Key Takeaways



• The Senate struck a deal to pass five of the six remaining appropriations bills and end the threat of a long-term government shutdown. 

• Those five bills will be funded through September 30, 2026.

• Funding for the Department of Homeland Security (DHS) will be separated from the spending bill and extended for only two weeks.

• This plan will isolate DHS spending while Congress and the White House try to negotiate a deal on Immigration and Customs Enforcement (ICE) spending. 

• A deal on DHS funding will be difficult to reach but the agency will still have resources to operate if spending expires in two weeks.

• The President selected Kevin Warsh as his nominee to replace Fed Chairman Jerome Powell. 

• Warsh’s successful confirmation is widely expected on Capitol Hill.

• Senate Republicans have apparently given their “last best offer” to extend expired subsidies under the Affordable Care Act.

• President Trump signaled that more federal aid may be coming for farmers. 



• The government announced licenses for U.S. oil companies to operate in Venezuela. 

White House and Congress Reach Agreement to Fund Government

Late Thursday, the White House and Senate Democrats came to an agreement to avert another prolonged government shutdown. As part of the agreement, five of the remaining six FY 2026 appropriations bills (Defense, Financial Services, Labor-Health-Education, State-Foreign Operations, and Transportation) will be separated from the bill funding the Department of Homeland Security (DHS).

The larger funding package will pass in the Senate later today and then must go back to the House before it can be sent to the President’s desk and signed into law. President Trump’s support for the agreement is expected to convince even reluctant Republicans in the House to vote for the measure. There are reports the House may consider the bill under suspension of the rules (requiring a ⅔ vote) to avoid any amendments and speed up passage. The House is, however, currently out of session, and with parts of the country expecting winter weather this weekend, they are not expected to return to Washington until Monday. 

Since the bill must wait for House approval, there will be a short, two-day government shutdown over the weekend. Agencies impacted by the spending lapse will operate using available resources and the impact of which is expected to be minimal.  

A Difficult Path to Long-Term DHS Funding

As we predicted on Monday, the DHS portion of the bill will be separated and funded subject to a two-week continuing resolution (CR). During that time, Democrats and Republicans on the Hill will continue negotiations in light of the shootings of Alex Pretti and Renee Good (more on Democrats’ demands below). Should it pass, the CR would go through February 13, right before the House and Senate go on a week-long recess. 

Republicans and Democrats will have a difficult task ahead of them to find agreement on DHS funding. Senate Democrats released a list of policies that they insist must be included in the Department of Homeland Security (DHS) funding bill in order to secure the Democratic votes needed to pass the measure. The policies could include:

• Creating a uniform code of conduct for agents with independent enforcement.

• Prohibiting Immigration and Customs Enforcement (ICE) agents from wearing masks and requiring agents to wear body cameras.

• Banning roving patrols by requiring warrants (White House border czar Tom Homan said on Thursday that ICE agents in Minnesota would focus on “targeted enforcement operations”).

Opening the DHS bill for further negotiations will make the bill harder to pass. Conservatives are likely to have policy demands of their own, including ending federal funding for sanctuary cities. The issue of ICE funding is politically incendiary and Members on both sides of the aisle are already making contradictory demands. 

This process increases the chances of a DHS funding lapse or another CR after two weeks. With the rest of the government funded through September 30, 2026, DHS funding will expire right before a week-long recess in February. As we have noted, however, the agency was given more than $160 billion in additional appropriations last summer and 95% of its employees would be deemed essential if funding expired. 

Trump Announces Kevin Warsh as Federal Reserve Chair Nominee

Early Friday morning, the President announced that Kevin Warsh would be his nominee to serve as the next Federal Reserve Chairman when current Chair Jerome Powell’s term ends in May. Warsh previously served on the Board of Governors, originally nominated by former President George W. Bush in 2006.

During his career, Warsh been critical of what he perceived as overreach by the Fed. This includes criticizing the Fed’s quantitative easing program in 2011, and he resigned that year. Some observers this morning have suggested that Warsh’s history of criticizing the Fed suggests his chairmanship will be independent of White House influence. We believe that Warsh would not have been nominated unless he already pledged allegiance to the President’s view of Fed policy. We expect him to do what President Trump wants when it comes to lowering interest rates. 

Warsh will face at least one roadblock to his nomination - Senator Thom Tillis (R-NC), who serves on the Senate Finance Committee who must first approve the nomination, said he will block any Federal Reserve nominee’s path until the Department of Justice probe into Powell is resolved. Sen. Tillis’ said his planned opposition is not based on Warsh’s qualifications, which indicates that the Senate believes he is an acceptable candidate. We expect that Warsh will easily get the necessary votes for confirmation. 

Powell has not yet indicated whether he will serve out the remainder of his term as a governor, which goes through January 31, 2028. 

Also this week, and as expected, the Federal Reserve voted to hold interest rates steady, citing an improving economic situation and stabilizing unemployment rate. The two dissenting votes came from Stephen Miran and Christopher Waller, who favored a rate cut. 

Last-Ditch Effort to Extend ACA Subsidies

Bipartisan discussions around extending the expired Obamacare subsidies took a back seat to spending negotiations this week but discussions were occurring behind the scene. Senator Bernie Moreno (R-OH), one of the lead negotiators on a bipartisan Senate solution, said that Republicans have made their “best and final” offer to Democrats. Numbers from the Centers for Medicare and Medicaid Services (CMS) show that approximately one million fewer Americans signed up for Obamacare this year amid the expiration.

OFAC Issues Licenses for U.S. Oil Companies to Operate in Venezuela

On Thursday, the Office of Foreign Assets Control (OFAC) of the U.S. Treasury Department issued a general license allowing U.S. oil companies to operate in Venezuela. It specifies that all contracts must be governed by the laws of the U.S. and disputes must be resolved in the U.S. It specifically excludes transactions involving entities in Iran, North Korea, or China. 

President Trump Signs EO on Cuba

The President signed an executive order on Thursday declaring a national emergency and invoking the International Emergency Economic Powers Act (IEEPA) to implement tariffs on products from “any other country that directly or indirectly sells or otherwise provides any oil to Cuba.” 

President Trump Touts Policies to Help U.S. Farmers

Earlier this week, President Trump traveled to Clive, Iowa, to highlight the economy and Administration policies to support American farmers. Farmers have faced major hardships due to inflation and retaliatory tariffs placed on U.S. food products. President Trump realizes that rural voters are a key constituency and will be important in the effort to hold the Senate.

The President touted policies he’s implemented so far to support American farmers during his visit, including.

• Direct Aid: The President reminded Iowa voters that the White House recently provided $12 billion in direct payments to farmers through the USDA. 

• Cutting Agricultural Regulations: The President talked about eliminating dozens of burdensome regulations that were crushing farmers, including the diesel exhaust fluid requirement. This saves farmers more than $1 billion per year alone. 

• Ending EV Mandates and Credits: The President also highlighted his work with Congress to remove an electric vehicle mandate that would have obliterated the ethanol industry, which is essential to American farmers.

• Ethanol and E15: The President reiterated a promise to support year-round E15, and encouraged Congress to take action. He noted that Congress is close to reaching an agreement, and he expressed faith in Republican leadership to get it done.

• Reducing Trade Deficits: The President highlighted the rebalancing of trade with foreign nations, noting he’s reduced the monthly U.S. trade deficit by 77%. 

• Achieving Trade Deals to Promote U.S. Farm Products: President Trump talked about opening up new markets for farmers, including:

• Japan will allow the U.S. to supply up to 100% of automobile ethanol.

• The United Kingdom will import nearly $1 billion of ethanol.

• Australia will allow U.S. beef into its market for the first time in over 20 years.

• China has agreed to purchase over $40 billion of U.S. soybeans.

• The European Union will increase purchases of U.S. pork, dairy, and soybean oil. 

The President’s visit underscores both the importance of rural support to President Trump and the negative impact that tariffs are having on this domestic sector. In addition to the policies announced, the Trump Administration may try to provide more benefits to American farmers this year, including: 

• More direct payments to offset impact of tariffs and inflation. 

• Updating and increasing commodity reference prices.

• Expanding crop insurance. 

• Asking Congress for direct, emergency appropriations in potential reconciliation bill.

U.S. Readies Military Action Against Iran

President Trump has warned Iran that time is running out for them to agree to a deal to halt its nuclear program. The U.S. has sent a fleet of ships to the Middle East in preparation for potential action. Although no decision has been made, Secretary of War Pete Hegseth said on Thursday that the Department is ready to “deliver whatever this president expects.” 

What to Watch Next Week

• The next two weeks will be busy for Congress, as they attempt to iron out an agreement on both DHS funding, and make a last attempt at extending expired ACA subsidies. 

As always, if you have questions about these or any other policy topics and would like to schedule a meeting or call with Marc and Andy, please email us.