Biden budget emphasizes infrastructure, education, tax reform
President Biden sent Congress his FY 2022 budget, putting price tags on the elements of his American Jobs Plan to rebuild infrastructure and his American Families Plan to help cover basic expenses of childcare, health care, and education. Although the budget estimates a cumulative deficit of $14.5 trillion by 2031, the Office of Management and Budget says that debt payments will remain “well below historical levels,” and the proposed tax reforms will reduce the deficit over time. Those changes would include increases to the capital gains tax and to the marginal income tax rate paid by households earning more than $1 million a year. At a House Appropriations Subcommittee hearing, Secretary of the Treasury Janet Yellen said she believed the tax increases would “be fiscally responsible and even lead to lower deficits” once spending winds down.
Cardin will seek additional funds for restaurant relief
Appearing before the Senate Small Business Committee last Wednesday, Small Business Administrator Isabella Guzman said the agency had received $75 billion in funding requests for the agency’s $28.6 billion Restaurant Revitalization Fund (RRF), approved as part of the American Rescue Plan earlier this year. More than 362,000 food and beverage businesses have applied for help through the RRF portal, which closed last week. Committee Chairman Ben Cardin (D-MD) said that he’d originally heard that the RRF might need as much as $100 billion, and that providing additional funds to the program would be a bipartisan priority. He has already spoken to Senate Majority Leader Chuck Schumer (D-NY) about adding a funding provision to legislation on the Senate floor. The Shuttered Venue Operators Grant (SVOG) program, funded at $16.2 billion, has received applications from 12,841 venues for a total of $11 billion in assistance.
Bankers worry about cyber risk, want regulatory guidance on digital assets
The CEOs of the nation’s largest financial institutions spent three hours with the Senate Banking Committeeand five hours with the House Financial Services Committee last week, discussing issues that ranged from serving the unbanked to appropriate capital levels. Questioning fell sharply along partisan lines, with Democratic members asking about diversity and inclusion policies and planning for climate risk and Republican members asking about credit availability to the fossil fuel industry and other controversial but legal businesses. The executives told legislators that they worry most about cyber risk, and spend billions of dollars annually to protect customer and bank data. The institutions are still wary of cybercurrency and other digital assets; JPMorgan Chase CEO Jamie Dimon said that he personally advises people to stay away from bitcoin and other cybercurrencies, but they understand clients’ interest in them and are debating whether to make them available in a safe way. Witnesses agreed on the need for a regulatory framework for banks’ handling of digital assets.
Guidelines for digital assets are a top priority for regulators, says Quarles
Randal Quarles, Vice Chairman of the Federal Reserve Board for Supervision, told the Senate Banking Committee last week that the Fed, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency are currently engaged in a “sprint” on the issue of financial institutions’ handling of digital assets, with the goal of agreeing on a common regulatory framework, capital treatment, and supervisory standards. Senator Cynthia Lummis (R-WY) suggested that federal regulators look to the suite of laws Wyoming enacted in 2019 to govern blockchain and create a FinTech sandbox.
SEC is moving “expeditiously” on proposals for disclosures on climate risk, human capital
Securities and Exchange Commission Chair Gary Gensler appeared before the House Appropriations Subcommittee on Financial Services and General Government last Wednesday to discuss the agency’s budget needs for FY 2022. Gensler identified four areas of particular attention for the agency over the next year: emergent financial technologies such as NFTs and cryptocurrencies; other new market trends driven by technology, such as meme stocks and the gamification of investing; increased disclosures and better standards for climate risk management; and the acceleration of income and wealth inequality during the pandemic. Gensler said that he had asked SEC staff to make recommendations for proposed new disclosure requirements on both climate risk and “human capital,” which might include demographic and geographic information as well as financial data. Standardizing disclosure in these areas will offer companies more certainty and make it easier for investors to compare performance, he said.
Toomey warns Fed about mission creep
At last Wednesday’s hearing, the Senate Banking Committee’s ranking member, Senator Pat Toomey (R-PA), told Fed Vice Chairman Quarles that the Fed is risking its credibility and independence by shifting its focus to climate change and social justice. Toomey wrote to the presidents of the Minneapolis, Boston, and Atlanta Federal Reserve Banks this week in response to the banks’ “Racism and the Economy” series, criticizing the work as “heavily laden with political and value judgments” and warning them about “reputational damage” incurred “by pursuing a highly politicized social agenda unrelated to monetary policy.”
Warren, Sanders call for dismissal of PCAOB members
Senators Elizabeth Warren (D-MA) and Bernie Sanders (I-VT) wrote to SEC Chair Gary Gensler last weekto ask that he “immediately remove and replace” all members of the Public Company Accounting Oversight Board (PCAOB). Since the Sarbanes-Oxley Act of 2002, the PCAOB has set standards for audits of public companies and supervised audit firms. Warren and Sanders said that the current members of the PCAOB were “partisan cronies” of former SEC Chair Jay Clayton, and said that PCAOB Chair William Duhnke had overseen a deterioration of the agency that included a sharp reduction in enforcement actions and weakened auditor independence standards. Gensler has “an opportunity and an obligation to strengthen the PCAOB,” the Senators wrote.
Treasury needs more money, Yellen says
At the House Appropriations Subcommittee hearing, Secretary of the Treasury Janet Yellen noted that the Department of the Treasury’s annual budget has not grown since 2010, despite considerable new responsibilities. Internal redistribution of funds within Treasury have led to budget cuts of up to 20% for critical policy offices including Domestic Finance, Economic Policy, and Tax Policy. Specifically, Yellen said, the Financial Crimes and Enforcement Network (FinCEN) needs money to build the database of beneficial ownership information Congress authorized last year; the CDFI Fund needs more money to administer the dramatically expanded funding provided by Congress to Community Development Financial Institutions; and the Internal Revenue Service currently has fewer auditors than at any time since World War II. The President’s budget would increase Treasury’s budget by 11.3% in FY 2022, to $15 billion.
Confirmations, Nominations, Departures
- Sarah Bianchi has been nominated to be Deputy US Trade Representative for Asia, Africa, Investment, Services, Textiles, and Industrial Competitiveness. Currently a Senior Managing Director and analyst with Evercore ISI, Bianchi was Director of Economic and Domestic Policy for then-Vice President Joe Biden.
- Brian E. Nelson was nominated to be Under Secretary of the Treasury for Terrorism and Financial Crimes. He is chief legal officer of LA28, the organizing committee for the 2028 Olympic and Paralympic Games in Los Angeles, and previously held senior roles with the California Department of Justice and the US Department of Justice.
- Elizabeth Rosenberg was named Assistant Secretary of the Treasury for Terrorist Financing. She is currently a Counselor to the Deputy Secretary of the Treasury, and was a Senior Advisor at Treasury from 2009 to 2013.
- Arun Venkataram was named Assistant Secretary of Commerce and Director General of the US and Foreign Commercial Service. He was most recently a Senior Director at Visa, and served as Director of Policy at the International Trade Administration under President Obama.
The Week Ahead in Washington
We don’t quite believe it ourselves, but neither the House nor the Senate has any public event events scheduled this week.
The Ellis Insight
Jim Ellis reports on political news
Iowa: Speculation continues around whether octogenarian Iowa Senator Chuck Grassley (R), who was elected the same night when Ronald Reagan first won the Presidency, will seek an eighth term next year. Most are now believing that he will run again. Under this backdrop, the Democrats are beginning to stir.
Former Crawford County Supervisor and farmer Dave Muhlbauer, who lost his re-election campaign by just 95 votes, formally announced last week that he will seek the Democratic Senatorial nomination. More significantly, former Congresswoman Abby Finkenauer (D), who lost her seat after one term to freshman Rep. Ashley Hinson (R-Marion/Cedar Rapids) last November, is reportedly preparing to announce a US Senate challenge to Sen. Grassley. It is likely the Iowa 2022 Senate race will be competitive.
Ohio: Ohio State Sen. Matt Dolan (D-Chagrin Falls), the chairman of the Senate Finance Committee and co-owner of the Cleveland Indians baseball club, has formed a US Senate exploratory committee.
Should he ultimately decide to enter the open statewide campaign, he would minimally face former Ohio Republican Party chair Jane Timken, ex-state Treasurer Josh Mandel, and likely author J.D. Vance, with others also contemplating candidacies. Rep. Bill Johnson (R-Marietta), however, citing an inability to raise competitive funds from his Appalachia political base, announced late last week that he will not run for the Senate.
Pennsylvania: A small-sample Change Research poll (released 5/24; 302 PA likely Democratic primary voters; weighted; online) for Lt. Gov. John Fetterman’s Senatorial bid finds him leading US Rep. Conor Lamb (D-Pittsburgh) 40-21% in an early statewide Democratic primary poll. All other potential candidates have less than 10% support. Rep. Lamb has not yet declared his political intentions for 2022.
Data for Progress, conducting a more substantial statewide survey (5/7-14; 651 PA likely voters; web panel) also finds Mr. Fetterman leading in hypothetical general election pairings. Against former Republican Lt. Governor nominee Jeff Bartos, the Democratic margin is 48-38%. If former congressional nominee Sean Parnell were his general election opponent, Mr. Fetterman would begin with a slightly closer 48-40% advantage.
Though two-term Pennsylvania US Rep. Susan Wild (D-Allentown) sometimes appeared on a list of open US Senate race potential candidates, she was never viewed as a serious Democratic contender. Last week, Rep. Wild confirmed that she won’t run statewide, but will seek re-election to her current position.
Vermont: Three-term Gov. Phil Scott (R) says he has not decided whether to seek a fourth two-year term next year but will not run for the US Senate. Now that Sen. Patrick Leahy (D) is signaling that he will run for re-election not only wouldn’t Gov. Scott oppose him, but he would actually vote for him.
Sen. Leahy, who will be 82 years of age before the next election, was first elected in 1974. He is currently the 13th longest serving member of Congress and third on the all-time seniority list of those who spent their entire federal career in the Senate. He is behind only the late Sens. Strom Thurmond (R-SC) and Ted Kennedy (D-MA) in the latter category.
Wisconsin: State Senator and former Minority Leader Chris Larson (D-Milwaukee) threw his hat into the US Senate political ring last week, making four credible Democratic candidates vying to oppose Sen. Ron Johnson (R), or run for an open seat should the latter man decide to retire. The previously announced Democratic candidates are State Treasurer Sarah Godlewski, Outagamie County Executive Tom Nelson, and Milwaukee Bucks basketball club senior executive and ex-Obama White House aide Alex Lasry. Sen. Johnson is expected to reveal his 2022 political plans after the summer ends.
FL-7: Florida Rep. Stephanie Murphy (D-Orlando) last week confirmed that she will seek re-election to her House seat in 2022 and not run statewide either for Senate or Governor. She said, “[so] I’ve decided instead of running for the U.S. Senate, I will devote my energy to helping make our party stronger.” The Murphy move boosts fellow Orlando area Rep. Val Demings’ US Senate candidacy as she attempts to unite the Democratic Party around her budding challenge to Sen. Marco Rubio (R).
FL-10: Florida Rep. Val Demings (D-Orlando) looks to be formally announcing her Senate candidacy next month, so US House contenders are already coming forward. Last month, state Sen. Randolph Bracy (D-Orlando) expressed interest in running for Governor but said he would opt for Rep. Demings’ open congressional seat if she decided to enter a statewide race. Last week, Sen. Bracy confirmed he would run for Ms. Demings’ congressional office. Also announcing or making moves to form a congressional campaign are ex-US Attorney Aramis Ayala and Black Lives Matter activist Natalie Jackson, both Democrats.
NM-1: According to a just published RRH Elections survey (5/18-21; 555 NM-1 special election voters and those intending to vote; interactive voice response system and online), state Rep. Melanie Stansbury (D-Albuquerque) leads Republican state Senator Mark Moores (R-Albuquerque) by a 49-33% count as they head toward their June 1st special election. The winner serves the balance of the term that former Rep. Deb Haaland (D) won in November. She resigned the House seat to become US Interior Secretary. According to the survey, 70% of those interviewed have already cast their ballot in the state’s early voting process.
TX-30: Before the 2020 election, 15-term Texas Rep. Eddie Bernice Johnson (D-Dallas) indicated that she was running for the last time. She has not reiterated her retirement decision since, but clearly Democrats are presuming that she is serving her final two years in the House.
Early last week, business consultant and former congressional candidate Shenita Cleveland (D) announced that she will run again. Four others, including the Biden 2020 campaign Texas director Jane Hamilton, have already declared candidacies. Ms. Hamilton said, however, that she will not run if Rep. Johnson, who will be 87 years of age at the beginning of the next Congress, ultimately decides to seek re-election.
California: The Public Policy Institute of California (PPIC) released its new statewide survey (5/9-18; 1,705 CA adults; 1,074 CA likely voters; live interview; English and Spanish) and finds Gov. Gavin Newsom (D) surviving his recall election with a 40-57% Yes/No preference. Both the Yes and No vote numbers are higher than we’ve seen in previous polls, but the option to keep Newsom in office leads in every iteration.
This poll may be a bit slanted in his favor, however, since the sampling universe is of adults and not exclusively registered or likely voters, though the question as to whether the respondent would vote in the special recall election, whenever it is scheduled, was asked. A California adult universe tends to be more liberal than a registered or likely voter segment. Therefore, while it is reasonable to assume that Gov. Newsom will survive the recall vote if the election were today, it is also probable that the margin will close once there is a date certain for the vote and the campaign begins in earnest.
Nevada: Former US Senator Dean Heller (R), who lost his seat to current Sen. Catherine Cortez Masto (D) in 2016, is reportedly considering running for Governor next year. Clark County Sheriff Joe Lombardo (R) is indicating that he will formally announce his gubernatorial campaign next month, while North Las Vegas Mayor John Lee is already in the statewide race. The eventual Republican nominee will face Gov. Steve Sisolak (D) in what should be a competitive 2022 general election campaign.
New Jersey: According to a Public Policy Polling survey (5/24-25; 591 NJ likely GOP primary voters; interactive voice response system) conducted for the Democratic Governors’ Association, former state Assemblyman Jack Ciattarelli has wrestled the Republican primary ballot test lead from businessman and frequent candidate Hirsch Singh, 29-23%.
An earlier Singh campaign internal poll found Mr. Ciattarelli, the party endorsed candidate, trailing by two percentage points. Former President Donald Trump, who has not endorsed a candidate in this race to date, is well regarded among New Jersey Republicans, sporting an 87:8% positive ratio.
Ohio: Cincinnati Mayor John Cranley (D), who is ineligible to seek a third term in his current position, has been raising money for a 2022 gubernatorial bid. Last week, he indicated that he will formally announce his statewide campaign at some point in July. Already in the Democratic primary field is Dayton Mayor Nan Whaley, who just earned the support of the powerful Ohio Association of Public School Employees union. The eventual Democratic nominee will challenge Gov. Mike DeWine (R).
Oklahoma: Former state Sen. Connie Johnson (D), who was the party nominee for the US Senate in 2014 and lost the 2018 Democratic gubernatorial primary to ex-Attorney General Drew Edmondson, declared that she will return for the 2022 Governor’s race. Ms. Johnson is the first Democrat to enter the race. First-term Gov. Kevin Stitt (R) will seek a second term and is a heavy favorite for re-election.
Rhode Island: Last week, two-term Rhode Island Secretary of State Nellie Gorbea formally announced that she will challenge Gov. Dan McKee in next year’s Democratic primary. The move comes as no surprise since Ms. Gorbea had long been projected as a gubernatorial candidate.
Upon then-Gov. Gina Raimondo (D) resigning to become US Commerce Secretary, Mr. McKee, then the state’s Lt. Governor, ascended to the position to serve the remainder of the current term. Further Democratic opposition is expected in what will be a highly competitive September 2022 primary battle for Gov. McKee. The eventual winner becomes the prohibitive favorite to win the open general election.
Anchorage: When the Anchorage City Clerk reported that “very few” ballots remain to be counted for the open Mayor’s race – Friday was the deadline for all votes to be received ending a lengthy counting period from the May 11th runoff election – Democrat Forest Dunbar conceded the election to Republican Dave Bronson.
With the unofficial vote count giving Mr. Bronson a 50.7 – 49.3% lead (1,191 vote margin of 90,587 counted ballots), the latter man’s margin would clearly remain intact when all received ballots are counted. Mr. Bronson replaces Acting Mayor Austin Quinn-Davidson (D) who did not seek election after she was appointed to succeed resigned Mayor Ethan Berkowitz (D) in October.
Los Angeles: News reports are suggesting that President Biden has decided to nominate Los Angeles Mayor Eric Garcetti (D) as the US Ambassador to India. Once the appointment is made and the Senate confirms, the Los Angeles City Councilmembers will choose a replacement Mayor.
Mr. Garcetti is ineligible to seek a third term in 2022, so the race to replace him is already underway. The Council has almost no criteria to follow in terms of who they choose as interim Mayor, but it is unlikely the members will install one of the candidates currently campaigning for the position. Such would potentially award that individual an unfair advantage.
New York City: Riding a recent New York Times endorsement, former city sanitation commissioner Kathryn Garcia has vaulted into a tie for second place in the upcoming open Mayor’s primary with former presidential candidate Andrew Yang, but both trail Brooklyn Borough President Eric Adams in the June 22nd ranked choice Democratic primary.
The Core Decision Analytics poll conducted for the Fontas Advisors organization and not affiliated with any candidate (released 5/26; 5/15-19; 800 NYC likely Democratic primary voters; live interview) finds Mr. Adams leading with 18%, while Mr. Yang and now Ms. Garcia trail with 13%, apiece. No other candidate reaches 10% support. The ranked choice simulation again shows Mr. Adams prevailing after several rounds of counting. Under this system, certain voters second and third, and perhaps further choices are counted until one candidate receives majority support.