Thought of the Week:
Yesterday, after breakfast, my wife said to me, “Don’t throw those bags out…I need those bags to put my bags in.” The female obsession with bags is one I don’t entirely understand. In our pantry, we have a fancier bag full of plastic grocery bags, and a reusable grocery bag full of reusable grocery bags. In one closet we have a large gift bag full of different size gift bags, and in another, we have rolling luggage full of various backpacks and duffels. This is all in addition to an entire section of our walk-in closet devoted to handbags of all different colors, shapes, and styles. If you need a bag, any bag, we’ve got it. Taking the metro into work, and thinking back on our exchange reminded me somewhat of the parable about a boy descending a mountain who finds a snake that is freezing and near death. The snake begs the boy for help, promising not to bite if picked up. The boy reaches down and places the snake inside his warm coat, but upon reaching the bottom, is suddenly bitten by the snake. The boy cries out in pain, “Why did you bite me? You promised you wouldn’t.” The snake retorts, “You knew I was a snake when you picked me up.” This week, Congress returned to Washington from its annual August recess, and, despite springtime assurances to the contrary, just like it has every year since 1997, faces the prospect of a government shutdown at the end of the month. With less than two weeks of legislative days remaining before the end of the fiscal year, the Republican trifecta that controls Washington is pursuing three different strategies for funding the government. Senate Republicans have doubled down on bipartisan funding bills that call for tens of billions of dollars more in spending than House Republicans—or the White House—have proposed. House Republicans seem to be gravitating toward a stopgap funding resolution that would keep the federal government funded through mid-November, kicking the can down the road, and giving Hill leaders and the White House more time to find a FY2026 spending solution. However, the White House isn’t interested in a short-term funding patch. Instead, Trump administration officials, in an attempt to avoid repeated shutdown dramas, want to fund federal agencies through the first quarter of next year. Yet, this path opens the door to a year-long continuing resolution (CR), something House and Senate appropriators desperately want to avoid. All this comes at the same time that President Trump has infuriated Democrats, and some Republicans, by issuing a “pocket rescission” of nearly $5 billion in previously appropriated, congressionally approved foreign aid. While in the end all that matters for Republicans is that President Trump, House Speaker Johnson, and Senate Majority Leader Thune align by the September 30th deadline, the diverging strategies coming from each reflect just how difficult it will be for the three to get on the same page—and whether they can shift the blame to Democrats if all else fails and there’s a government shutdown. For a lobbyist and husband, there are lessons to be learned here. Just as the boy in the parable learns that once a snake, always a snake, federal lobbyists must recognize how things truly are, and have been, on Capitol Hill, not pine for how things are mandated to be. For a husband, it’s my wife’s nature, she’s just going to collect more bags…but I’m drawing the line at pillows. Good luck with that one, Jamie.
Thought Leadership from our Consultants, Think Tanks, and Trade Associations
Bloomberg Government Reports that Lobbyists are Expecting Turbulence as Funding Uncertainty Clouds the Agenda. Lobbyists are bracing their clients for a possible government shutdown at month’s end, as bitter policy and procedural fights return to Capitol Hill and muddy the K Street agenda. Lobbyists expect strong demand for their services to continue through the end of the year, as corporations seek to navigate the turbulent policy landscape. It’s been a record year for lobbying revenue already, and new federal client registrations in August were up more than 15% when compared to last August. Fights over a President Trump-backed Washington D.C. crime and cleanup measure, Federal Reserve officials, and congressional redistricting will compete for attention along with debates over government funding, tariffs, an annual defense policy measure, crypto, housing legislation, and health care and tax talk. What’s more, bipartisan collaboration may be in short supply, especially as the White House presses Senate Republicans to change the rules to speed along the confirmation process for some of their nominees. This year, Trump-linked firms have disrupted the K Street hierarchy, as clients clamor for connections to administration decision-makers. Heading into the September stretch, lobbyists and their clients have more questions than answers. The top-tier item is government funding, and even though the schedule and policy priorities appear opaque, lobbyists say the key is being ready to hitch items onto any moving legislation this month and through the end of the year. Regulatory matters are also top of mind for corporations with a stake on how the Trump administration implements its mega tax and budget law. Lobbyists also are looking to a possible second reconciliation measure and, longer-term, to 2026 priorities.
Inside U.S. Trade Says Japan and South Korea are Struggling to Cement Trade Details. Japan and South Korea appear to be struggling to agree with the Trump administration on key questions about their new trade deals with the U.S., particularly on the timing of U.S. tariff reductions and the structure of foreign investment commitments. In fact, high-level talks last week either failed to produce any action on trade (South Korean President Lee met with President Trump in the Oval Office) or were cancelled altogether (Japanese trade negotiator Akazawa’s cancelled a planned August 28 trip to Washington at the last-minute). In July, President Trump announced separate trade deals with both countries that he said would lower tariffs on their goods to 15% from a threatened 25%, provide new market access for U.S. goods, ease duties on American exports, and secure commitments to invest in U.S. industries—$350 billion from South Korea and $550 billion from Japan. However, efforts to formalize any details have moved slowly. In particular, each country has sought quick action by the U.S. to cap tariffs on their goods at 15%, including sectoral duties on vehicles and auto parts, which are now set at 25%. At the same time, the U.S. has voiced a starkly different interpretation of the investment planks in each deal than what Japan and South Korea describe. While the White House has framed them as measures allowing the president to direct billions of dollars in funding at his discretion, Tokyo and Seoul cast them as financing plans by which their governments will facilitate private companies’ loans and spending. Analysts expect both countries to seek quick resolutions to the impasses even if it means accepting worse terms from the U.S.
Observatory Group Predicts Republicans Could Retain Their Congressional Majorities if the Economy Holds Up. The 2026 midterm elections are shaping up to be extremely close and historically expensive, with some structural advantages for Republicans and weaknesses for Democrats. Many issues are swirling that prognosticators say could define the midterm narrative: the Epstein files, mid-decade House redistricting, unpopularity of the One Big Beautiful Bill (OBBB), President Trump’s crackdown on crime in Democratic-led cities, and ICE raids, to name just a few. One view is that ultimately these issues will not overwhelmingly benefit or hurt either party in the midterms. The coming 2026 elections will be defined by one issue: the economy, and the key variable will be whether President Trump’s and Republicans’ policies deliver the economic results promised. The data over the coming months will be critically important to the midterm landscape. If unemployment remains low and inflation contained, Republicans could pull off a historically favorable outcome in 2026.
Punchbowl News Asks Whether There is Any Chance Congress Avoids a Shutdown. September ushers in a critical period for President Trump and the Big Four congressional leaders—Speaker Johnson, House Minority Leader Jeffries, Senate Majority Leader Thune, and Senate Minority Leader Schumer. While there are a bunch of major issues at play in the coming weeks, including President Trump’s crime emergency, immigration crackdowns, tariffs and trade wars, the state of the economy, the future of the Federal Reserve, Jeffrey Epstein, Gaza, and Ukraine, looming is a government-funding crisis—funding for federal agencies expires in 25 days. With both chambers out the week of September 22 for Rosh Hashanah, this leaves less than 14 legislative days for Congress and the White House to avert a government shutdown. Right now, a potential shutdown seems more likely than not, and if there isn’t a shutdown, federal agencies may limp along on a series of short-term funding bills through this year and next, giving White House officials even more sway over federal spending. A continuing resolution (CR) will be needed to avoid an October 1 shutdown because there is no way Congress will pass all 12 spending bills by then. How long an initial CR lasts is anyone’s guess. A year-long CR would be devastating for the House and Senate Appropriations panels; yet the president could live with current funding levels as the White House got new defense, border security, and veterans’ money in the One Big Beautiful Bill. The Trump administration is already saying it wants a clean CR while Congress tries to reach a broader deal. Meanwhile, the White House announced it was unilaterally rescinding nearly $5 billion in foreign aid last week via a “pocket rescission.” While even Senate Appropriations Committee Chair Collins (R-ME) called the move “unlawful,” it appears that Republicans are doing nothing to stop it, and Democrats can’t. For Senate Democrats, the issue now becomes whether they’re willing to force a government shutdown and what their demands will be. In order to avoid a March-like debacle, Democrats in the House and Senate will need to agree on an actual strategy; but fault lines are already emerging that will put pressure on Minority Leader Schumer. Progressives like Sen. Warren (D-MA) say Democrats shouldn’t help Republicans fund the government unless they reverse cuts from the reconciliation bill. That’s just not going to happen.
“Inside Baseball”
President Trump is scheduled to swap the Oval Office for Yankee Stadium on September 11th to watch the Bronx Bombers take on the Detroit Tigers. This is significant because President Biden broke 116 years of presidential tradition when he passed on attending even a single Major League Baseball game during his time in office. While President Trump attended only one game during his first term—Game 5 of the 2019 World Series at Nationals Park, no presidential mound visit could ever top former President George W. Bush’s perfect strike to start Game 3 of the 2001 World Series, also at Yankee Stadium.
In Other Words
“Never felt better in my life,” President Trump responding to rumors he had passed away over the Labor Day weekend.
“Watching the Biden thing really said something about the necessity for generational change in the party,” Rep. Nadler (D-NY) on his retirement.
Did You Know
According to data from the Federal Reserve Bank of Atlanta, U.S. wage growth for job stayers topped that for those who changed jobs for a sixth straight month in July, the longest such stretch since the Great Recession. Annual wage growth for those who stayed in their current positions was 4.1% in July, compared with 4% for people who switched jobs. With workers typically changing jobs to secure bigger pay bumps, the uncommon shift underscores the softening seen in labor demand in recent months.
Graphs of the Week
Gallup Finds Tepid August Ratings for President Trump. After registering 43% or higher in the first five months of the year, a new poll finds that just 40% of Americans approve of President Trump’s overall job performance, in line with his support in June and July. Similar percentages of Americans back the White House’s performance on the economy (37%) and foreign affairs (39%), both of which are five points below February peaks. The poll also found that partisan differences remain at peak levels; 93% of Republicans approve of the president’s overall job performance, compared with just 1% of Democrats, a 92-point gap, tying the record for the largest partisan divide in Gallup’s history (Republicans’ lowest approval for any Democratic president was 2% for Joe Biden in 2023-2024). The bottom line is that President Trump’s job approval has settled at 40%, held up by near-unanimous Republican support offset by a near-total absence of Democratic support and weak support from independents. Similar partisan differences are seen in Americans’ satisfaction with the direction of the country and the Supreme Court, making the nation more polarized than modern polling has ever seen.
U.S. Factory Activity Shrank for a Sixth Straight Month in August. Even as manufacturing remains bogged down by higher import duties tied to President Trump’s trade war, there were several positive signs—orders expanded for the first time since the start of the year and one measure of prices paid for raw materials declined to their lowest level since February. The mixed report highlights the number of cross-currents facing American manufacturers. While still experiencing higher costs as a result of tariffs, manufacturers appear to be benefiting from solid business investment and resilient household demand. At the same time, factories are wrestling with supply chain disruptions related to scattershot trade policy, which saw a new court ruling deeming most of the White House’s levies illegal.
