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Democrats suffer in statehouse races, too

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In February Democrats in Wisconsin celebrated when Tony Evers, the Democratic governor, signed into law new maps for the state legislature and Senate. The maps were the result of Democrat-aligned judges becoming the majority on the state Supreme Court, and the signing undid 13 years in which Republicans won lopsided majorities on thin vote margins. It constituted a “sea change”, said Ben Wikler, the state’s Democratic Party chairman, and on November 5th voters would have a real chance to throw out their Republican legislative leaders for the first time.

They didn’t. With several seats still undetermined, Republicans controlled 52 of the 99 seats in the state legislature—a big drop from their previous 64, but still a solid majority. They lost their supermajority in the state Senate, but retained control. Wisconsin reflected dashed hopes for Democrats down-ballot across America. Whereas in 2022 four state legislatures flipped to Democratic control, this time Republicans clawed some back. Overall, the result was a slight increase in divided government.

In Michigan Democrats lost their narrow trifecta, and that seemed likely in Minnesota as well, where two races are heading for recounts. In Pennsylvania, where the governor is a Democrat and his party controlled the House but not the Senate, they were on track to lose it. In New Hampshire, in one of the few competitive governor’s races, Kelly Ayotte, a Republican, beat her Democratic opponent comfortably, which means the party should retain its trifecta. Democrats also seemed unlikely to make good on hopes of taking the Arizona House of Representatives for the first time since the 1960s.

The news for Democrats was not universally bleak. They won the governorship of North Carolina, where Josh Stein defeated Mark Robinson, who was revealed to have described himself as a “black Nazi”. They also won the offices of the lieutenant-governor, attorney-general and superintendent of public schools and broke the Republican Party’s supermajority there, meaning that the state’s Republicans will have to negotiate with Mr Stein if they want to get legislation passed over his veto. Democrats also held onto their supermajorities in the state legislatures in New York and Illinois, despite the surges for Donald Trump in the presidential races there. Republicans did not add any states to the 22 they already completely control.

What does it mean? State governments are powerful. In Minnesota and Michigan, for example, taking control of governments in 2022 allowed the Democratic governors to pass swathes of legislation—legalising cannabis, introducing free school meals, expanding abortion rights, tightening gun-control laws and giving more power to trade unions. Had Democrats held or increased the number they controlled, they might have been able to mitigate some of Mr Trump’s national policies. Instead, the governors of those two states, Gretchen Whitmer and the losing vice-presidential candidate, Tim Walz, will probably finish their terms with fewer bills to sign.

Elsewhere, expanded Republican majorities may lead to more aggressive legislating. In Texas Greg Abbott, the governor, said he now has “more than enough votes” to pass a school-voucher programme, which he has tried and failed to get through the legislature, stymied by rural Republican holdouts. But Democratic strategists in several Republican-dominated states say the losses could have been far worse: with Joe Biden at the top of the ticket, some expected a “tidal wave” of new supermajorities. Chaz Nuttycombe, the president of State Navigate, which crunches data on state races, reckons that this year there may well have been more ticket-splitting, where voters chose Mr Trump and their local Democrat, than in 2020.

Polling from Pew published in May showed that voters consider the inability of Republicans and Democrats to work together to be the second-worst problem facing America, behind only inflation (which is now easing). In recent decades divided government had in fact been receding. The bounceback is modest, but division is going to be more entrenched.

Economics

BOI Reporting and the impact of the recent Federal Injunction

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The Corporate Transparency Act (CTA) is a legislative measure designed to enhance financial transparency

The Corporate Transparency Act (CTA) is a legislative measure designed to enhance financial transparency and mitigate risks such as money laundering, terrorist financing, and other illicit financial activities. The CTA aims to close loopholes and create a fairer business environment by requiring certain entities to disclose their beneficial ownership information. However, recent legal developments have temporarily impacted compliance requirements, bringing attention to the act’s ongoing litigation and implementation.

Federal Court Decision and Its Implications

On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al. (No. 4:24-cv-00478). This injunction temporarily halts the enforcement of the CTA, specifically its beneficial ownership reporting requirements. Additionally, the court order stays all deadlines for compliance.

As a result, reporting companies are currently not obligated to submit beneficial ownership information (BOI) reports to the Financial Crimes Enforcement Network (FinCEN). During the injunction, these entities are also shielded from liability for non-compliance with CTA mandates.

Despite this pause, FinCEN has clarified that companies may still voluntarily submit their BOI reports. This voluntary reporting option remains available for businesses that wish to align with the CTA’s transparency goals.

Overview of the Corporate Transparency Act

The CTA mandates that certain entities provide information about their beneficial owners—individuals who own or control a business. The act is intended to increase transparency, enhance national security, and reduce the anonymity that can facilitate financial crimes.

While the CTA has garnered support for its objectives, it has also faced legal challenges questioning its constitutionality. Courts in different jurisdictions have issued varying rulings, with some upholding the law and others granting temporary injunctions. For example, district courts in Virginia and Oregon have ruled in favor of the Department of the Treasury, asserting the CTA’s alignment with constitutional principles.

Compliance During the Injunction

Currently, the federal injunction exempts businesses from mandatory BOI filing requirements nationwide. This temporary halt will remain in place until further developments, such as a decision by an appellate court or a reversal of the injunction.

In response to the ruling, the Department of Justice, representing the Department of the Treasury, has filed an appeal. While the case proceeds through the legal system, FinCEN has confirmed its compliance with the court order.

Looking Ahead

The legal proceedings surrounding the CTA highlight the evolving nature of financial regulation. As courts continue to deliberate, businesses should monitor updates to remain informed about their obligations. By staying informed and prepared, businesses can effectively manage their compliance responsibilities and contribute to efforts that promote financial integrity and transparency.

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Economics

After a chaotic scramble, Congress strikes a budget deal

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Donald Trump is the most powerful Republican politician in a generation, but the president-elect is still no match for the most nihilistic members of his own party. The budget chaos that unfolded on Capitol Hill as the Christmas break approached is only a preview of the difficult realities Mr Trump will face when he starts to govern next month.

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Economics

Why Congress is so dysfunctional

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Budgetary chaos is a sign that governing will be harder than Donald Trump might assume

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