Partial Government Shutdown

The partial government shutdown entered its 13th day this morning amid the standoff between the President and Congress over his request for $5 billion to build a border wall. As a result, nine departments and dozens of agencies and other entities are largely closed with hundreds of thousands of federal workers furloughed.

On Wednesday, bipartisan congressional leaders went to the White House for a border security briefing but did not make any progress towards a deal to reopen the government. As the 116th Congress convenes today, incoming Speaker Nancy Pelosi (D-CA) will bring up and the House is expected to approve Senate-passed legislation to fund through the end of the fiscal year all of the agencies that are currently closed, except the Department of Homeland Security, which would be funded at current levels through February 8. Senate Majority Leader McConnell (R-KY) doesn’t plan to bring anything to the Senate floor that the President doesn’t support, however.

Executive Branch Nominations

Before the 115th Congress came to a close, the Senate confirmed a number of pending executive branch nominations. Geoffrey Starks will fill the vacant Democratic seat on the Federal Communications Commission (FCC). The Senate also confirmed Republican Commissioner Brendan Carr to a full second term. Dr. Kelvin Droegemeier is the Director of the White House Office of Science and Technology Policy, the first person to hold the position during this administration. Patrick Fuchs and Martin Oberman join the Surface Transportation Board and Joel Szabat is the new Assistant Secretary for Aviation and International Affairs at the Department of Transportation. A complete list of those confirmed can be found here. The President will have to resubmit any nominations that were not confirmed to the new Congress.

116th Congress

As the 116th Congress gets underway, the Senate has nine new members, namely Senators Blackburn (R-TN), Braun (R-IN), Cramer (R-ND), Hawley (R-MO), McSally (R-AZ), Romney (R-UT), Rosen (D-NV), Scott (R-FL), and Sinema (D-AZ). The House is swearing in over 100 new members today.

Read more in our Emerging Technologies Washington Update

Continuing Resolution

The White House and Congress spent the early part of the week negotiating the parameters of an end of year spending package that would avert a partial government shutdown at midnight on Friday. The negotiations focused on the President’s strong desire for $5 billion to build a border wall. On Wednesday, Senate Majority Leader Mitch McConnell (R-KY) introduced a clean continuing resolution (CR) extending current funding levels for upwards of seven departments and agencies (among them the Departments of Homeland Security, Transportation, and Commerce) through February 8. The bill also extends several government programs, mostly for the duration of the CR, including the National Flood Insurance Program, the Violence Against Women Act, and Temporary Assistance for Needy Families (TANF). The Senate passed the bill on Wednesday evening by voice vote.

The House was expected to vote on the measure late tonight, but conservative members oppose kicking the can down the road, especially to a Democratic majority, and failing to fill the President’s $5 billion request. The President told House Republican leadership this afternoon that he will not sign the CR as is, prompting outgoing Speaker Ryan (R-WI) to say the House will add “border security” to the bill and increasing the likelihood of a partial shutdown.

Criminal Justice Reform, Tax Bill, Farm Bill

Congress moved several other pieces of legislation this week. On Tuesday, the Senate voted 87-12 to pass sweeping bipartisan criminal justice reform legislation. With the President’s endorsement, the House is scheduled to follow suit on Thursday under suspension of the rules. The House will also move a Republican end of year tax bill today with little hope of the Senate doing the same. In the meantime, the President signed the farm bill into law.

Personnel and Membership-Related Announcements

As the Administration and Congress grappled over government funding, each also saw a slew of personnel and membership-related announcements. Last Friday evening, the President named Mick Mulvaney Acting White House Chief of Staff upon the departure of John Kelly. Mulvaney, a former representative from South Carolina, is the Director of the Office of Management and Budget (OMB) and until recently was also serving as the Acting Director of the Consumer Financial Protection Bureau (CFPB). OMB Deputy Director Russell Vought will take over as Acting Director. On Saturday, the President announced that Secretary of the Interior Ryan Zinke will also step down at the end of the year.

On Capitol Hill, Senate Minority Leader Chuck Schumer (D-NY) announced that Senators-elect Kyrsten Sinema (D-NV) and Jacky Rosen (D-NV) will sit on the Senate Commerce, Science, and Transportation Committee in the next Congress. Senators Cortez Masto (D-NV) and Hassan (D-NH) are leaving the Committee. Senator Jon Kyl (R-AZ) said last Friday that he will resign at the end of the year, prompting Governor Doug Ducey (R-AZ) to name another appointment to the late Senator John McCain’s seat until a 2020 special election. On Tuesday, Ducey tapped Rep. Martha McSally (R-AZ), who narrowly lost her bid in November for the state’s other Senate seat to Rep. Kyrsten Sinema (D-AZ). Senator Lamar Alexander (R-TN), who chairs the Senate Health, Education, Labor, and Pensions Committee also announced this week that he will not seek reelection in 2020.

Read more in our Emerging Technologies Washington Update

End of year spending package

With the December 21 deadline looming to fund remaining areas of government for FY19, congressional Democratic leaders traveled to the White House on Tuesday to discuss the parameters of an end of year spending package. In a heated public meeting, the President and Leaders Schumer (D-NY) and Pelosi (D-CA) argued over the President’s request for $5 billion to build a border wall, with Trump claiming he would be “proud” to (partially) shut down the government if the request goes unfulfilled. Congressional leaders are now weighing options to avert or minimize the shutdown threat, including potentially separating the FY19 DHS bill from the other remaining measures, including Transportation-Housing and Urban Development and Commerce-Science-Justice.

Farm bill

Elsewhere, the Senate voted 87-13 on Tuesday to adopt the $867 billion farm bill conference report. The House followed suit Wednesday, 369-47, sending the bill to the President for his signature. Thursday, the Senate voted on a resolution to withdraw US support from Saudi Arabia’s efforts in Yemen’s civil war. Support for the measure grew after journalist Jamal Khashoggi’s murder, but it is unlikely to come to the House floor and the Administration opposes the measure and has threatened a veto.

Leadership changes

Senator Maria Cantwell (D-WA) confirmed this week that she will assume the top Democratic seat on the Senate Commerce, Science, and Transportation Committee, succeeding outgoing Ranking Member Bill Nelson (D-FL). Under incoming Chairman Roger Wicker (R-MS), the Committee is expected to focus at the outset on developing a federal consumer privacy framework, building on a series of hearings this year during which lawmakers heard from the private sector, consumer advocates, and those involved in developing the EU’s GDPR and the California Consumer Privacy Act (CCPA). For more on committee leadership changes and agendas for the 116th Congress, click here.

Virtual currency

Reps. Darren Soto (D-FL) and Ted Budd (R-NC) introduced legislation this week to promote US competitiveness in the global virtual currency marketplace. The bill defines virtual currency as “a digital representation of value that does not have legal tender status and that functions as a medium of exchange, a unit of account, or a store of value” and directs the Commodity Futures Trading Commission (CFTC) to produce a report on the state of virtual markets and ways to promote American competitiveness. Soto, Budd, and Rep. Bonnie Watson Coleman (D-NJ) also introduced a consumer protection-focused measure that orders a CFTC report on promoting fair and transparent virtual currency markets by examining the potential for price manipulation. Both bills are representative of the increasing importance of and congressional interest in both promoting and regulating financial technologies.

Read more in our Emerging Technologies Washington Update.

Wednesday, the President, Vice President, former Presidents and Vice Presidents, members of Congress, and other US and foreign dignitaries attended a state funeral honoring the late President George H.W. Bush at the National Cathedral in Washington. The federal government and the stock market also closed to mark the national day of mourning.

As the nation paused this week to remember President Bush, Congress took steps to extend the December 7 deadline to address the remaining four areas of FY19 appropriations, including Transportation-Housing and Urban Development (THUD) and Commerce-Science-Justice (CJS). Earlier this week, with support from the President and Senate leaders, House appropriators rolled out a bill to extend funding through December 21. Congress passed the measure earlier today, which heads to the President for his signature before current authorities expire tomorrow.

In the meantime, the Senate voted on Wednesday to end debate on Bernard McNamee’s nomination to be a member of the Federal Energy Regulatory Commission (FERC). The upper chamber confirmed McNamee early Thursday afternoon. Lawmakers also voted Thursday on Kathleen Kraninger’s nomination to be director of the Consumer Financial Protection Bureau (CFPB).

Incoming congressional committee leaders are making key staff appointments for the 116th Congress. John Keast, a former top aide to incoming Senate Commerce Committee Chairman Roger Wicker (R-MS), will return to Capitol Hill to serve as the Committee’s Staff Director. On Thursday, incoming House Transportation and Infrastructure Committee Ranking Member Sam Graves (R-MO) announced his Chief of Staff Paul Sass will serve as Republican Staff Director.

The White House hosted a number of senior executives from leading technology companies to discuss U.S. leadership within emerging technology sectors such as artificial intelligence (AI) and 5G. White House Deputy Chief of Staff Chris Liddell, Deputy U.S. Chief Technology Officer Michael Kratsios, and presidential advisors Jared Kushner and Ivanka Trump will represent the Administration during the discussion alongside White House Economic Adviser Larry Kudlow and U.S. Trade Representative Robert Lighthizer. Google CEO Sundar Pichai, Microsoft CEO Satya Nadella, and IBM CEO Ginni Rometty are among the industry leaders scheduled to attend Thursday’s meeting.

This year’s midterm gubernatorial elections proved successful for Democrats, gaining seven seats that Republicans had held. This change shifts the margin from 33 Republican, 16 Democratic and 1 Independent governors to 26 Republican and 23 Democratic governors (pending official call in Georgia). Republicans appear to have secured an important hold in the state of Florida, where Republican Ron DeSantis holds a narrow lead over Democrat Andrew Gillum. This was one of the nation’s most watched races. Additionally, while state ballot initiatives ran the gamut, several states had ballot initiatives on a contentious state healthcare issue – Medicaid expansion. Four traditionally Republican states considered ballot initiatives on Medicaid expansion, and three approved these initiatives. Additionally, Maine elected a Democratic governor who has promised to implement a previously approved ballot initiative on Medicaid.

Paul Reagan on House Democrats

House Democrats can be expected to devote their initial weeks in power to campaign finance reform and other good government measures that featured prominently in their campaigns. This approach is similar to their playbook in 2007, when they last retook the House, and has the advantage of providing some early victories on legislation that has little fiscal or regulatory impact. Over the longer term, House Democrats can be expected to prioritize healthcare and infrastructure, as well as gun safety measures and legislation offering a legal path forward for Dreamers, the children of undocumented immigrants brought into the country unlawfully at a very young age.

The overarching challenge for House Democrats is to temper the high expectations of their base with restored, appropriate executive branch oversight and legislation that advances their broad agenda.

Stephanie Kennan on New Healthcare Leadership

In the House, Rep. Richard Neal (D-MA) has a long history of involvement in Medicare reimbursement issues, and helped craft the Affordable Care Act (ACA).  He does not oppose Medicare for all. However, he probably would prefer to spend time on stabilizing the individual market.  Rep. Frank Pallone (D-NJ) will chair the House Energy and Commerce Committee. He has already expressed interest in reviewing drug prices, as well as looking at Medicaid to provide more opioid treatment options. In the Senate, Sen. Chuck Grassley (R-IA) may take over the Finance Committee, which he chaired over 10 years ago. He is likely to focus on oversight of the healthcare programs.

Issues the 116th Congress are likely to take up include drug prices and reform to what is known as Stark law – self referral laws that have become difficult to interpret and are preventing alternative payment and delivery systems from flourishing. Congress may have its hand forced to address ACA-related issues because of several court cases that would require Congress to act depending on how they are settled. One case in particular involves the individual mandate, and those who brought the case argue that if the mandate is invalid then so are consumer protections in the law because of its interconnectedness. Look for Congress to consider slowing the rate of growth in Medicare and Medicaid, perhaps using the budget process; however, the House will serve as a block on any sweeping Medicare or Medicaid reforms.

Ryan Bernstein on Energy and Agriculture

Energy and agriculture will have a couple of overlapping major issues in 2019.  The largest will be trade followed by regulatory oversight.  Energy policy in the Senate will depend on who is going to be the ranking Democrat member of the Energy and Natural Resources Committee.  If Sen. Maria Cantwell (D-WA) moves to Commerce, Sen. Joe Manchin (D-WV) may take the position. If that is the case, we can expect more fossil fuel legislation and hearings about grid reliability. Rep. Frank Pallone (D-NJ) will lead the House Energy and Commerce Committee. It is expected he will spend time trying to promote clean energy and holding oversight hearings on the administration’s attempt to undo Obama-era rules such as the Waters of the U.S. rule and the Methane and Waste Prevention rule. The Farm Bill will be priority number one for Sen. Roberts (R-KS) and Rep. Collin Peterson (D-MN) if it is not completed during the lame duck session.

Michael Drobac on Technology and the Internet

With a few races still too close to call, Republicans expanded their majority in the Senate, while Democrats picked up enough seats to take control of the House. With a divided Congress, compromise will be key to any successful agenda. While there is certain to be continued partisan bickering, Democrats and Republicans alike believe there are opportunities to reach consensus in several areas which might result in legislation in the 116th Congress. Technology presents just such an opportunity.

Despite the political rancor that comes with a divided Congress, there are important and bipartisan issues such as consumer data security and privacy reforms, federal infrastructure programs, workforce realignment and immigration reforms that could receive bipartisan agreement. The internet and technology developments in the “sharing economy” and the “internet of things” movement have fundamentally changed the manner in which consumers have access to goods, services and content leading to necessary changes in law to keep pace.

With new leadership in the Congress and specifically within key committees of jurisdiction, we expect progress on a number of these issues. Most notably, industries reeling from the enactment of the California Consumer Privacy Act (CCPA), effective January 2020, and the current European Union’s General Data Protection Regulation (GDPR), are seeking bipartisan efforts to provide certainty on data security and privacy laws in order to avoid a patchwork of state laws and inconsistent foreign standards. Lawmakers and regulators alike recognize the need for action and believe legislation can be supported that does not overreach nor politicize the issue.

Finally, lawmakers, regulators and the Trump Administration have signaled a willingness to consider whether big technology and internet companies should be regulated and receive greater antitrust scrutiny with a focus on where there is direct harm to consumers that can be identified and quantified.

The new leadership on key House and Senate committees such as both Judiciary committees and Senate Commerce, Science, and Transportation will influence policymaking in technology, telecommunications, innovation, and other key areas.

Rob Wasinger on the Trump Administration

It is likely that the deregulatory framework established in the first two years of the Trump presidency will accelerate. The Office of Information and Regulatory Affairs set a goal of two deregulatory actions for every single regulatory action; and the current ratio is now twelve deregulatory actions for every regulatory action. Given the logjam in Congress that pre-dated the election, the majority of the President’s agenda will likely continue to be accomplished through the administrative process and unilateral actions. Also, with an expanded Senate majority and the retirements of Senators Bob Corker (R-TN) and Jeff Flake (R-AZ), we should expect a more aggressive agenda to confirm judges and appointees in less time. With a Senate more in tune with the President, the influence of Sens. Susan Collins (R-ME) and Lisa Murkowski (R-AK) on the overall process will likely diminish. The legislative agenda coming out of the White House will likely be one that focuses on infrastructure, which will present interesting opportunities for bipartisanship.

The House and Senate both returned to Washington on Tuesday to begin a post-election, lame duck session. In the lower chamber, House members considered a number of bills under suspension as well as a measure to remove the grey wolf from the Endangered Species list. Meanwhile, the Senate took up Michelle Bowman’s nomination to sit on the Federal Reserve Board of Governors and a Coast Guard reauthorization bill that has already passed the House. On Monday, Senate Commerce Committee Chairman John Thune (R-SD) and Senate Environment and Public Works Committee Ranking Member Tom Carper (D-DE) announced an agreement on a reauthorization bill through FY19, teeing up a cloture vote of 92-5 on Tuesday and final vote of 94-6 to pass the bill on Wednesday. The chamber will vote to confirm Bowman Thursday afternoon.

On Wednesday, both House and Senate Republicans and Senate Democrats held leadership elections. As expected, Majority Leader Mitch McConnell (R-KY) was re-elected to represent the Conference as Leader and Senator John Thune was elected to replace term-limited Senator John Cornyn (R-TX) as Majority Whip. Senator Joni Ernst (R-IA) beat Senator Deb Fischer (R-NE) in the only contested leadership race to serve as Conference Vice Chair. Additionally, Senators John Barrasso (R-WY), Roy Blunt (R-MO), and Todd Young (R-IN) were elected to join Senate Republican leadership ranks. On the House side, Leader Kevin McCarthy (R-CA) was elected House minority leader, beating Rep. Jim Jordan (R-OH) in a 159-43 vote, and Rep. Steve Scalise (R-LA) was elected Minority Whip. Reps. Liz Cheney (R-WY), Tom Emmer (R-MN), Gary Palmer (R-AL), Mark Walker (R-NC), and Jason Smith (R-MO) will also join the House Republican leadership team.

Democratic Senate leadership remained the same, with Minority Leader Chuck Schumer (D-NY) re-elected Leader. In the lower chamber, House Democrats held their first caucus meeting since the midterms, but leadership elections are not expected until after the Thanksgiving recess.

In a Nov. 9 Law360 article, McGuireWoods Consulting senior advisor, Frank Donatelli, reviewed the 2018 midterm elections with ten snap observations.

TEN: The turnout for the 2018 midterms was the largest in history – approaching 113 million voters.

NINE: Republican campaigns focused on immigration, and base Republican voters were energized by the Brett Kavanaugh U.S. Supreme Court hearings. However, Republicans did not do well in southwestern states, and the strong economy was not emphasized.

“Trump is comfortable talking about issues that motivate his base, and that won him an upset victory in 2016,” said Donatelli. “However, he has yet to construct a broader message that might win him support of new voters to fortify his electoral coalition.”

EIGHT: The congressional issue agenda will be altered with a Democratic House majority, including oversight investigations and scrutiny for the president’s revised trade treaty with Mexico and Canada. Progress on immigration and criminal justice reform may be possible – both parties now have a stake in seeing legislative results.

SEVEN: Republicans gained at least three Senate seats, making it easier to confirm Trump appointees.

SIX: Republicans control 62 of the 99 state legislative chambers, giving them a strong voice in redistricting, and Democrats won governorships in key states such as Pennsylvania, Michigan and Wisconsin – all states won by the president in 2016.

Donatelli noted, “Not only do those wins give Democrats more leverage in the next census and redistricting, but they also enhance Democratic chances to win those states’ electoral votes in 2020. Governors matter in many ways.”

FIVE: Progressive stars came up short.

“The results support the argument of Democratic centrists that their party needs to attract more independents and moderate voters to win larger states,” Donatelli said, and added a prediction – “Progressives will resist that conclusion.”

FOUR: Important voter groups such as college-educated women and suburban voters came out for Democrats in key swing districts – helped by Republican efforts to repeal the Affordable Care Act.

THREE: Republicans won governorships in Maryland, Massachusetts, New Hampshire and Vermont – all reliably blue and purple states. It is still possible to decouple a state campaign from national issues and partisan national interest groups, Donatelli added.

TWO: Spending on political advertising this election cycle is close to $4.7 billion.

ONE: Democrats continue to make inroads in the Southwest – winning in New Mexico, taking the Senate and governorship in Nevada, and Beto O’Rourke came within three points of winning the Senate in Texas. Democrats also made major gains at the state and local level. In the past, the business-friendly policies of Republicans attracted urban votes, but the GOP is now changing from “a suburban party to one dominated by rural voters and cultural matters,” he said.

Donatelli added, “For those of you who cannot get enough of politics, the next presidential election begins — RIGHT NOW.”

When Congress reconvenes in January, Democrats will be in control of the House for the first time in eight years. Lawmakers will continue to discuss privacy and cybersecurity issues, including whether there should be a federal standard for how companies should be allowed to use and safeguard consumer data and how to stop cyberattacks from foreign entities.

In a Nov. 7 article from Law360, McGuireWoods Consulting senior advisor, Michael Drobac, noted that these issues may receive more attention in a split Congress.

“When there’s a divided Congress that’s unlikely to be able to move forward with controversial issues such as middle-class tax cuts or reforming health care, then it becomes more likely that lawmakers will seek to address and bring to the fore issues like privacy that have been percolating and have bipartisan agreement,” said Drobac.

Republican and Democrat lawmakers have proposed standards around data security, breach notifications and privacy in the past decades. Leadership of the Commerce, Judiciary and Intelligence committees will determine the priority of these issues.

Rep. Frank Pallone (D-NJ) is expected to take over the House Commerce Committee and “has been incredibly eager to do research and to get information from companies about what privacy practices and safeguards have been put in place for consumers,” Drobac said.

He added that Sen. Roger Wicker (R-MS), who will likely become chairman of the Senate Commerce Committee, has shown an interest in making tweaks to the privacy landscape so companies are not dealing with a patchwork of privacy laws. The House Judiciary Committee may work to craft meaningful notice and disclosure regulations that make sense for members of the digital ecosystem under the expected leadership of Rep. Jerrold Nadler (D-NY).

Pallone, Nadler and Wicker “have shown an affinity and interest in doing a deep dive into what has taken place with the tech industry and how that compares with consumers’ expectations, and what needs to be done to address different laws that have been imposed and have been enacted in other states and countries, and they are likely to take leadership on these issues,” Drobac said.

Other influencing factors include former tech executive Sen. Maria Cantwell (D-WA), who could lead the Commerce Committee if current ranking member Bill Nelson loses his re-election race in Florida, and Rep. Adam Schiff (D-CA), who is expected to take over the House Intelligence Committee and reopen inquiries into possible Russian interference in the 2016 U.S. presidential election.

The 2018 midterm elections were significant due to the volume of statewide races across the country with potential policy and political impact.  As anticipated, there were significant victories for the Democratic candidates for Governor.  Democrats flipped seven governor seats from Republican control, bringing the total up to 23 Democrat and 26 Republican governors.  This is a big win for Democrats, especially considering no single party has netted more than 6 governorships since 1994.  Note: These numbers are based on projections of a Republican win in Alaska and no official call yet in Georgia.

At the Attorney General level, Senator Aaron Ford flipped the Nevada Attorney General office from Republican to Democrat. There also may be potential flips for the Democrats in Colorado and Michigan, but those races have not yet been called.  Other notable results include Tish James, who will become the first African American elected statewide in New York, Keith Ellison, the first Muslim elected to Congress, who will also be the first African American elected to the position in Minnesota, and William Tong, who will be the first Asian American Attorney General in Connecticut.  Once all the races are called, the Democrats are poised to take over the majority of the Attorney General seats across the country.

On the legislative level, Democrats made some inroads picking up new trifectas in Colorado, Illinois, Maine, New Mexico and New York.  Trifectas, which are valuable heading into redistricting after the next Census, signify that one party has control of both legislative chambers and the Governor’s mansion.  There are now 12 Democratic trifectas, up from seven, heading into next year.  Despite these gains for Democrats, Republicans still control a majority of state legislative chambers. Republicans, who currently control 67 chambers, lost control of only 5 chambers in this election.  In 2019, they will control 62 out of a possible 99 chambers.

Visit McGuireWoods Consulting’s website for midterm election results from the gubernatorial and attorneys general races across the country.

With several races still too close to call, Republicans maintained and expanded their majority in the Senate, while Democrats picked up enough seats to take control of the House. Once in the majority, House Democrats can be expected to exercise their oversight, and if necessary, subpoena authority to compel responses from the Administration to inquiries from the minority on a host of controversial topics that were not answered due to the process that only committee chairs could compel those responses. Despite the increased political rancor that comes with a divided Congress, there are important and bipartisan issues such as consumer data security and privacy reforms, federal infrastructure programs, and immigration reforms that could receive bipartisan agreement. There will also be new leadership on key committees like Senate Commerce, Science, and Transportation that will influence policymaking in technology, telecommunications, innovation, and other key areas.

Read the full update for an overview of expected changes in leadership on congressional committees that shape policies that determine how businesses can integrate emerging technologies to be competitive in today’s economy. We also explore the potential agenda for the 116th Congress as it may impact companies with a stake in issues ranging from data privacy to antitrust, oversight, and technology and innovation policy.

Learn more about McGuireWoods Consulting’s Emerging Technologies team.