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The Senate confirmed three of President Trump’s nominees, including Tulsi Gabbard to serve as Director of National Intelligence, Robert F. Kennedy Jr. to serve as Health and Human Services Secretary and Brooke Rollins to serve as Agriculture Secretary (see below). The House passed a bill to allow Congress to overturn multiple regulations issued in the last year of a president’s term and a bill to impose criminal and immigration penalties for vehicle drivers who evade arrest or detention within 100 miles of the US border.

The Senate will continue to confirm Trump administration nominees. The House will be out of session until February 24^th.��

Trump on a Roll with Cabinet Nominations.

This week, the Senate confirmed three more of President Trump’s cabinet-level nominees. The President so far has a perfect record on nominees that have received a Senate vote (16 and counting). This includes nominees like Robert F. Kennedy Jr. (approved as Secretary of Health and Human Services yesterday), who had faced serious concerns from some Senate Republicans. The record underscores Trump’s influence with Republican Senators and is a feather in the cap for new Senate Majority Leader John Thune (R-SD). It is likely that Trump at some point will have future nominees for lower offices fail, but they are a secondary priority to those being confirmed now. Remarkably, the only Trump nominee to falter was the controversial Matt Gaetz, who was the first pick for Attorney General and never a serious prospect to be confirmed in the Senate (and withdrew from consideration).

More Focus on Tariffs.

No surprises here. President Trump announced a 25% tariff on all imported steel and aluminum effective March 3. Most steel and aluminum imports to the US come from Canada, Mexico and Brazil. Negotiations are underway to revise those plans with the affected countries. The President also called for a study to equalize tariffs with trading partners. Notice that both activities cite future dates for possible implementation, which provides time for negotiations that may delay or revise the proposed tariff increases. However, we think most of the tariff increases on steel and aluminum will proceed in March. The President views these tariffs differently than others imposed over the last few weeks since he invoked similar tariffs on these products in his first term and wants to be politically responsive to US steel workers who would benefit from the higher tariffs.

Trump Agenda Moving Slowly in Congress.

The House and Senate budget committees each passed separate budget resolutions this week. The budget resolutions set the parameters around subsequent “reconciliation” bills that will likely soon advance. The two chambers right now are taking two different approaches. The House budget resolution looks to set up one big reconciliation bill that is very broad in scope and would include funding for Trump priorities (immigration, energy and defense), an extension of the 2017 tax law, large-scale spending cuts and an increase to the debt limit. The Senate budget resolution just focuses on the spending for immigration, energy and defense. Senate Republicans want to prioritize that funding, which is needed to expand law enforcement along the borders and to increase deportations of those in the US without documentation. Without the funding, President Trump will have a limited impact on illegal immigration. While each chamber will look to pass their different resolutions later this month, they will need to coordinate a path ahead in order to give Trump policy wins in the months ahead.

Government Shutdown Coming?

On March 14, government funding will expire unless Congress acts to extend it. We are starting to see warning signs that this deadline might not be met. This would trigger a government shutdown. As a reminder, the funding bill needs to be bipartisan since it will require 60 votes in the Senate to pass (it also will need Democratic votes in the House since not all Republicans will vote for the funding bill). Democratic lawmakers are frustrated with the Trump administration’s action to try to freeze certain government spending and efforts to pare back the federal workforce and bureaucracy through the efforts of Elon Musk. This likely will lead to demands from Democrats that Musk cease his work and that all federal funding approved by Congress be spent by the new administration. These demands will be difficult for Trump to accept. The sprint over the next four weeks to reach a deal for funding government operations is heating up and the current trajectory is starting to point to a shutdown.

US in Gaza, Ukraine.

We have received a lot of inquiries this week about whether President Trump’s proposals for Gaza and Ukraine are serious. We believe they are a means to reach clear end games in both the Middle East and Ukraine. The world has struggled to find solutions to both crises, and Trump’s unconventional solutions to both have started more urgent conversations among a broader group of stakeholders to suggest alternative solutions. We think this is what Trump intended. Our sense is that Trump is more interested in the end games – peace in Ukraine and more stability in the Middle East – and is less concerned with the specific solutions that reach those goals. We think he would abandon his proposals if others emerged that reached a similar outcome in a shorter amount of time with sufficient international support. It seems more likely to us that there is a method behind the perceived madness. To the President, the end game is more important than the process or any guiding principles used in getting there.

Corporate SALT.

We frequently discuss the future of the $10,000 state and local tax (SALT) deduction cap for individual taxpayers that was included in the 2017 tax law. Corporations also pay SALT taxes. There currently is no cap for “C SALT.” But Republicans are looking at a possible cap as a way to help offset to the cost of renewing the 2017 tax cuts. Some Republican lawmakers also are interested in the option because they believe the federal tax code subsidizes high tax states, such as New York, New Jersey and California. This also offers an alternative to an increase in the corporate tax rate, which most Republicans want to avoid. For some companies, a new C SALT tax may be more impactful than an increase in the corporate tax rate. This proposal still faces some serious obstacles, but it is under discussion and will be considered for inclusion in legislation to extend the 2017 tax law in the weeks ahead.

RFK Jr. and Health Policy.

The nomination of Robert F. Kennedy Jr. to serve as HHS Secretary was approved by the Senate this week. In his confirmation hearings and discussions with lawmakers, he singled out two priorities that are important to Congress. The first was a bill to reform pharmacy benefit manager practices. This bill has bipartisan support and almost passed in final form last year. The second was an announcement of President Trump’s support for the Medicare drug pricing provisions of the Inflation Reduction Act (IRA), a major priority of the Biden administration. Many Republican lawmakers want to repeal those IRA provisions, but that won’t happen now in view of President Trump’s position. While the new Secretary is well known for his positions on vaccines, we expect him to work with a broader and bipartisan group of lawmakers on the two issues mentioned above in the weeks ahead.

Regulatory Consolidation.

The US has a financial regulatory system featuring many agencies with sometimes overlapping responsibilities. The architecture has evolved into ever greater complexity as Congress and the executive branch have responded to economic and market challenges over decades. While there sometimes have been proposals to streamline the system, they haven’t really progressed. When Congress responded to the last financial crisis, the Dodd Frank Act created a new agency (the Consumer Financial Protection Bureau) and only eliminated one relatively minor agency that had been discredited. As part of DOGE’s push for greater government efficiency, the Trump administration is considering ways to restructure and consolidate the current regulatory structure. They already have sought to shutter the CFPB and are looking at trying to consolidate bank regulation and supervision into one agency. With the Trump administration this week issuing its nominations for many of these regulatory positions, the issue of regulatory restructuring will be a hot topic at confirmation hearings. Given that these agencies have been created by Congress with clearly defined statutory powers, the Trump administration would need an act of Congress (which is unlikely due to the 60-vote threshold) to legally undertake a major restructuring.

Common Cents.

President Trump’s executive order to halt production of the penny is one of the rare ones to receive bipartisan support. Eliminating the penny has been suggested numerous times by lawmakers from both parties. Supporters of the idea have argued that the production of the penny is a significant waste of resources since it now costs 3.7 cents to produce a single penny. Elimination of the penny would save an estimated $130 million per year. Some lawmakers are also touting an elimination of the nickel since it costs 13 cents each to produce. At this point, it's unclear if President Trump legally has the power to unilaterally eliminate the penny or whether it will require an act of Congress. Regardless, this could end up being a rare bipartisan win that does indeed cut the deficit, albeit slightly. Everyone knows that Washington will need to do more than look for pennies under the couch cushions to make a real dent on the deficit and debt.