Welcome back. As summer turns to fall, Washington returns to a heavy slate of legislative tasks amidst a growing backdrop of intra-party and intra-branch showdowns.
While the annual September 30 government funding deadline looms large, Congress will also grapple with potential changes to Senate rules for nominations and floor consideration of the FY 2026 National Defense Authorization Act (NDAA). Meanwhile, President Trump will remain active and aggressive on a multitude of policy fronts, several of which will require a ruling from the Supreme Court. All this to say nothing of the ongoing redistricting wars breaking out across the country that could very well determine control of the House of Representatives in 2027.
Below is our latest forecast on what to watch over a busy September work period.
Government Funding
With just over three weeks until the end of the fiscal year, none of the twelve annual appropriations bills for Fiscal Year 2026 have been enacted into law. Although both the House and Senate have passed three individual bills through their respective chambers (Defense, Energy & Water, and Military Construction/VA in the House; Agriculture, Legislative Branch, and Military Construction/VA in the Senate), a continuing resolution (CR) will be required to avoid a government shutdown.
The current discussions on Capitol Hill surround the length of any such CR, with opinions ranging from a few months to a full year.
In one camp, House and Senate appropriators are fighting for as short a funding patch as possible-likely until November 6 or November 20-to provide more time to attempt to enact bipartisan appropriations bills. In addition, this camp would like to begin bicameral negotiations (formal conference or otherwise) on the three bills passed by the Senate as a means of building momentum for enacting further spending bills.
On the other end of the spectrum, members of the conservative House Freedom Caucus (HFC) have publicly endorsed a full-year CR, which would keep spending flat for another year while giving maximum flexibility to the Trump Administration to administer its funding priorities. Some conservatives have also suggested adding member earmarks to a CR to entice Democratic votes, an option we view as unlikely.
Finally, although President Trump has not yet publicly weighed in on the matter, multiple Administration officials have relayed their preference for a CR until sometime in early 2026 so as to avoid enduring multiple shutdown showdowns for the remainder of this calendar year.
As of this writing, House Republican Leadership is surveying its conference and assessing its options but appears most inclined to pursue a clean CR into November-a least common denominator approach and the most difficult for Democrats to oppose-potentially in tandem with establishing either formal or informal bicameral conference committees on MilCon/VA, Legislative Branch, and Agriculture. Action would likely begin the week of September 15, with both the House and Senate in recess the week of September 22 for Rosh Hashanah. The situation is fluid, however, and subject to change as Member conversations continue this coming week.
Also still to be determined is the response of Congressional Democrats, whose votes will be needed-at a minimum-in the Senate to avoid a shutdown. While House Minority Leader Hakeem Jeffries and Senate Minority Leader Chuck Schumer have taken pains to align their strategies after the March funding debacle, many Democrats are itching to initiate a shutdown fight with the President over a variety of topics-ranging from the Administration’s untested use of “pocket rescissions” and ongoing deployment of the National Guard to an end-of-year expiration of numerous COVID-era healthcare subsidies.
Look for Leaders Jeffries and Schumer to attempt to extract some fig leaf from Republicans that can serve as justification for them voting to move the process forward (i.e., a bicameral conference committee on the aforementioned three appropriation bills and/or a commitment to work on an extension of ACA premium subsidies). However, if House Republicans can pass a CR on their own-as they did in March behind a full whip effort from the Trump Administration-Leader Schumer would once again face the exceedingly difficult decision of whether to supply Democratic votes to pass a short-term CR.
National Defense Authorization Act (NDAA)
The House and Senate are expected to complete floor consideration of their respective versions of the FY2026 NDAA this week. The Senate bill, S.2296, authorizes $878.7 billion for the recently renamed “Department of War,” while the House version reflects the $848.2 billion included in President Trump’s budget request for the Pentagon.
Senate Armed Services Committee Chairman Roger Wicker and Ranking Member Jack Reed released a substitute amendment last week comprised of 49 amendments submitted by Senators prior to the August recess, including the Intelligence Authorization Act, the Department of State Authorization Act, and a one-year extension of the Defense Production Act. An amendment to implement export controls for advanced artificial intelligence chips authored by Senator Jim Banks was also included, as was the PRC Broker-Dealers and Investment Advisors Moratorium Act, authored by Senator Dave McCormick. Notably, Senator John Cornyn’s outbound investment legislation-the COINS Act-was not included in the package, but the amendment could still receive a stand-alone vote this week. Over 900 amendments have been filed and bipartisan negotiations will continue in the coming days as Senators seek unanimous consent for amendment votes and another manager’s amendment. Final passage is expected late this week or early next week with a strong bipartisan vote.
In the House, the Rules Committee will meet at 2:00 p.m. on Monday to consider a rule governing floor consideration of H.R. 3838, the Streamlining Procurement for Effective Execution and Delivery and National Defense Authorization Act for Fiscal Year 2026. The Rules Committee will also determine which of the 1,136 filed amendments will be made in order.
We anticipate that Coast Guard authorization will be made in order as an amendment and expect the House to consider amendments dealing with support for Ukraine, artificial intelligence, and a series of amendments dealing with China, including an amendment authored by China Select Committee Chairman John Moolenaar to prohibit the Department of Defense from contracting with entities that have licensing agreements with certain Chinese military companies. Several hundred amendments will be made in order in total, although most of them will eventually be voted on as part of large en bloc amendments. Narrow bipartisan support for the final bill is possible, but dependent upon the outcome of several high-profile amendments dealing with social issues.
While both the House and Senate will pass their respective bills, reconciling the differences will take some time as well as input on sensitive geopolitical issues from the Administration, meaning a final conferenced bill is not likely to be enacted until late in the year.
Senate Rules Changes on Nominees
Following extensive internal conversations among Senate Republicans, Majority Leader Thune may move as soon as this week to change the Senate rules to allow expedited consideration of President Trump’s nominees-specifically, the ability to consider nominees en bloc, excluding lifetime judicial appointments and Cabinet positions.
Due to objections from the minority, not a single one of President Trump’s civilian nominees has been confirmed by unanimous consent or voice vote so far this Congress. As a result, the Senate has spent disproportionate floor time on nominees, with over 150 nominees reported by Committees still awaiting confirmation. This is a stark departure from recent historical norms in the Senate and an unsustainable position for the Majority (see chart below, courtesy of the Senate Republican Leader’s office).
Details are still being finalized, but any changes are likely to be modeled on a 2023 proposal from Democratic Senators Amy Klobuchar, Angus King, and Ben Cardin. Their proposal, which was not acted upon at the time, would allow up to 10 nominees from a singular committee to be voted on at once, essentially codifying what until recently had been long-standing practice into the Senate Rules.
The exact details of the rule change to be acted upon are still being worked out to ensure it is narrow in scope and has the support necessary to pass on a simple majority vote. For example, it may well narrow the Klobuchar proposal by excluding District Court judges from the rule, since the problem in the Senate this year has more so been executive branch nominations than judges. We anticipate this change to be voted on either this week or the following, before the recess week of the 22nd.
Trade Outlook
Now past the August 1 reciprocal tariff deadline, the Trump Administration is focused on formal implementation via executive order of the deals made to date, with Japan most recently executed last week. There is also hope that more deals will emerge with those countries yet to reach agreement and now subject to their respective snap-back reciprocal rates (e.g., Switzerland).
Meanwhile, the President has fully trained his trade ire on India and has clearly grown frustrated with a lack of progress on Ukraine-Russia talks. Already having imposed secondary sanctions on Russian oil and gas via India-while exempting China for the time being-the President raised the possibility of additional Russian sanctions absent progress in trilateral talks. The emerging China-India-Russia bloc will greatly test the prospects of a Trump-Xi summit later this year.
We believe that we are entering a geopolitical and global trade stage whereby a US bloc vs a China bloc is beginning to emerge more clearly. While much of Asia, the EU, Middle East, and North America have aligned with the US, India appears to be taking the side of China. Up for grabs remains much of Africa and the BRICs, though the impasse with Brazil points to an alignment with China.
Meanwhile, it is noteworthy that Mexico is considering additional tariffs on China in its upcoming 2026 budget, due next week. That augers to further goodwill with the Trump Administration in combatting transshipments and fentanyl from China. Canada, too, has taken positive steps by carving out USMCA-compliant goods from its reciprocal tariffs. Amidst that backdrop, USMCA renegotiations will formally begin this month, though we are awaiting the announcement of the formal comment period.
Impacting all of the above, the Trump Administration has appealed the recent US Court of Appeals for the Federal Circuit ruling against its use of IEEPA for the purposes of reciprocal and fentanyl tariffs. The Administration is keen for the Supreme Court to take up its case as soon as possible, hoping for oral arguments at the beginning of November. The Administration remains bullish that SCOTUS will side with it, but the Appeals ruling does cast doubt on reaching agreements with current holdouts given the uncertainty (i.e., why negotiate against yourself if you are a US trading partner?).
Finally, President Trump announced last week that he would be imposing “fairly substantial” tariffs on chips shortly, with the caveat that investment in the US would result in no tariff-signaling to Tim Cook, for example, that Apple might be spared.
Reconciliation 2.0 and OBBB Implementation
Although the ink is barely dry on the One Big Beautiful Bill (OBBB) Act, many Republicans in Congress are already looking ahead to another potential reconciliation effort, this time using the FY26 budget as the vehicle for a new party-line bill.
While Speaker Johnson has expressed support for the idea and Leader Thune has not ruled it out, no formal steps have been taken behind the scenes to suggest an effort of this scale is underway. Advancing such a measure would once again require passage of a unified budget in both chambers-a daunting hurdle in itself-followed by the task of securing enough votes to move another sweeping package through the two narrowly divided chambers. Even the OBBB, which commanded unusually broad buy-in across the GOP spectrum, only cleared Congress in July by razor-thin margins: 51-50 in the Senate and 218-214 in the House.
Indeed, the barriers now are less procedural than political. Chief among them is the lack of consensus among Republicans on the purpose and scope of a second reconciliation bill. Though some members are eager to revive the spending cut proposals that were excluded from OBBB, others are wary of reopening those fights when many members are still struggling to sell OBBB’s existing provisions to skeptical voters. This challenge has been significant enough that senior White House staff recently briefed Hill Republicans on messaging, urging them to emphasize the bill’s benefits for ordinary households and even suggesting they rebrand the OBBB as the “Working Families Tax Cut” in their public remarks.
Other Republicans would prefer to use reconciliation to address looming health care issues, most notably the expiration of COVID-era enhanced ACA subsidies at the end of the year. But this provision is both costly and divisive within the party. Other members have also raised the possibility of tackling drug pricing, including the PBM reforms that were dropped from last December’s continuing resolution.
Lastly, tax policy has emerged as a final area of interest, with some Republicans eager to revisit business tax provisions excluded from OBBB. Yet it is not clear that reconciliation is necessary for this purpose, since bipartisan proposals to extend or refine particular tax incentives are currently attracting more momentum.
Overlaying these policy disputes is the political reality: Republicans are still working to defend OBBB while also staring down the possibility of a government shutdown at the end of September, and likely again later in the fiscal year. Against this backdrop, a bipartisan health-and perhaps tax-package later this year, uncertain as it may be, appears more plausible than a second reconciliation bill, at least for the remainder of 2025.
In the meantime, implementation of OBBB continues at Treasury, with initial guidance relating to the phasing out of wind and solar credits released in August, and forthcoming regulation expected on a litany of issues, including individual tax provisions such as “No Tax on Tips,” and “No Tax on Overtime,” as well as additional clean energy policy issues such as how restrictions on investments made by Foreign Entities of Concern (FEOC) will apply to developers.
Additional Legislative Items
Outside of the annual high-profile must-pass items, the House has reserved floor time during the week of September 15 for consideration of the SCORE Act-Student Compensation and Opportunity through Rights and Endorsements-which would establish a national framework for college athletes to benefit from their name, image, and likeness (NIL), while injecting greater accountability and transparency into the collegiate NIL process. Across the Capitol, Senate Commerce Committee Chairman Ted Cruz is working to build a bipartisan coalition on the issue of NIL, as well-though has not yet been able to secure a Democratic lead, leaving the path forward uncertain.
That same week, the House also plans to consider H.R. 3062, the Promoting Cross-Border Energy Infrastructure Act, a noteworthy agenda item given the ongoing discussions around broader permitting reform. We expect the House to consider further permitting bills in the future, and Senate committees could also consider permitting legislation this year. While obstacles remain for a bipartisan permitting reform package to become law, there will continue to be a major push from outside stakeholders to get a deal done.
In the background, we expect progress to be made in both chambers on housing legislation and a digital assets market structure bill. Later this year, the Senate could consider the ROAD to Housing Act, a bipartisan housing legislation package that passed out of the Senate Banking Committee unanimously. It is also possible that the Senate could consider a crypto market structure bill this year, following the recent release of a discussion draft by Senate Banking Chairman Tim Scott.
OUTLOOK/ANALYSIS. As has become routine, Congress is once again laboring to achieve basic bipartisan lawmaking-this time, a short-term extension of government funding needed by September 30. While cross-aisle cooperation on the Hill appears to be at or near an all-time low, it is also not readily apparent what either party would stand to gain from a government shutdown at this point in time.
For congressional Republicans-typically the agitators of government shutdowns-there exists a rare consensus around the need to fund the government, if only so as to ensure that President Trump’s agenda remains on-track and unabated.
Meanwhile, though congressional Democrats are looking to channel the anger of their restless base and avoid a redux of the blowback they faced for funding the government in March, Democratic Leadership knows that it’s much easier to get into a shutdown fight than to get out of one. Moreover, a funding fight now would sap Democratic leverage from later in the year, when the expiration of various COVID-era health subsidies could provide a more advantageous battleground against Republicans who are already splintering on the issue.
Additionally, a shutdown would provide the Trump Administration-especially Office of Management and Budget Director Russ Vought-with extensive authority to determine which government agencies continue to function and which do not. In a shutdown scenario, the Administration would almost certainly seek to punish Democratic states and priorities in a multitude of ways.
That said, unity among the ever-rambunctious House Republican Conference is never a guarantee and congressional Democratic Leadership may determine that picking a fight-even a symbolic one that is unlikely to yield any concrete policy gains-is preferable to another round of cooperation with an administration their voters oppose.
If a shutdown does occur, it would be the first such lapse since the December 2018 to January 2019 shutdown during the first Trump Administration, a thirty-five-day shutdown over border security that represented the longest shutdown in U.S. history. In either scenario, September promises to be an active-and consequential-month in our nation’s capital.
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