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This is your weekly Washington Policy Pulse on the Balance of Power podcast. I'm Joe Matthew. Every Monday, Bloomberg Intelligence senior policy analyst and friend of the show, Nathan Dean shares his weekly call on upcoming catalysts in the nation's capital. Listen for the most recent and relevant policy research from our team at Bloomberg Intelligence. Now with today's installment, here's Nathan Dean.

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Good morning and good afternoon everybody. Welcome again to the Washington Policy Pulse. My name is Nathan Dean. I'm a senior Policy Analyst with Bloomberg Intelligence here in Washington, D.C. also want to say thank you to those of you who are listening to us via the Balance of Power podcast. We always welcome your support and your participation as well. Well, we actually have somewhat of a light week this week. So what I want to do this week is I want to run through some of the smaller items first and then we'll talk about the government shutdown at the end. So what else is happening this week? Well, tomorrow we have an election in Virginia, New Jersey, New York City and a couple of other things across the nation. Key thing to keep in mind is right now Virginia, the Democratic governor candidate has about a 12 point lead. New Jersey, it's a little bit closer, a little bit tighter. The Democrat has a four to five point lead but within the margin of error. And so, you know, I would just caution though is that as much as we love to see people say that, you know, this is going to be a bellwether for 2026 elections and so forth like that. Just keep in mind that politics are local. Politics is also national. There's a lot of things going into this. But again, you know, we'll know tomorrow night obviously who's going to be the winner. We also have the election in New York City. President Trump most certainly has already been talking about this over the weekend. Most certainly will also get involved in the New York City mayoral election in terms of commenting on. And then finally just other things keep in mind is that there is a proposition in California for redistricting that we're going to be keeping an eyes on. And also there's some more smaller items in Texas. So again, election night on Tuesday, for those of you are in the Fairfax County, Virginia area, you know, obviously you know that your children don't have schools. So, you know, it's something that just every few years, you know, Virginia has to deal with it. So other things going on Wednesday, we have a very important day in terms of President Trump's reciprocal tariffs. This is when we're going to hear oral arguments at the Supreme Court on whether or not those tariffs. Think of the Liberation Day tariffs where President Trump held up those, you know, those pieces of paper in the Rose Garden back in April. This is the day in which we'll get an indication whether the Supreme Court will find the find those tariffs to be lawful or unlawful. Just real big backstory here is obviously President Trump has used the International Economic Powers Emergency Economic Powers act, also known as iaapa, to put these tariffs in place. For what it's worth, tariff is not mentioned in the International Economic Emergency Powers Act. You know, this was something that, you know, was challenged on legal grounds. He went to the U.S. trade Court. The U.S. trade Court found that those tariffs were unlawful. He went to the appeals court. The appeals court found that those tariffs will be lawful. And my colleague Holly frome has a 60% chance the Supreme Court is going to find those tariffs to be unlawful. Now, the hearing is anticipated to last around two and a half hours. We'll probably know listening to Hawley and listening to what Bloomberg News has been reporting, we'll probably know during that hearing how certain justices are going to be thinking of this. So you may get insight on where the Supreme Court is going. And it's just as a reminder that if the Supreme Court does find that these to be unlawful, Treasury Secretary Scott Besson has said that they're going to refund approximately 80 to $100 billion worth of tariffs. And Bloomberg News has a piece on how that would work. And they call it refund chaos because the United States does not have the ability to just turn on an electric send wires like the refunds here. It has to be done by check. It's going to be very messy. So they call it refund chaos. So if the Supreme Court does move this way, and obviously this isn't the decision day, this is just the or argument day. You know, if the Supreme Court moves this way, stay close. We're going to have to probably do a little bit more research on how those refunds are actually going to get doled back out to the industry. And just as a reminder, you know, this doesn't stop President Trump from using other avenues to conduct tariffs like section 232 or section 301. This just removes the avenue that President Trump has actually been using for reciprocal tariffs. Other thing to keep in mind, just last week we saw some votes in the Senate on resolutions to overturn President Trump's Canada and Brazil tariffs. These actually passed the House because a number of Republicans joined Democrats in opposing those tariffs. Just keep in mind, these are resolutions. Even though they passed the Senate, the House has already said that they're not going to take this up. It's symbolic in nature. It's not going to go anywhere. So that's what's going on in tariff land. A couple other things to keep in mind. SNAP benefits. So as we saw, you know, November 1st down, the supplemental Nutrition Assistance Program is currently lapsed. There's no funding associated with it. This is very important to those of you who have exposures, Walmart, Albertsons and Kroger. Walmart brings in about 25% of SNAP related revenue. Albertsons is at 6, Kroger is at 8%. And for what it's worth, there's about $8 billion per month in terms of SNAP revenue. So if you do the math, Walmart has some decent exposure here. But what happened is over on Friday there was a lawsuit essentially saying, and I'm paraphrasing here, to the White House saying, look, you have the ability to reallocate funds into snap. And under the law, you're supposed to do this, you know, and the court agreed. So the court gave the White House up until today to fully refund snap, to do a partial refund by Wednesday. It sounds like that's what Treasury Secretary Scott Bessant wants to do, is he made comments yesterday that it sounds like the Wednesday partial refunding, which means they would just reallocate certain funds, not the entire 8 billion, but just certain funds that they would put that in by Wednesday. So then you're looking at a couple days lag. But from an economic perspective and certainly from an equity perspective, this isn't one of those situations where the lapse in money just means the money is not going to be spent. It just means the money is going to be spent a little bit later in the month. So once those SNAP benefits go through to the consumer, the consumer then will Then spend it at Walmart, Albertsons and Kroger. So you're looking at a headline risk perspective, but not something that ultimately is going to be that much of a drain on the equities unless we get into a situation where snap benefits isn't funded for the entire month of November. And that leads me to the later discussion of the government shutdown. Now last thing, the last two things I want to talk about before the shutdown is the first is just keep in mind that while the shutdown continues, farmers are hurting and farmers are still waiting for this bailout. Now last week we saw the US China deal where they trying to agreed to purchase some soybeans. If you want more insight on that deal, ib me, call me, message me and I will send you a votes and verdicts podcast that we did with our chief geo economics analyst Jenny Welch who sits just right behind me. She went a little bit deeper into that deal and what it means. So you know I will give you a copy of that. It's actually on Apple and Spotify so you don't even need a terminal for that. So I don't want to go into too much detail of that deal. But from what it's worth is is that the reaction that we got from our ag analysts and from the farmer community is that the soybean purchases that China has agreed to do, it's great, but it's not that great. And so you're we're anticipating a significant farmer bailout coming at the end of this government shutdown. You know it's been floated 13 billion dol billion. Some folks on the House Ag Committee want as much as 50 billion. So that's something that we're going to be keeping an eye on is how much of that overall number and just as a reminder, I've said this on this call before, is that if you're going to get around $13 billion in farmer ag bailout if you will. Our ag analyst Alexis Maxwell, who does the fertilizer industry for bi estimates that most of that is going to go to 4Q spend. It's not going to be a long term solution. This is actually just going to be going for temporary purchases in the month of 4Q. Finally moving away from Congress and moving back towards the regulatory agencies. If you recall last Monday I talked a little bit about bank capital issues that have been going on over the Federal Reserve. The Friday before that call, the Federal Reserve had released a stress testing proposal on transparency. I finally had the chance to go through that. And just to summarize at a high level what this proposal does. It essentially just gave the 2026 scenarios to the banking industry in advance and made it more transparent so that if you're going into the stress test of 2026 and if you're one of the 23 banks that have to do this, you at least know what you're going to be judged on. This is something that I would like to I like the joke that would get the chief risk officer or the chief compliance officer or the chief legal officer. It would get them excited. So if you work in risk compliance or legal, you're probably really excited about this. If you're on the investor side or if you're looking in the front office, this is something that probably doesn't excite you all that much because ultimately there's really no impact on capital requirements here, maybe a small indirect impact on the stress capital buffer. But ultimately, I think both this stress testing proposal and the one that came from April, which was about volatility, really isn't all that big of a deal when it comes to capital requirements. And I anticipate both of those to be finalized in the first quarter of next year before we get into the 2026 stress testing season. So let's talk about the government shutdown now. There is some optimism that the government shutdown could end later this week. So let me back up and tell you what's happened over the last couple of days. At the tail end of last week, there were discussions, chit chats, if you will. I'm not going to call them negotiations, but there were discussions about moving forward on certain appropriation bills. And this was coming from rank and file senators, not leadership. So think of the National Defense Authorization act, the ndaa, think of a couple of other appropriation bills. And so some of these rank and file senators got together on their own and they said, okay, let's start trying to talk about trying to put together appropriations so that when the government does reopen, we can move forward. And in the NDAA case, there's optimism that they could get something done by. Thanks moving. So these Democrats and Republicans started talking together. And I'm not going to say it made them feel better about the situation, but at least they got them talking. And so now combined with some of the catalysts that are going on, the SNAP benefits. Obviously SNAP is not being funded until Wednesday. Assuming, according to the Treasury Secretary, you have SNAP benefits, you have air traffic controllers calling sick. The Transportation Secretary just said this morning that they're operating about 2 to $3,000, sorry, 2 to 3,000 air traffic controllers under what they O' Hare had a 2.5 hour 2 and a half hour ground stop. Newark's had several ground stops, JFK, LaGuardia, DCA, knock on wood. I'm flying this weekend. I really hope there's not a ground stop on Saturday. But the air traffic controller situation is getting worse and that is weighing on Congress people's minds. For example, DCA had a ground stop on Friday when a lot of senators were trying to fly home and especially just majority leaders. Thune, I think he was stuck at Reagan airport for three hours before he could get back to South Dakota. So and for what it's worth, if Congress is leaving, the Senate's leaving again on Friday. So if you're flying on Friday, maybe some air traffic controllers may decide to call in sick when the senators are over at Reagan. But you've got SNAP benefits, you got the ACA open enrollment. Those premiums have now gone up. People are beginning to look at it and they're seeing this prices of those healthcare subsidies being gone. You have the Virginia and New Jersey elections. If the Democrats win tomorrow, they could potentially say look, let's cash our chips in while we're high. People like our strategy. If the Republicans win big tomorrow, the Democrats may say look this isn't really working. Let's talk about an end game strategy. There's a lot of different catalysts that are happening this week and that ultimately impacts that. If those chit chats, what comes over appropriations, combined with these catalysts to the point that nobody wants travel snafus over Thanksgiving week, combined with the fact that the Senate is supposed to go on a 10 day recess starting on Friday and they don't want to be here in Washington. The House isn't here, the Senate doesn't want to be here. There are some folks saying that potentially the government could open later this week. I don't want to say it's going to but you know, in my course scenario and what I've been telling my clients is that it'll either open at the end of this week or probably the weekend right before Thanksgiving. Just because you know, again that Thanksgiving travel snafu, that's going to be something that's really weighing on policymakers minds. Former congressman, former OMB director Mick Mulvaney was actually on Bloomberg Television last week and he that back in the 2018, 2019 shutdown, the travel snafus were essentially the thing that they were keeping in mind when they were determining when the government would reopen so little bit cause of optimism here. But again, you know, I don't want to say it's going to happen. The last thing I want to talk about is really just this idea of, you know, when the government impact, we aren't really seeing it in the markets. We're continuing to not see it in the markets. We're not seeing it even in like defense industries or anything like that. But if we get into a situation where if the government shutdown goes beyond Thanksgiving, you're going to see President Trump really put on the pressure to end the filibuster when it comes to the budget. You know, President Trump said over the weekend that Republicans should get rid of the filibuster. They have control. They should do be able to do what they want. There is not that there aren't the votes in the Senate to do away with the filibuster. Senator Thune is against it. Senator Boozman's against it. Senator McConnell is against it. There's plenty of Republican senators who are against this idea because if the Republicans do away with the filibuster now, now filibuster won't exist when the Democrats come into power. And it's one of the last remaining checks and balances of having a minority party versus the majority party. So I don't think the filibuster is going to weigh unless the government shutdown goes into December. At that point, the pressure is going to be extremely difficult for Senator Thune to come back and say that we're going to extend this and we're going to keep extending this. So just keep that in mind. The filibuster is not going away right now, but if the shutdown goes into December, that pressure is going to ramp up tremendously. So I'm going to stop there. I'm going to say thank you very much for attending. We really appreciate it. If we can ever be of assistance, please don't hesitate to reach out and we'll talk soon.