s 2018 gubernatorial race should be highly competitive.

Virginia:  Two polls provide drastically different snapshots of the 2017 Virginia Democratic gubernatorial primary. Public Policy Polling (5/9-10; 745 VA likely Democratic primary voters), surveying for the Virginia Education Association, finds Lt. Gov. Ralph Northam, who the VEA has already endorsed, leading former US Rep. Tom Perriello (D-Charlottesville), 45-35%. But, the Washington Post/Schur School of George Mason University sponsored an Abt Associates poll (5/9-14; 1,604 VA adults; 351 likely Democratic primary voters; 264 likely Republican primary voters) that finds Perriello edging Northam, 40-38%. The latter poll has methodological flaws, but the VEA survey may have an inherent bias since they are outwardly supporting Northam. The closer result is more in line with other previous polls, except for the VEA’s earlier survey, which actually projected Perriello to an even stronger lead. The primary election is scheduled for June 13th. The eventual Democratic nominee is likely to face former Republican National Committee chairman and 2014 US Senate candidate Ed Gillespie in the fall.