What Can Congress Get Done in Its Lame-Duck Session?

0:00A t-shirt and jeans, mac and cheese, oceans and sunsets. Some things in life are an obvious match, like RIAs and Schwab Advisor Services, the number one choice for independent advisors looking for a custodian who can help them go further. With all the wealth services, technology, and support an RIA firm needs, the difference is so obvious, it's Schwabvius. Find your match and learn why custody is just the beginning at schwabvius.com.

0:32from the opinion pages of the wall street journal this is potomac watch congress returns for its lame duck sessions as both parties assess the results of the enormous democratic party victory in congress can shell-shocked republicans make the final use of their majority, at least for the next few weeks, to pass something worth getting done and helping the country in the final weeks. The prospects are not good, as Democrats seek to make impeaching Defense Secretary Pete Hegseth their first big post-election act. Welcome. Those are the subjects we'll take up today on Potomac Watch, as well as talking a little about the president's interview post-election with 60 Minutes on Sunday and what that might have told us about his thinking.

1:26Post-election, welcome. I'm Paul Gigo of the Wall Street Journal opinion pages. And I'm here with a couple of my colleagues, Joe Sternberg and Kate Batchelder-Odell. So let's listen first to Donald Trump on 60 Minutes, talk about his lesson from the election, especially on immigration enforcement. What is one thing you would like to work with a Democratic majority? I'd love to do something on immigration. What? Because, well, so. Do you think immigration hurt you in the midterm? Do you think the crackdown hurt you? I think it both helped and hurt. I think I got an A plus for closing up the border.

2:02I get very high marks for getting the bad ones out. But I get hurt because we also took people that had good jobs, that created one violation for breaking of the law, and that was that they came into the country illegally. Now, there is a large part of the country that think that they should be put out. And there's a large part of the country that thinks that they should be allowed to stay if they're good people working in a landscaping company or working in a hotel or doing something, right? And in some cases, paying taxes. And there's a large group of people think that they should be allowed to stay.

2:38So you think your deportation policy went too far? It was too tough. I think it might be too tough, yeah. Well, there's a flash of recognition about the politics of mass deportation. Now, nothing like this can happen in the lame duck session. So this would be something that has to happen, a deal on immigration, Kate, in the next Congress. But hope springs infernal, as they say. And I would certainly hope that we could get something done. We've been at that stand before. But it's at least good that the president has recognized that, A, that deportation policy was too tough, and B, that there is perhaps a compromise to be made here between those two sides.

3:20What do you think? Well, I think Donald Trump has always been somebody with a lot of credibility with a Republican base who could broker a larger immigration compromise if he wanted to do it. Now, look, those very sensible remarks on 60 Minutes are directly at odds with making Stephen Miller your chief of staff last week. They are directly at odds with what the vice president had to say about immigration's role in the election last week. And I will add to Democrats may think the next two years they should just bandy the issue and not cut a deal. There is also a risk of that. But look, there was a bipartisan immigration compromise that was not perfect, that was killed under President Biden, but it would have actually changed the long-term incentives to come to the country and outlast That's Trump.

4:06You know, closing the border is good, but you want to change the incentives on whether you claim asylum and other issues like that. And so, look, there's always been a deal to be had there. But the politics have just been toxic. And if anybody can overcome that, though, I really do think it would be Trump. Yeah, I agree with that. And because Trump has unique credibility on this with the restrictionist part of the Republican Party. But his chief of staff now, new chief of staff, Stephen Miller, has argued that they should keep the issue rather than do a compromise because Stephen Miller, I think he'd be fairly honest about this.

4:40He hasn't won immigration at all for a long time. And that's even legal immigration. You know, he has made the case that Democrats, when they get in, they open the borders and let in all these immigrants. And then Republicans, when they get in, they may close the border, but then they're supposed to accept all these immigrants who came into the country under the Democratic administration. And that's why he favors deportation, because he doesn't want the Democrats to think they can do this every time they take power and then essentially force Republicans to accept that as a fait accompli. Now, he doesn't believe these people are assets, right?

5:16And Joe, he thinks that too many immigrants are eroding the social compact and aren't assimilating. I think the evidence in most cases is contrary to that, but that's where they're coming from. Yeah, and I think, Paul, the phenomenon that you were describing, this political seesaw between Republican and Democratic administrations, would actually be a good argument for trying to get a deal through Congress. because one of the problems that we have had for a couple decades without that kind of legislative buy-in from both parties is that it does create opportunities and incentives for exactly that kind of seesawing whenever the administration changes.

5:54Part of the problem I fear that we're going to run into here is that at the moment, I actually find it a little easier to envision Republicans coming to the table and being willing to do a deal than I think the Democrats would be. And it's precisely because Trump does have a certain amount of credibility on this issue now. And I think that at least the more perceptive Republicans are going to understand that the way that this enforcement crackdown was done became a substantial political liability for them. And I think that you'll probably get a lot of more sensible Republicans who would be keen to make the issue go away with some kind of legislative fix.

6:31And so you can imagine on the Republican side where the coalition comes together in favor of this. I unfortunately have more trouble envisioning Democrats being willing to say to their base that we signed a deal with Trump about anything. I'm concerned that that's going to be the holdup. Well, and in the background here, it will be the Democratic, for the next two years, will be the Democratic belief that they can sweep everything in 2028. And then if they do, they'll break the filibuster and they get anything done. And that will be in the background here, arguing against any compromises with the Republicans.

7:10We are going to take a break and when we come back, we'll talk more about what might happen, could happen, we hope will happen in the lame duck session when we come back. If you're an RIA, Schwab Advisor Services is the Watson to your homes. Smart, dependable, always has your back. With all the wealth services, technology, and support your firm needs, the difference is so obvious, it's Schwab-vious. Follow the clues at schwab-vious.com. This is Matthew Hennessey, the editor of Free Expression. I want to personally invite you to come check out what we're doing. Signing up for the newsletter couldn't be easier.

7:45Just go to our homepage, directly below the Wall Street Journal logo, you'll find the magic words, free expression, wedged between opinion and arts. There's an option to sign up for the newsletter right at the top of our section. Just hit that button and you'll start getting the world's hardest working newsletter delivered directly to your inbox Monday through Friday. If you aren't a journal subscriber, the newsletter is free, but we are going to need your email address. There's a lot of fun stuff in the newsletter that you can only read in the newsletter, and I don't want you to miss any of it.

8:17Sign up for free expression today. We'll see you in your inbox. Welcome back. I'm Paul Gigo here on Potomac Watch with Joe Sternberg and Kate O'Dell. Let's talk about the lame duck, Kate. This is the near term. And you've kind of examined the landscape here. Such as it is. Yeah, it's full of rubble from the election. There's no question about it. But the president endorsed on the weekend in a true social post, the Senate compromise bill on permitting. So he's behind that. Both parties in the Senate members have put their names to this unofficially and said we endorse this. John Podesta, unfortunately, Joe Biden's climate czar, weighed in with a group of left-wing activists and said we need to mobilize to kill this because it's too favorable to fossil fuels.

9:05But in fact, it isn't. it's modestly favorable to fossil fuels in return for concessions on opening up permits for transmission lines across state lines that the climateers desperately need for getting wind and solar energy to major markets. Yes, I mean, the permitting bill is subject to the same forces we were talking about on immigration, where you do have Democrats now after the election saying, why would we pass this now that we won the majority by a mile? But I think they do have incentive to pass it. One of the incentives that you mentioned, which is that renewable energy projects are getting ensnared by the same permitting process that ensnares oil and gas.

9:44And so they want to get those projects done. They have an incentive to pass it. And also, the increasing progressiveness of the Democratic Party is going to make it quite difficult to start from zero again in a new Congress and try to get a permitting deal that you can pass the Senate and that you can get Donald Trump to sign. And so I think it would be a win-win for both parties. And Republicans especially, I think, should really exercise some energy to get it across the finish line because they won't have a lot of opportunities in the next two years for policy that creates regulatory certainty and sanity and growth.

10:16And so this is one of the last opportunities. So hopefully there's a reason for both parties to get it done. One reason the so-called abundance movement developed on the left, Joe, is that there was a lot of frustration among Democrats that they passed this big infrastructure bill under Biden. And they spent all this money on green energy and they wanted charging stations. And they get six built, charging stations built, because everything they tried to do after they passed this bill was stymied by permitting. So they decide, hmm, maybe it's a good idea to reform some of these laws and not let judges and interest groups litigate opposition to getting anything done.

11:00So they have a real stake in getting this done if they're smart. And I think Kate is exactly right. If the left wing writes a permitting bill, it'll freeze out oil and gas and Trump will never sign it. Yeah, and I think that there's a bigger point here about this as well. Well, I think that analysis of where the abundance agenda came from is spot on. And I think that the key political insight here is that you have to answer the question that voters have asked. And I think that the big question that voters are asked in this election is, what are you going to do to make the economy better? So I think that the big trap for Democrats here and permitting reform is an opportunity for an early opportunity for them to avoid falling into it, is they have to make sure that they don't get dragged into all of this legislation that looks like they are answering questions that no one has asked.

11:48You know, they have to demonstrate that they can do things that are going to be positive for the economy. I think that permitting reform is an easy win for them because you can get Republican buy-in as well. And it's intuitive to explain to voters how it is good for the economy that you are making it easier to build stuff. So, you know, to put it that way doesn't necessarily make me optimistic that they're going to do it. But I think that this is an important early test for them in ways that they might not fully realize if they want to really deliver on this mandate that the voters have just handed them.

12:22All right, let's talk about some other items in the potential agenda for the lame duck, Kate. There's a big defense spending project that the president has proposed. Pete Hegseth, the defense secretary, reinforced that on the weekend in a video, the need to do this. Something like$350 billion that could go in a reconciliation bill, which Democrats couldn't block if Republicans all vote together on it. There's also some people are talking about indexing capital gains for inflation, which would, I think, help the economy and be a kind of insurance policy against bad policy going the next couple of years.

12:59And in particular, this instability, volatility over what happens with AI investment, which is driving the economy so much now. There's also health and welfare reforms they could do and judicial confirmations, which are crucial and which will stop full stop once Democrats take over. Well, and also, I mean, the funding for the federal government expires on December 11th. So there's this coming deadline that is organizing everybody in Congress, and that is connected with the defense funding you just mentioned, because basically on the defense side, President Trump has proposed this$1.5 trillion budget, but he's divided it up.

13:38Some of it is in the normal budget. Some of it needs a reconciliation bill. And nobody knows whether they're going to pass both of those things, whether they will just do the basic bill, whether they will keep funding the government on stopgap measures that fund the DOD at like$840 billion, which is about like half of the original top line. So that is a huge unknown. I think Hegseth is at least starting to make a case that you have to get a budget bill done to get this money that the department needs. And right now, there is some talk about that in the House around getting Senate leaders going on that.

14:14But I think if you're going to do a budget bill and move something, you should make it larger because this is the last opportunity for who knows how long. I mean, we've been talking on this show about how election losses like last week tend to have a very long tail. It could be a long time before the Republicans have full control of Congress. So there is some organizing around this defense money. The question is, is there political will or political courage to move it beyond that? And that is what I see almost none of at the current juncture. That defense spending is really crucial in my view, Kate, because I think what the Democrats are going to do here is going to say, OK, we're going to control the whole budget process in Congress next year.

14:55And if the president wants more defense spending, then we'll negotiate with him. We'll talk to him about it. But we want an enormous domestic spending program, Biden levels spending on domestic issues, including adding back the Obamacare Biden era subsidies. You can make a long list, and they will, that they will force Trump to accede to if he wants any defense spending. So if he just wants a defense increase now, the Republicans are going to have to unite to deliver it to him. And now just so our listeners understand, a reconciliation bill will be different, separate from the normal appropriation process, right?

15:36And that is something, it doesn't have to be, but the normal appropriation bills are subject to Democratic 60 vote limits. So the filibuster. So the Democrats, I think, are just going to say, well, we'll just do the current spending levels and kick this into the new year. So I don't think they can count on appropriations to get them anything, much of anything. Do you agree? I completely agree. And, you know, at the top line of the defense debate and all of these larger numbers is really the president has said, you know, we need to get back to four to five percent of GDP on defense because of the threats that we face.

16:10And Hegseth did say the other day at a fireside chat that, you know, the Chinese Communist Party has undertaken the biggest military buildup perhaps in history. Like, this is what the larger defense budget is about. I would add one other quick element to it, which is just the president has to deal with this issue on defense if he wants to even continue a naval blockade to put pressure on Iran. Democrats are already starting to put pressure on the president that when the December 11th funding runs out, They're going to attach a condition that says you can't use any of this money for military operations against Iran.

16:43And they are making that same demand in the defense policy bill. It's become their uniform ask for everything. So there's also a real risk for the president that Congress tries to cut the legs out from under him in some kind of bizarre Vietnam comparison when it's a naval blockade versus a years long combat operations. Yeah, this is the price the president and we are all going to pay for the fact that the president has kept saying for two years, I rebuilt the military when in fact he had not. And he has not made the case for why we need this extra defense spending. So that's a real problem. We'll see how this plays out.

17:20Other than that, I'm not sure anything gets done. I hope they at least do confirm some judges, particularly at the appellate court level. That would be very, very helpful. I have the other things I mentioned are something of a wish list. I'll take them. We put them out there in an editorial so that we hope somebody in the Capitol Hill says, hey, I hadn't thought of that. Let's try it. But I don't know that it will. We are going to take another break and we come back. We'll talk about impeaching Pete Hegseth. Is this what Democrats really want to do as the first big post-election act when we come back?

17:56This episode is brought to you by Hard Lessons, a podcast from Morgan Stanley. Some investing lessons only become clear after you see how a call plays out. On Hard Lessons, iconic investors sit down with Morgan Stanley leaders to go behind the scenes on the critical moments, both successes and setbacks, that shaped who they are today. Watch or listen to Hard Lessons wherever you get your podcasts. Don't forget, you can reach the latest episode of Potomac Watch anytime. Just ask your smart speaker. Play the Opinion Potomac Watch podcast. That is Play the Opinion Potomac Watch podcast. From the opinion pages of The Wall Street Journal, this is Potomac Watch.

18:43Welcome back. I'm Paul Gigo here in Potomac Watch with Kate O'Dell and Joe Sternberg. Let's turn to the, we've talked about Hank Seth. The Democrats are trying to get rid of him. They want him impeached. Thomas Massey, the Republican from Kentucky, something of a crank, but he's on his way. He lost his primary. He's just trying to create trouble. He has a motion to impeach Pete Hexeth on the House. He wants to put it to the House floor. It's a privilege motion, which means he gets a vote on it. The Republican leadership cannot stop it. And on the weekend, Hakeem Jeffries, the Democratic leader who will be speaker in the next Congress said, oh, I'm a hard yes on that.

19:21And most of my members will be too, Joe. So he could actually, that could pass that motion. Paul, you remember what I was saying a minute ago about how you have to answer the question that voters have asked of you? And this is the real problem that I foresee developing with this Hegseth impeachment drive. I get it, you know, particularly for Republicans or the Trump administration. If your side is lost in election, you might feel like you need a scapegoat or two. If you've just won a thumping victory the way the Democrats have, you're kind of out for blood. And it's also true that the Iran war may have probably did factor in various ways into voters' decisions, but the problem is that getting rid of Hexeth is not answering the real complaints that people had about the Iran war.

20:07And I think that it's going to end up looking like a big distraction, partly because I have skimmed through the articles of impeachment that have been filed. And I think that it's going to be very difficult to explain to the public exactly what the complaint is here, other than some generalized discontent with the conduct of the Iran war, which is not actually the thing that people were unhappy. People are not unhappy that the Ayatollah was killed in that strike back in February. Right. And they are not unhappy that the nuclear program has been set back considerably, if not entirely destroyed.

20:45So I don't understand what Democrats think that they are going to gain politically from this, other than that their base is really baying ferociously for the impeachments to start. If you want a new defense secretary, Kate, this is exactly the wrong way to do it, an impeachment vote. Because Trump, you know, there were rumors that he's been contemplating replacing Hegseth, but he's not going to do it under duress like this, under the orders of the House of Representatives, and Hakeem Jeffries. No, I mean, if there's anything, especially in his second term, he's been very reluctant to fire people when the pressure is on, when the public demands are on.

21:23Think about the signal affair with Mike Waltz. He didn't want to give in there. And I think so. I think you will see a similar dynamic here. And the president has been backing up Secretary Hegseth so far. I mean, this impeachment resolution, it's very silly to imagine that Pete Hegseth is responsible for the inconclusive outcome in Iran. The president made the decision to go. The president was the one who was indecisive. He listened to the vice president who wanted to wrap it up very early in the campaign. I mean, the idea that Hegseth owns that failure is very hard to credit. Now, there are things Hegseth has done that voters do not like, including kind of exploring cul-de-sacs about testosterone testing or, you know, saying we won't have any fatties in the military.

22:06He has been a very polarizing public figure in a lot of ways, which I think is regrettable because it has overshadowed some of the decent stuff the administration has done, and it's made it harder to get people to take seriously the idea that we actually do need to change our defense posture. But this is just a gesture, and there are not votes to convict in the Senate. And so it's not going anywhere. And, you know, talking about all the other things that Republicans could be doing this week, it's very it's really too bad this is at the top of their list. Well, they have to do it, but they have to hold the vote.

22:36And then the Senate has to dispense with the articles when they are sent over to the Senate. Somehow they can dispense with them, I think, on a summary vote if they can put together the majority to do it. But it is you're Right. It's a distraction. It's also I mean, I just keep thinking of seeing an animal house where the boys at Faber College say it's time for a really stupid, hopeless gesture. And that's what this is. It's just it's gesture politics and it doesn't accomplish anything, except it suggests that the Democrats are in their first big act after they get this majority. And that's how voters see it.

23:15Right. They're going to they're not going to wait till January to size up the Democrats and say, oh, well, what are you doing now? What we make of these guys now. And the first big act, yeah, let's try to impeach Pete Hegseth. And of course, they'll fail. And it just looks like it's rank partisanship, Joe. Exactly. I mean, if I were a Democrat right now and I were trying to think about what can I do to really capitalize on this victory over the next two years to set the Democrats up for success in 2028, I would be focused relentlessly on any kind of legislation that might answer these questions that voters have about the economy and demonstrate that the Democrats can be a serious governing party on that.

23:52So, you know, we talked about permitting reform, you know, any legislation that they want to put forward on, you know, maybe since we're daring to dream, what about reining in some of the president's arbitrary tariff powers if Congress wants to do that and then the tariffs were unpopular with voters? You know, go down that list and focus on what is going to be the economic agenda that we are going to offer voters in 2028 and try to set ourselves up to look serious on that. And I think if they're going to get themselves trapped in this impeachment cul-de-sac, their base is going to love it. You know, there are a lot of people in the Democratic, you know, interest groups and in that orbit who are just thrilled to bits with the prospect of doing these impeachments and holding Trump accountable, but he's not going to be on the ballot in two years.

24:37And they can waste an awful lot of time and an awful lot of political capital and goodwill with the public that just elected them if they're going to get dragged into this. The tariff repeal is an excellent idea. And a longtime friend and source of mine, Republican, sent me an email over the weekend suggesting that we should ask Congress to do this in the lame duck. And, you know, as an idea, it's certainly good. The problem is that you're not going to get it in a Republican-led lame duck session because they're not going to counter the president on this one, and the president will veto it. So what we're thinking about is things you could actually accomplish in the lame duck before the Republicans leave town.

25:18Now, next year, if the Democrats want to unite with Republicans and put together a vote, some Republicans put together a vote to repeal various tariffs, I'd start with Canada, Mexico, and go on from there. But do that and put that on the president's desk. The president will veto it. But let's see what happens then, because that actually would really, really help the economy. But it's not going to happen in the lame duck, Kate. No, it's not going to happen in the lame duck. But if we're making a list of productive things Democrats could do if they were serious about legislating, I have a couple of entries myself.

25:54And I think another one that's similar to that on tariffs is like, look, we talk a lot about the Iran war and its clear role in the election results last week. But Trump also, So his closing argument was three weeks of Russia accommodation in various fashion, buying diesel from the Russians. I mean, the Democratic Congress could make an issue out of Ukraine and U.S. support for Ukraine and try to get the president to help Ukraine more. That would be a great use of their political capital. But also, my final word about that, too, is just on the Iran war, I think the Democrats are drawing entirely the wrong lessons from what voters had to say about the Iran war by going on this crusade to cut off funding.

26:32If they were serious about solving it, I think the public would be open to that. But what they're proposing is just let's cut off funding for the naval blockade. Let's drive out of the Strait of Hormuz. Let's take sanctions off. Let's just capitulate. And voters don't have to be consistent. They cannot like Trump's prosecution of the war, and they can also not like the Democratic surrender of the war, too. And I think that is where they're heading on that issue as well. Well, immigration is exactly an example of voters deciding they don't like something that either party does. They didn't like Biden opening the border, letting everybody in.

27:07They didn't like Trump's over-enforcement that raided houses and people who've been here for 20, 30 years. So that's exactly right. Will we get some of this golden mean policy? Recent history suggests not, but we are here to recommend it. So we'll leave it out there today. We'll follow the lame duck here in the next couple of weeks because there is a chance at least to get some good things done. Thank you, Kate O'Dell. Thank you, Joe Sternberg. Thank you all for listening. We are here every day on Potomac Watch. If you're an RIA, Schwab Advisor Services is the Watson to your homes. Smart, dependable, always has your back.

27:47With all the wealth services, technology, and support your firm needs, the difference is so obvious, it's Schwab-vious. Follow the clues at Schwabius.com.