December 22, 2023

Although I opted to travel down a more sentimental route this year, I’ve been known to tuck a few gag gifts under the tree. Over the years these have included funny t-shirts, prank gift boxes, and odd tasting candy…I mean, you haven’t lived until you’ve tried a hot dog flavored candy cane…am I right? Unfortunately, Washington has given us a few gag gifts of their own this year. Who can forget the 4 days and 15 ballots just to pick a Speaker of the House, only to oust him 10 months later; a former president remains the GOP frontrunner despite being indicted four times on 91 felony counts; and a New York congressman became just the sixth member to be expelled from Congress in over 200 years. We’ve seen a U.S. senator, who literally stuffed gold bars in his pockets, indicted on bribery charges; an impeachment inquiry opened on the sitting president; and perhaps the least productive Congress of all time now facing not one, but two, government shutdowns in the new year. But the biggest political gag gift could be waiting for us on Election Day 2024. Imagine scanning the list of presidential candidates and finding President Biden, Democrat; Donald Trump, Republican; various Libertarian, Green, and other minor party candidates; as well as Robert F. Kennedy, Jr., Independent; and Larry Hogan or Joe Manchin, No Labels. With more than half of all registered voters saying they would like additional candidates to enter the race, it’s imaginable that millions of Americans vote for someone not named Biden or Trump, denying one or the other the necessary 270 Electoral Votes to win the election. In such a case the Constitution directs that the election of the head of state be placed in the hands of Congress, specifically the newly elected Congress. Each state’s House delegation would receive one vote to allocate among the top performing candidates in the Electoral College. The Senate would choose, by majority vote, the vice president among the top two performing vice presidential candidates. Although this may sound like something from a made-for-TV drama, there is precedence, specifically, the election of 1824. Whether things actually go that far remains to be seen, but the market is there for votes for someone other than Trump or Biden, and even a single credible challenger could deny one of the major party candidates the majority. In fact, third party candidates have won electoral votes in the past; the most recent being George Wallace in 1968, who recorded 46 electoral votes. As noted,  a parallel scenario occurred 200 years ago, during the election of 1824, where John Quincy Adams was sent to the White House by winning support from more delegations than Andrew Jackson, the winner of a plurality of the popular vote and most electoral votes. While the conditions of the 1824 election were vastly different than our own today, the unpredictability of 1824, and the political fallout, offers an example of what is possible in 2024. At present, the breakdown of House delegations would seem to give the advantage to the Republican, since the GOP has the majority in 26 House delegations while Democrats have the majority in 22; two state delegations, Minnesota’s and North Carolina’s, are evenly split. But any contingent presidential election in January 2025 would be taken among newly sworn-in House members, meaning those elected in November 2024. The vice president in a contingent election is selected by a simple majority in the Senate, meaning it’s possible Congress could elect a president and vice president from different tickets. Oh, what a gift that would be.

 This will be the last blog of 2023; we’ll resume next year on January 5. Happy Holidays!

 Thought Leadership from our Consultants, Think Tanks, and Trade Associations

 Eurasia Group Says Third-Party Candidates Won’t Win Any States but Could Play Spoiler. The potential for third-party candidates to disrupt the 2024 election remains high, as they garner their best polling numbers since 1992 amid elevated dissatisfaction with President Biden and former president Trump. Securing a spot on the presidential ballot will be the first challenge for third-party and independent candidates, especially those not running under a minor-party label. Qualifying for the ballot in key swing states requires between 2,000 and 45,000 signatures by next summer, and collecting these signatures would cost millions of dollars and demand that campaigns organize robust ground operations. On balance, former president Trump seems to benefit from the third-party presence. RFK Jr.’s campaign appears to be taking roughly equally from Biden and Trump, while the far-left campaigns of Cornel West and Jill Stein are clearly harming Biden. However, polling on how third-party candidates affect the race is inconsistent and spotty. Regardless, third-party presence will make the race more volatile over the next 11 months, and this will be especially true if a serious centrist candidate enters the race, likely under the banner of the No Labels political organization. No Labels has said it will not run a campaign if it appears to take disproportionately more votes from one party than the other, meaning that polling on a centrist third-party bid will be a crucial indicator of No Labels’ intentions.

Inside EPA.com Warns Environmentalists to Brace for Chevron’s Repeal, and Possibly a ‘Halt’ To Rulemakings. Environmentalists are bracing for the likelihood that the conservative-majority Supreme Court will repeal the Chevron doctrine that allows the EPA and other agencies to reasonably interpret ambiguous statutory language. The Court is set to hear two cases early next year that will test the issue, and the fear is that it could halt key rulemakings. While Democratic lawmakers have reintroduced H.R. 1507, the Stop Corporate Capture Act, which would codify Chevron into law, the Supreme Court is slated to hear arguments in Loper Bright Enterprises v. Raimondo and Relentless Inc., et al. v. Department of Commerce, et al. that could overturn or sharply limit Chevron, which was established by the high court in 1984. Both cases involve challenges to federal rules, and provide the court the opportunity to overturn 40 years of case law. If that happens, thousands of regulations and policies involving environmental protections, worker and consumer protections, and more are in jeopardy, and could give courts a bigger policy role than the agencies Congress created to implement statutes. At present, courts often say in decisions that they are constrained by Chevron and that a reasonable agency interpretation is a policy choice that agencies are allowed to make; in a post-Chevron world judges may not say they are constrained. Although Justices Gorsuch and Thomas have openly called for Chevron’s reversal and Justice Alito similarly dislikes the doctrine, Chief Justice Roberts and Justice Coney Barrett care about stare decisis, the doctrine that courts adhere to precedent. It will be interesting to see how the rulings shake out particularly because the case is “symbolic” for conservatives, who argue that agencies abuse Chevron. The upcoming cases are similar to a high-profile 2022 decision, West Virginia v. EPA, where the high court embraced the “major question doctrine” which bars agencies from issuing rules with major economic and political implications without express congressional authority.

Observatory Group Asks if it’s Shutdown Déjà Vu. With only eight legislative days until January 19, Congress is threatening another government shutdown. Unlike the shutdown threats in September and November, it is doubtful Congress will punt FY2024 funding past the current deadlines of January 19 and February 2. However, with negotiators at a stalemate over top-line spending numbers, the risk of a shutdown cannot be dismissed entirely. Against this backdrop, there is a non-trivial risk of a year-long Continuing Resolution (CR) to fund the remainder of FY2024, bringing the 1% across-the-board sequester from the debt limit deal into view. However, if a year-long CR is enacted, there is a reasonable chance the mandatory sequestration from the debt limit deal would be nullified. First, the Government Accountability Office (GAO) could interpret a year-long CR as a “full year discretionary appropriation,” thus avoiding the sequestration trigger. Or Second, Congress could turn the sequester off via legislative language included in the CR. It should be noted that while House Republicans have dropped demands that the discretionary parts of the government be funded below the debt limit deal, Senate Democrats are demanding that the top-line discretionary cap be revised upward by nearly $70 billion to account for additional non-defense domestic spending. Thus, out of a $6.4 trillion federal budget, the holdup is over just 1.1% of overall spending. In the end, a full 2024 CR is likely to hue towards the FY23 discretionary budget level of $1.602 trillion with some upward variations, most notably defense (Congress just passed the FY24 National Defense Authorization Act, allowing for a 3.17% increase to $874.2 billion). Ultimately, whether there is a year-long CR or an unlikely budget breakthrough, Congress is ready to move on and put the Fiscal 2024 discretionary budget debate to bed.

“Off the Record”

 Current thinking among DC analysts holds that if the Federal Reserve’s 2024 median economic outlook holds true, the central bank will implement at least two 25 bp rate cuts next year, but not the six reflected in current market pricing. To cut six times would mean starting as early as March and staying the course through the year. Analysts are skeptical not just of the early start, but also getting in five more cuts before year-end. In fact, the risk around current pricing for six rate cuts in 2024 is almost entirely one-sided. For the data to trigger a rate cut as soon as the March 19-20 meeting and then five more before year-end—absent a recession—would require two developments. First, that by March 20, all the data align with core inflation continuing to slow combined with broad evidence of a significantly softening labor market. Second, that the Fed would be willing to get ahead of the decline in inflation and cut rates 150 bp even when its median inflation outlook is for headline PCE inflation to slow 0.5 percentage points over the same period.

In Other Words

“You’re reading the wrong polls,” President Biden on polls that show him trailing former president Trump in a hypothetical 2024 rematch.

Did You Know

 Although the first session of the 118th Congress held the most votes of any session in a decade, it passed just 27 laws, the lowest count since the second session of Congress in 1937. The record for most bills passed into law goes to the 95th Congress, which enacted 804 between 1977-78. The 118^th censured three members: Reps. Schiff (D-CA), Tlaib (D-MI), and Bowman (D-NY), tying 1870 for the most censures in one year.  

 Graph of the Week

 The CATO Institute released its ninth annual Human Freedom Index. The HFI covers 165 countries, and is based on 86 indicators of personal, civil, and economic freedom, using data from 2000 to 2021, the most recent year for which sufficient data is available. The second year of the coronavirus pandemic witnessed a continued decline in global freedom—from 2019 to 2021, 90% of the world’s population saw a fall in overall freedom, including significant declines in the rule of law, and freedom of movement, expression, assembly, and trade. The decline affected every region, included rich and poor countries and democracies and non-democracies, setting global freedom far below where it was in 2000, the previous low point. Switzerland topped the rankings, followed by New Zealand. The U.S. climbed four spots, moving from 21st to 17th in 2021. The findings suggest that freedom plays an important role in human well‐being.