Investors Eyeing Big Issues as Washington Reopens

I've been in Washington doing policy and political analysis for more than 30 years. And one of the most common questions I get when I am traveling around the country talking to investors is something along the lines of, "How can you possibly stand it? All the craziness, all the political machinations and back-stabbing, the arguing, the wasted time, the bitter partisanship, the inability to produce solutions to real problems. Isn't it frustrating? Doesn't it drive you crazy?"

Well, the answers are yes and yes. But it's also never boring. These days, more than ever, it feels like there are about 15 consequential things that happen every single day in Washington. 

The last couple of weeks have proved that to be true once again. We've had a number of seismic political events, from the "mini-midterm" elections that saw major victories across the country for Democrats, to the Supreme Court wrestling with legal questions that could dramatically reshape tariffs, to a surprise retirement at the Federal Reserve that could have implications for the Fed's independence, to the end of the longest government shutdown in U.S. history. Like I said, never boring.

Welcome to WashingtonWise, a podcast for investors from Charles Schwab. I'm your host, Mike Townsend, and on this show, our goal is to cut through the noise and confusion of the nation's capital and help investors figure out what's really worth paying attention to.

This is a special edition of the podcast—we were planning to take a little break before the Thanksgiving holiday, but so much has happened in the last couple of weeks that I wanted to take time to offer some perspective on the biggest stories coming out of Washington.

And there is no bigger story than the end of the government shutdown, so let's start there. Last week, Congress reached an agreement to end the shutdown after 43 days—the longest shutdown in history. 

The deal includes three major elements. First, it re-opens the government via a temporary funding measure, a "continuing resolution," that runs through January 30 of 2026. All federal government functions are fully funded through that time.

But that also means that there's a new countdown clock ticking towards another shutdown. As crazy as that sounds, it's not beyond the realm of possibility that we could have another shutdown in January. Congress has about 70 days to figure out how to avoid that outcome.

But one major difference is that if there is another shutdown in early 2026, it will be only a "partial" shutdown, affecting some agencies, but not every agency. That's because of the second part of the agreement, which saw Congress approve three of the 12 appropriations bills to fund certain agencies.

It's easy to forget that the whole reason there was a government shutdown in the first place is because Congress had not passed any of those appropriations bills by the time the government's fiscal year began on October 1, something it is supposed to do every year. Failing to pass the bills by the deadline is not in and of itself particularly unusual—Congress has not passed all 12 bills by the deadline since 1997. But usually lawmakers pass one or more temporary extensions, which just keep funding going at the previous year's rate for a specific amount of time while negotiations on the new bills continue. Those temporary agreements can last a couple of days, a few weeks, even a few months. This year, however, there was no agreement, and that's why the government shut down on October 1. Congress simply hadn't passed anything to pay the bills and keep the lights on.

Last week's deal made some notable progress on that front. The three appropriations bills that are now signed into law are for agriculture, military construction and veterans, and the legislative branch. The agriculture funding bill was particularly important because that's home to the Supplemental Nutrition Assistance Program, SNAP, which provides food stamps and other assistance to about 42 million low-income families. SNAP benefits became one of the lightning rod issues of this shutdown when the program ran out of money in November. But full SNAP benefits have now been restored and are going out to recipients as scheduled.

The military construction and veterans measure ensures that veterans will continue to have access to health care and other services. And the legislative branch bill pays for congressional staff, the Library of Congress, and other entities that support Congress. 

All programs covered by these three appropriations bills are fully funded through the end of the fiscal year on September 30 of 2026—so they will stay open and operating no matter what happens in January.

The Senate is now taking the lead on developing a second package of four more appropriations bills, which is expected to include the year's funding for Defense and a host of other agencies, including the Departments of Commerce, Education, Health and Human Services, Justice, Labor, and Transportation. That's a big, complicated $1.2 trillion package, but Senate leaders are confident they can pass that bill in December. 

And the third element of the agreement to end the shutdown is some clarity for federal workers. It ensures that they receive back pay for the shutdown period, which was pretty clear in the law already, but this just makes it certain. It also ensures that federal workers can't be fired during the period from now until January 30. And it reinstates about 4,100 federal workers who were fired during the shutdown. 

But almost as important as what was in the agreement is what is not in the agreement. For most of the 43 days of the shutdown, Democrats had insisted that any plan to re-open the government had to be paired with an extension of the expiring subsidies that help lower health care costs for people who buy insurance through the Affordable Care Act. Those subsidies have been in place since 2021, but they're set to expire at the end of the year, resulting in big premium increases for about 22 million Americans as they look to purchase a health plan for 2026. 

In the end, though, Democrats did not get those subsides extended. They received a vague promise from Senate Majority Leader John Thune to hold a vote on extending the subsidies by the second week of December. Of course, there is no guarantee that an extension will pass the Senate. And even if it does pass the Senate, there is no guarantee that the House of Representatives will vote on it. 

It's a genuinely tricky issue. Many Republicans are open to extending the subsidies, but they would like to see some changes, like caps on the amount of income one can earn and still be eligible for the subsidies. Other Republicans are dead set against extending the subsidies at all and want to pass a major overhaul of the Affordable Care Act itself instead. Of course, Republicans have wanted to do that for more than a decade now but have never been able to coalesce around an alternative health care plan. President Trump recently floated the idea of changing the subsidies so that payments go directly to individuals, rather than health insurance companies, though it's unclear exactly how that would work.

With so many people impacted by the ending of the subsidies, this is likely to be a big issue in the next year's midterm elections. I'll be keeping my eye on bipartisan negotiations that are going on behind the scenes in the Senate about what that December vote to extend the subsidies would look like. The vote would need a 60-vote supermajority to pass the Senate, so Democrats would need to convince more than a dozen Republicans to join them. Right now, that seems like a long shot. The open enrollment period for purchasing health care insurance through the Affordable Care Act portal began on November 1 and runs through January 15. Even if Congress were to reach an agreement on the subsidies, it would be extraordinarily complicated to implement it and communicate changes to the public while the enrollment window is still open.

Looking back, I don't think there were any winners in this 43-day standoff. But historically, no one ever wins these shutdowns. There have been eight shutdowns of more than a day or two since the Ronald Reagan era in the 1980s. And in all eight cases, the party that did the shutting down won very little, politically or policy-wise. But the party in charge of Congress, historically, got more of the blame. In other words, both sides lose. 

And that's pretty much what happened in 2025. Democrats did not get what they wanted from the shutdown, but they did succeed at spotlighting a critical health care issue. Republicans think Democrats capitulated, but polling has consistently found that voters blame Republicans for the shutdown more than they blame Democrats, though some of the polling has been close. 

The end of the shutdown has also caused deep divisions within the Democratic Party. At the end of the day, it was seven Democrat senators and one Democrat-leaning independent senator who broke with the rest of the party and voted to end the shutdown. Many Democrats are furious with their colleagues for doing so. But it's not clear that Democrats would have won any better deal if they'd held out longer. 

And the pain was increasing for federal workers who had already missed three paychecks, for SNAP recipients who stopped getting much-needed food assistance, for ordinary citizens who just wanted the federal government to work. The eight senators who broke with their party made a calculated decision that prolonging the shutdown was only going to increase the pain for their constituents and wasn't likely to result in a different outcome on the health care issue. 

Interestingly, while there was general public discontent with the shutdown, including frustration over the lack of government services, the expiring health care subsidies, unpaid federal workers, and aid for the poorest Americans, the reality is that the biggest catalyst for resolving the shutdown just may have been the worsening air travel situation. With air traffic controllers and TSA agents staging sick-outs to protest being forced to work without pay, the administration reduced air traffic by up to 10% at 40 major airports earlier this month, causing thousands of delayed and cancelled flights. With Thanksgiving week looming, it wasn't ever realistic to think Congress would allow holiday travel to be so disrupted—a resolution to the shutdown had to come before that happened. And, indeed, with the government reopened and airport staffing issues dwindling, the Transportation Department lifted all flight restrictions on November 17, ensuring that flight operations should be normal across the country for the Thanksgiving holiday.

So in the end, the deal that ultimately opened the government is pretty much the same deal that could have been had on Day 20 or Day 10 or perhaps even Day 1 of the shutdown. Neither side should feel good about it. 

There is one other lingering effect from the shutdown that matters to investors, and that's the lack of reliable economic data. The Bureau of Labor Statistics will publish the September jobs report on November 20—that's the report that was ready to be released in early October but was delayed once the government shut down.

But the White House said that there likely won't be any October jobs report, nor an October inflation report, since furloughed employees were not available at the time to field surveys or collect the data. Other reports on consumer spending, housing, and manufacturing will also be impacted. And when the data finally does come, it's likely to be incomplete and based partially on estimates, because some of the information just can't be re-created. Labor data, for example, includes a household survey. But it's unlikely that sending out a survey asking workers what they were doing six weeks ago is going to produce much useful data. Most economists believe it will be January before we have a reliable picture of what's going on in the economy.

The lack of data will also make things tricky for the Federal Reserve, especially with the Federal Open Markets Committee, the FOMC, set to meet on December 9 and 10 for its final monetary policy meeting of 2025. Before the shutdown, the Fed was already struggling with conflicting economic data that showed a softening jobs outlook at the same time as inflation was continuing to creep up. Now the picture is even less clear.

At its last meeting in late October, the Fed cut the fed funds rate by 25 basis points. But the Fed was divided. There were two dissenting votes, and they were in opposite directions. Jeffrey Schmid, the president of the Federal Reserve Bank of Kansas City, urged the Fed to hold rates steady last month. The newest Fed governor, Stephen Miran, who was confirmed in September to fill a term that expires at the end of January, voted for a larger, 50-basis-point cut. Fed Chair Jerome Powell sent a clear message to the markets in his post-meeting news conference on October 29, when he said that "another rate cut in December is not a foregone conclusion, far from it."

Since the October meeting, several other voting members of the FOMC have publicly said that they are uncertain about whether to vote to cut rates again in December. 

As a result, market expectations for a rate cut next month have plummeted. According to CME's FedWatch tool, which tracks fed funds futures activity, traders thought, as this week began, that there's about a 44% chance of a rate cut next month. A month ago, they believed there was a 94% chance.

The Fed also continues to be buffeted by personnel drama that threatens to overshadow the monetary policy drama. The Fed got a surprise announcement last week from Raphael Bostic, the president of the Atlanta Regional Fed bank, that he will retire at the end of his term in February. Bostic is only 59—he could have served six more years before hitting the Fed's mandatory retirement age. 

Bostic serves as one of 12 regional bank presidents. Together with the seven Fed governors, they form the 19-member FOMC that makes interest rate decisions. But only 12 of the 19 are voting members—the seven Fed governors, the president of the New York Fed, and then four of the other 11 regional bank presidents are voting members for a year on a rotating basis. 

Keep in mind that, unlike the seven Fed governors, who are nominated by the U.S. president and confirmed by the Senate, the regional bank presidents are chosen via a search process conducted by their respective bank board of directors. But here's where things get interesting. Every five years on March 1, the seven Fed governors have to vote to confirm the 12 regional bank presidents. This is normally a non-controversial box-checking exercise, no drama whatsoever. The next one of those votes comes up in 2026. Some Fed observers who are concerned about the Trump administration's attempts to undermine the Fed's independence have worried that this vote may give the administration more control over the full board. Here's why.

Right now, the Fed has three members who were nominated by President Trump—Vice Chair for Supervision Michelle Bowman, Christopher Waller, and Stephen Miran. Miran, who arrived at the Fed in September to fill in the few remaining months of a term that expires in January, has come under scrutiny because he is also the head of the White House Council of Economic Advisors and chose to take a leave of absence from that position rather than resign—a controversial decision that raises questions about his ability to be independent at the Fed. His dissenting votes at both of the FOMC meetings since he took office, and his call for 50-basis-point cuts, have exacerbated concerns, among some observers, that he is doing the bidding of the president, who has called on the Fed repeatedly this year to dramatically lower rates. 

In August, the president, for the first time ever, tried to fire a Fed governor, Lisa Cook. If successful, he would have the ability to nominate a new Fed member, which would mean a majority of the Fed governors will have been appointed by Trump. And that, in turn, would allow that majority to potentially reject one or more of the Fed regional bank presidents at the normally routine vote early next year and urge the regional bank directors to appoint leaders more in line with the president's views on rate cuts. For Fed watchers worried about the eroding independence of the Fed, this is a major concern.

Now I want to be clear, there are a lot of dominoes that would have to fall to make this a plausible outcome. And the biggest domino of all is the attempt to fire Lisa Cook. So far, two lower courts have ruled that she could remain at the Fed while her case plays out. Last week, the Supreme Court announced that they would hear oral arguments on January 21 on whether the president has the right to remove her from the Fed. That means Cook will stay as a voting member for the December Fed meeting and likely for at least the first two or three meetings in 2026 while the court decides her fate. But the outcome of her case has the potential to dramatically change more than 100 years of Fed independence. 

Speaking of big court cases, investors are keeping their eyes on another one that has potentially major ramifications for the markets and the economy. Last week, the Supreme Court heard oral arguments over the legality of much of the president's tariff policy. The highly anticipated session lasted more than two and a half hours—unusually long for a case at the high court, which typically allocates 80 minutes for arguments and often keeps the debate at one hour. 

I've talked about this several times on the show, but it's worth mentioning again that the case is not about whether tariffs are good economic policy or bad economic policy. At issue is whether Trump exceeded his authority in using a 1970s law, the International Emergency Economic Powers Act or IEEPA, to impose the so-called "reciprocal" tariffs on imports from about 100 countries, as well some of the tariffs imposed on imports from Canada, China, and Mexico as part of the president's effort to reduce the flow of fentanyl from those countries into the United States. A lower court in May ruled that the president had exceeded his authority and an appeals court upheld that decision in August. Supreme Court justices seemed skeptical of the administration's arguments earlier this month, raising the possibility that the bulk of the president's tariffs could be ruled illegal. Should the Supreme Court agree with the lower courts, it could trigger a complicated refund process for more than $100 billion in tariffs paid to date. That would be a big blow to the president's economic agenda, as he has touted tariffs as a critical revenue raiser that could eventually be used to reduce the federal deficit.

The timing for a decision is uncertain, though some court watchers have said that early December is the soonest a decision could be rendered. Others think early 2026 is a more realistic timetable. 

It's important to note, however, that the administration does have other tools available to it for imposing tariffs, regardless of what the court decides in this case. There is a different emergency authority, for example, under which the president can impose tariffs of 15% for up to 150 days—but that would actually result in lower tariffs, since the current tariff rates range as high as 50% on imports from some countries. And the sector tariffs that are in place—including those on steel, aluminum, copper, cars and car parts, pharmaceuticals, furniture, and more—are not part of this case. Those tariffs went through a "regular" process, which includes a study and a report by the administration, a proposal, a public comment period, and then finalization. There are other sectors and products in that queue. So no matter what happens at the Supreme Court, tariffs are not going away anytime soon.

I wanted also today to take a couple of minutes to share some thoughts on the implications of the 2025 election results from a couple of weeks ago. There is no question it was a big night for Democrats. In New Jersey, Congresswoman Mikie Sherrill was elected governor, winning her race by 14 points in a state that just a year ago favored Kamala Harris by just six points. Virginia elected its first-ever female governor, with former Congresswoman Abigail Spanberger winning by nearly 15 points. In Pennsylvania, three Democrat-leaning justices on the state Supreme Court won their races, preserving their majority. In California, voters overwhelmingly approved a ballot measure to redraw the state's Congressional district lines, which could yield as many as five new Democrat members of Congress after next year's elections. And in New York City, the 34-year-old self-described democratic socialist Zohran Mamdani was elected mayor, winning more votes than any candidate in the city since 1969. 

It was a reminder that Republicans struggle without Trump on the ballot. The president himself posted on his social media feed about this on Election Night. Trump is a political unicorn, and the coalition of voters he built to win the 2024 election cannot necessarily be counted on to vote Republican in other years. This will be a huge issue as we head toward next year's midterms.

It was also a reminder of the political truism "It's the economy, stupid." President Trump was swept back into office in 2024 by focusing on the economy, particularly high inflation. But that advantage has disappeared in just a year. In a recent NBC News poll, just 34% of voters said the president had lived up to their expectations when it comes to the economy, and just 30% said they approved of his handling of inflation and the cost of living. In these most recent elections, Democrats succeeded in focusing relentlessly on the affordability issue.

All that said, I think we should all be careful of reading too much into this year's election results. The scope of the Democratic victories makes it hard to see the 2025 election as anything but a rebuke to the president and his policies. But off-year elections tend to be unique to their local circumstances. And there were only a handful of states that had major statewide races. So extrapolating meaning for the 2026 midterms is hard—it's a long way between now and then, and we've seen how quickly things can change in politics these days. There is no question—Democrats feel some momentum, and momentum matters in politics. But I'm not changing my outlook for the 2026 midterms: Democrats have a slight advantage for recapturing the majority in the House of Representatives, but Republicans remain favored to hold on to their majority in the Senate.

Next November, all 435 seats in the House of Representatives will be on the ballot, while 35 of the 100 Senate seats will be up for election. One interesting trend I'll be keeping my eye on is the number of members of Congress who are choosing not to run for re-election in 2026. As of mid-November, 36 representatives and eight senators have announced they will not seek re-election. That's a high number for this time of year, but I expect it will go quite a bit higher. Politicians tend to use the holidays to reflect on whether they want to run again, and there's often a flurry of retirement announcements in January.

Some of these recent announcements are very high-profile, including the decision by former Speaker of the House Nancy Pelosi, a Democrat from California, to step aside next year after 38 years in politics. House Budget Committee Chairman Jodey Arrington, a Republican from Texas, is leaving Congress after just 10 years at age 53, saying that he's looking for other challenges. And Maine Congressman Jared Golden, who has the distinction of being the Democrat on Capitol Hill who represents a redder district than any other Democrat, announced that he will not run for re-election in 2026 either. Golden, one of the younger members of the House at just 43, wrote an op-ed explaining his decision, saying he had "grown tired of the increasing incivility and plain nastiness" dominating today's politics. He also cited the risk of political violence as a big concern, saying that he doesn't fear losing an election, but that he now dreads the prospect of winning. Whatever you may think of the congressman's politics, that's just not a good thing for the country.

There are lots of reasons members of Congress decide not to run for re-election. Some are running for another office, like governor of their state. Some are old and are just retiring. But at least some are just finding the job to be increasingly miserable and thinking that their time could be spent more productively working outside of the federal government. It'll be interesting to see where the retirement count stands after the holidays. 

Finally, I couldn't let this episode go by without taking a moment to raise a glass to the good old U.S. penny. Last week, production of pennies ended after 232 years, with a final pressing at the U.S. Mint in Philadelphia. President Trump signed an executive order ending the production of the penny back in February, noting that it costs nearly four cents to produce the one-cent coin, whose purchasing power has dwindled to just about nothing. While no new pennies will be produced, we're not in danger of running out of the coins anytime soon—between 250 and 300 billion pennies remain in circulation. The final few coins produced last week in Philadelphia are scheduled to be auctioned off next month—and some coin experts have estimated that the bidding could soar to as high as $5 million. 

But the end of the penny has raised real concerns for retailers and banks. There's no clear guidance on how retailers should handle the rounding of prices to the nearest nickel—and how that will affect sales tax calculations. And there's concern about customer confusion, since rounding only matters for cash transactions—paying to the exact penny will still continue to be the case for electronic payments. But there are state and local laws that prohibit retailers from charging different prices for cash and non-cash transactions—so rounding to the nickel could be a violation of those laws.

Banks will face similar issues when it comes to things like cashing checks—how do they handle that if there is a penny shortage at some point? Groups representing both stores and banks have called on Treasury to issue clear standards for rounding. And there is even a movement toward having Congress pass a law outlining how this will work. Last summer, a bill setting standards for how transactions will work in the post-penny era passed the House Financial Services Committee, but it has yet to be voted on by the full House of Representatives. With the penny officially hitting its expiration date, efforts on Capitol Hill to provide some rules of the road may get a boost.

Well that's all for this week's episode of WashingtonWise. We'll be off until December 11, when Kevin Gordon will join me to look ahead at what may be in store for the markets in 2026. Take a moment now to follow the show in your listening app so you get an alert when that episode drops and you don't miss any future episodes. And don't forget to leave us a rating or a review—those really help new listeners discover the show. 

For important disclosures, see the show notes or schwab.com/WashingtonWise, where you can also find a transcript. 

I'm Mike Townsend, and this has been WashingtonWise, a podcast for investors. Wherever you are, stay safe, stay healthy, have a very Happy Thanksgiving, and keep investing wisely.