“While Democrats lost the shutdown standoff, they were successful in using it as a vehicle to make the affordability of healthcare the most pressing issue going into year end – and potentially at the ballot box next November.” — Howard Schweitzer, CEO, Cozen O’Connor Public Strategies
The Cozen Lens
- With the shutdown over, Democrats must determine if they want to make a point or make a difference on extending the Affordable Care Act’s expiring enhanced premium tax credits. Republicans must decide whether to support extending the premium tax credits or pursue alternative health policy solutions to limit premium increases for their constituents.
- The Supreme Court appears likely to at least curtail President Trump’s ability to use the International Emergency Economic Powers Act to impose tariffs, which could mean refunds for importers but will not mean the end of the president’s sweeping tariff proposals.
- Senators continue to make progress toward a crypto market structure bill, releasing fresh legislative text earlier this month, but the road to a presidential signature remains long and winding.
Democrats Made Healthcare Their Top Issue. Now What?
The Shutdown’s Fallout. With the government reopened, both sides are claiming they got the better end of the deal.
- In the end, the longest shutdown in US history ended not with a bang but with a whimper. Seven moderate Democratic senators and one Independent senator broke with the rest of their caucus to reopen the government. Democrats have been promised a vote in (just) the Senate on a bill extending expiring tax credits for Affordable Care Act (ACA) marketplaces by the second week of December along with some concessions related to federal operations (fully funding the Government Accountability Office, e.g.) and reversing the reductions in force for federal workers. Three of the twelve spending bills got passed on a bipartisan basis with the other nine expiring at the end of January.
- For their efforts, the moderate Democrats received intense verbal abuse and vilification from all corners of their party. The chair of the Democratic National Committee called it a “betrayal of the American people” while Senator Elizabeth Warren (D-MA) said it was a “terrible mistake.” Some are openly clamoring for Senate Minority Leader Chuck Schumer (D-NY) to lose his job and the latest round of infighting threatens to compromise what good the party did get out of the situation.
- The fact of the matter is that very little of this noise matters. Almost no one will vote next November based on the shutdown that happened a year prior. The shutdown was an exercise in playing for position and what does matter is how each party decides to play the cards the shutdown has dealt. Each side faces a critical juncture in how they decide to proceed.
The Democratic Decision. Democrats must choose whether they want to make a difference or just make a point.
- To repeat, Democrats have been promised a Senate vote on an ACA bill of their choice in December. In theory, this bill could contain anything and everything, representing not just a variety of options on ACA subsidies but including other unrelated policies as well.
- Thus far, Democrats have only presented proposals Republicans would not support. Schumer presented a clean one-year extension of expiring ACA credits just before the shutdown’s resolution while House Democrats would like to seek a discharge petition for a clean three-year extension. Substantial interest in an extension in some form from rank-and-file Republicans has made a compromise look possible and encouraged Democrats to try to seek a deal. At the same time, Republicans are holding listening sessions and seeking out ways to legislate on the recent comments from President Trump on health care solutions he supports. Those could take significantly more time to finetune and socialize than a simpler extension of the premium tax credits.
- A final deal, if one is reached, would likely see Republicans agree to extend enhanced subsidies for a year or two with stricter income limits, minimum premiums, verification checks, or potentially other changes.
The Republican Decision. For Republicans, the toughest choice lies not in the nitty-gritty details around tax credits but in the decision of whether to come to the table or not at all.
- While the premium tax credits ultimately are a product of the ACA, almost 20 million marketplace enrollees received premium tax credits in 2024 so there is significant constituent interest. High medical costs are directly tied to the affordability concerns that propelled Democrats to major victories in elections this year. All of this has led a small contingent of both House and Senate Republicans to call for an extension of some variety.
- The passage of a bipartisan compromise extension in the Senate is a necessary but insufficient criterion to actually extending the enhanced credits. No promise of a vote on a Democratic bill was extended to the lower chamber, where House Speaker Mike Johnson (R-LA) is incentivized not to bring the measure to a floor vote due to the absence of unanimity among his caucus to do so. Both President Trump and GOP leadership must be brought into the negotiations and be convinced an extension is necessary to their own political benefit in order for any bill to cross the finish line. Trump’s personal pollster found that a three-point deficit in battleground districts became a 15-point deficit for the generic Republicans if they allowed the premium tax credits to expire earlier in the year.
How to Think About Trump’s Tariffs Post-Supreme Court Ruling
Checking Trump’s Tariffs. In light of the Supreme Court hearing earlier this month, it looks likely that President Trump’s ability to use the International Emergency Economic Powers Act (IEEPA) to impose tariffs will at least be partially restricted, once the court rules.
- In the hearing, a majority of justices appeared skeptical of the Trump administration’s arguments that the statute allows the president to impose tariffs without any serious limits. However, questions suggested that the justices are not viewing the case as having a binary outcome but instead may aim to narrow the president’s authority without curtailing it completely.
- While the Supreme Court typically issues its most consequential decisions at the end of its term in late June, the expedited manner in which this case has proceeded, and its economic significance suggest that a ruling may be published sooner. This likely means a decision will be issued no later than the first few months of 2026, though a verdict could be released as early as before the end of the year.
The Refund Issue. One of the items that will be closely watched in the Supreme Court’s decision is any commentary it makes on refunds that the government will be required to issue for any illegally collected tariff revenue.
- If Trump’s tariffs are at least partially struck down, at a minimum, the parties to the case are expected to be entitled to refunds for the tariffs they paid. However, who else may be eligible beyond that is less obvious. At the hearing, the justices expressed concern about the potential chaos of what would be the largest tariff refund in US history, potentially nearing $100 billion.
- Part of the question around the tariff refunds is how any returns would be processed. Customs and Border Protection has previously established systems for automatic refunds and has standard processes for claiming refunds, but neither has been used at this scale. Additionally, the White House has proposed how it wants to spend the new tariff revenue, which could mean it seeks to slow-roll the process of issuing refunds to the extent it can.
- One uncertainty around the Supreme Court’s decision is how much it will weigh in on the refund process, as traditionally, such penalty decisions have been referred to lower courts. These additional legal hurdles may further slow businesses’ ability to claim these returns beyond any delays from the Trump administration.
Hydra-Like Tariffs. While a decision against Trump in this case would be a blow to his ability to impose tariffs freely, it would be far from the end, as there are ample other authorities he can use to effectively reinstate the duties.
- One option for Trump would be to increase reliance on Section 232, which has been used to impose sectoral tariffs under his administration. While these duties are legally more secure than the president’s IEEPA duties, they would require a Commerce Department investigation first, which would prevent them from being quickly imposed.
- Other alternatives, such as Section 338 or Section 122, do not require as long of an investigation and could be comparatively quick, as Trump did with IEEPA. Of these two options, Section 338 is the least restricted, as its only limit is a maximum rate of 50 percent. The risk of using this authority, though, is that it has seen minimal use in US history since it became law in the 1930s, which could make it open to further legal challenges.
Congress Resumes Crypto Market Structure Negotiations
Much Needed Clarity. The Senate Agriculture Committee released the first draft legislative text of its section of a crypto market structure bill last week, marking a key milestone in the upper chamber’s push to get the all-encompassing crypto regulatory framework to President Trump’s desk.
- The release of the Senate Agriculture Committee’s draft fills in a key gap in the upper chamber’s crypto regulatory effort. Given the committee’s jurisdiction over the Commodity Futures Trading Commission (CFTC), the new text covers the regulation of digital commodities, a newly defined term for non-security digital assets which is expected to encompass most major crypto tokens including Bitcoin and Ether. The legislation would establish the regulatory guardrails around spot digital commodity trading, creating registration processes for digital commodity exchanges, brokers, and dealers with the CFTC.
- Alongside the bill’s newly established digital commodity spot market regulations and consumer protections, the Agriculture Committee’s text would also create a new funding stream for the CFTC. The bill would give the CFTC the authority to assess fees on digital commodity firms under its jurisdiction to help the agency recoup the cost of registering and overseeing the new entities. The provision addresses a longstanding concern of Senate Democrats and crypto-skeptical lawmakers who worry that the agency doesn’t have the staff or funds to handle its expanded role.
- While the committee’s release of the draft legislative text is a sign of progress, much remains to be done before the bill can advance to the Senate floor. Agriculture Committee lawmakers left placeholders in key sections of the bill where negotiators haven’t yet reached a consensus, including on the all-important topics of decentralized finance (DeFi) and anti-money laundering protections. Committee Democrats are also working to get the administration to commit to filling the two vacant commission seats at the CFTC recommended by the minority party, a requirement that’s tentatively included in the draft text.
A House Divided. Even with the Senate Agriculture Committee’s text now public, a number of significant hurdles remain before lawmakers can consider a final legislative product on the Senate floor.
- Whereas in the House, the effort to draft a comprehensive regulatory framework for digital assets was spearheaded jointly by the House Financial Services Committee and the House Agriculture Committee, in the Senate, the effort is being undertaken separately by the Senate Banking Committee and the Senate Agriculture Committee. The two committees will eventually combine their respective legislative texts into one final product, but for now, the divide in the upper chamber has resulted in a disjointed process by which the bill has been unveiled in bits and pieces.
- With the release of its own draft, the Senate Agriculture Committee is now roughly up to speed with the Senate Banking Committee, which separately released (and updated) its own draft covering the Securities and Exchange Commission’s (SEC) role in crypto regulation earlier this fall. The next step in the process is for both committees to separately vote to advance their portions of the market structure bill out of their respective committees, but neither can do so until they’ve sorted out a number of disagreements among negotiators. Senate Banking Committee lawmakers are separately struggling to find a consensus on the language governing the SEC’s regulation of DeFi products, a hot button issue for industry stakeholders. Other issues, such as the banking industry’s effort to limit potential interest payments on stablecoin holdings at exchanges, will also need to be litigated.
- Leadership on both Senate committees of jurisdiction would like to advance their respective portions of the crypto market structure bill out of the committees next month, although the timing is far from set in stone. Senators will also need to contend with House lawmakers’ preference for the upper chamber to adopt its version of the market structure bill, the Digital Asset Market Clarity Act, which passed the House by a wide bipartisan margin this summer, although just as was the case with the GENIUS Act, the Senate and the White House are expected to push the lower chamber to accept its version of the bill without modification.
