Key Issues to Watch in the Second Session of the 115th Congress

Executive Summary

As Congress returns to begin the second session of the 115th Congress, the overarching question in the wake of the tax package vote is what comes next? In our congressional outlook for this year, we summarize some of the key policy debates that we see unfolding in 2018 and discuss what sectors of the economy could be impacted the most should policy change. Among the key issues we will be tracking are a potential infrastructure package, immigration reforms, financial regulation/Government-Sponsored Enterprise (GSE) reform, changes to entitlement programs and another possible attempt to repeal the Affordable Care Act (ACA). All of these issues are in addition to the need to come to a budget agreement for FY 2018, which is now more than a quarter complete, and the need to increase the debt ceiling by late March and pass a budget for FY 2019, which begins on October 1.

Among these key issues that are likely to be discussed in the second session of Congress, we see some immigration and financial regulation reform, along with a one- or two-year budget agreement, as the major policy changes most likely to occur this year. We remain skeptical that a large infrastructure package, entitlement reform, GSE reform or another attempted repeal of the ACA are likely given the challenges we outline below. Given the political dynamics of this midterm election year, we see most major policy changes occurring early this year before members shift their focus toward primaries and the November elections.

Infrastructure Spending

In our congressional outlook report released this time last year, we predicted that Congress would not have much of an appetite for a big boost in infrastructure spending in 2017.1 This prediction turned out to be correct, as lawmakers directed their attention instead to ACA repeal and an overhaul of the nation’s tax system. While the passage of the tax bill was a major check off the 2017 congressional to-do list, infrastructure remains a top priority for 2018. Several members of Congress have indicated that they would like to focus on making the president’s infrastructure package a reality, dovetailing on the successful passage of tax reform in December. That said, we still remain skeptical that any large infrastructure package will be passed this year. The last time Congress passed a transportation bill, which occurred at the end of 2015 and amounted to $305 billion over five years, the biggest challenge was how to pay for the package. In the end, Congress found the funding through a variety of one-off items, such as capping the Federal Reserve’s capital surplus at $10 billion and lowering the  dividends paid to banks by the Federal Reserve.

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