By Libby Cantrill, Head of US Public Policy at PIMCO
What is happening? Congress is back from recess this week for what will be a busy week – and a jam-packed February; market-related noise from Washington this week includes:
- Several classified briefings of House and Senate members on the escalating situation in Ukraine will occur on Thursday, and around then we also expect the formal introduction of a bipartisan Russia sanctions bill that is still in process of being negotiated, but is expected to include a combination of financial sanctions export controls, and individual penalties for Putin’s inner-circle.
- This week, the House will also move its own pro-U.S. / anti-China competition bill, the “Competes Act,” its version of the Senate’s $250bn U.S. Innovation and Competition Act (“USICA”) that was passed on a bipartisan basis in June. The House bill resembles the Senate bill in some ways, and includes a similar investment in domestic semi-conductors ($50bn over five years) as well as new provisions, such $45bn invested in helping to improve supply chains and a slew of climate provisions, including authorizing the State Department to invest $2bn annually for clean technologies, among other things. We could see a conference and ultimate passage in March/early-spring.
- Federal Reserve nominees Philip Jefferson, Lisa Cook, and Sarah Bloom Raskin will appear in front of the Senate Banking Committee on Thursday as an official step forward on the road to their confirmations.
- SCOTUS nominee: With Justice Breyer’s announced resignation last week, the White House will look to nominate his successor to the Supreme Court by the end of February, at which point the nomination will dominate Capitol Hill. President Biden has pledged to honor a campaign commitment to put a black woman on the court for the first time with momentum building around several candidates, including Michele Childs, Ketanji Brown Jackson and Leondra Kruger.
- BBB taking the back-burner: The Build Back Better (BBB) bill will continue to take a back-seat to other priorities on the Hill for this week and presumably for much of this month. Speaker Pelosi bluntly put it that there was no specific timeframe for a revived BBB, even though progressives want something passed by Biden’s SOTU address on March 1st , and reminded them that she would bring a bill up for a vote only when she had the votes. We continue to believe something still gets done on the BBB that includes a combination of the climate provisions, childcare and universal pre-K and perhaps a scaled-back child tax credit, although the timeframe is quickly slipping from late winter to decidedly spring.
- Solar tariffs decision to come this week: The Administration floated a trial balloon last week on work-around for Trump-era tariffs on Chinese solar panels, effectively keeping most of the tariffs on for another ~4 years, although allowing for the caps to increase and excluding tariffs on so-called bifacials, which are double-sided panels that are needed for large projects. This policy would effectively “split the baby” by assuaging some domestic stakeholders and climate advocates for more access to solar panels, while also continuing to appear tough on China. The existing tariffs put on by President Trump in February 2018 expire on February 6th.
Bottom line: After a January that was mired in symbolic arguments about voting rights and the filibuster with very little policy action, February is setting up to be a very busy month policy-wise. We should expect the spring to be similarly busy followed by a quiet summer where most members are sent home to campaign for what could be much of the remainder of the year, as both Speaker Pelosi and leader Schumer try to protect as many Democrats as possible in what increasingly looks like a possible red wave midterm in November.