The midterm results have given way to a busy Lame Duck session. Lawmakers are rushing to pass legislation ahead of the new Congress. Early signs of division within the Republican Party, as well as the negotiating positions of both parties on government funding, indicate a likely crisis over the debt ceiling in mid-2023 as well as increasing politicisation of ESG.
- Republicans are divided, with members in the House and Senate publicly disagreeing over strategy and policy. A lack of internal cohesion will create further obstacles to any legislative progress.
- The right of the Republican House is using aggressive tactics to gain influence over the House Speaker race. The narrow majority in the House means any Speaker will need to gain the support of this wing of the party to win election.
- A House Speaker who requires support from the right of the party to remain in post increases the likelihood of a crisis over the debt ceiling. House Republicans will put forward measures that will be rejected by Senate Democrats and vice versa.
- The most likely outcome is a debt ceiling crisis resolution close to the so called X-date, after market consequences have become apparent. As in 2011 and 2013, market volatility is likely to galvanise policymakers into reaching a solution.
- A split Congress will prevent any partisan legislation passing into law. Despite this, House Republicans will use control of committees to launch investigations into ESG investing and the regulatory actions of the SEC. It is likely that ESG will become increasingly politicised ahead of the 2024 election.