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The fight to win the most unruly institution in Washington

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MIKE LAWLER, a Republican congressman representing New York’s 17th congressional district, considers himself a moderate. Mondaire Jones, a former congressman challenging Mr Lawler, also considers himself a moderate. Neither candidate in this swing race agrees with the other’s self-description. “At the end of the day, if it talks like a socialist, votes like a socialist—folks, it’s socialist,” Mr Lawler said in a recent debate. Mr Jones hit back, “If it talks like a fascist and supports a fascist for president of the United States for the third consecutive presidential election, then it’s a mini-fascist.”

That hyperbole probably won’t sway the contest’s outcome, which is driven more by national trends, but this mostly suburban district north of New York City will help influence which party will control the House of Representatives. Though Senate races get most of the attention, the country’s lower chamber also can make or break the next president’s agenda.

By this point in the election cycle, everyone knows that the presidential election will be decided in six or seven swing states, and that the electoral college gives states in the upper Midwest an outsize say over the future of the free world. The electorate that will determine what the next president will be able to do—the voters who will pick the House majority—are different. During the 2022 midterm elections Republican wins in California and New York, two states used to being ignored in presidential elections, gave the party its majority. Both sides agree that those states could make the difference again. The Economist’s forecast shows that seven of the 20 closest House races are in either New York or California, and are now held by Republicans like Mr Lawler.

Unlike the electoral college, which gives the Republican candidate an advantage worth about two points of the national vote share in this election, the House map is fair. Democrats used to complain about being at a disadvantage due to gerrymandering (the practice of politicians drawing district maps to their advantage). Now we estimate Democrats need only win by one point to have a 50:50 chance of controlling the House.

The tightness in national elections means that control of the House changes often. Between 1955 and 1995 Democrats had the majority. Since 1995 control has switched five times. But the House hasn’t flipped in the opposite direction to a presidential race since the 19th century, and both parties agree that it’s unlikely to happen this year. They also concur that whoever wins a majority will have a narrow one. That means that if Donald Trump wins, Republicans are quite likely to have a House and Senate majority (Republicans are favourites to win the Senate regardless of who takes the White House).

“We’ve expanded the map of competitive districts, which gives us more paths,” says a House Democratic operative, referring to how Joe Biden’s departure from the presidential race boosted down-ballot candidates. Even so, the Democrat believes that only around three dozen races are truly competitive, a view shared by Republican strategists: “I think this really comes down ultimately to a Republican or Democratic plus-five majority.”

Dial five for shutdown

The difference between a five- and ten-seat majority could have tremendous implications for public policy, particularly if Republicans win the House. Their current narrow majority made governing nearly impossible for the past two years, as the party’s nihilists had disproportionate clout. The latest fiscal year was nearly halfway over, for example, by the time Congress approved a permanent government-funding bill. Given that the next president’s ability to govern rides on the shape of Congress, it is perhaps surprising how little money is spent on House campaigns compared with Senate races (let alone the presidential contest).

Congressional Leadership Fund, the most important Republican super PAC for winning the House, raised $81.4m from July to September. House Majority PAC, the equivalent Democratic group, pulled in about $99m. In the Texas Senate race alone the two candidates have raised a total of $166m. The presidential candidates have mustered $1.4bn (campaign groups have gathered an additional $1.3bn). This reflects the fact that House races have been eaten by national politics. If either Kamala Harris or Mr Trump somehow does end up controlling the White House but not the House, it will be because of candidates who managed to defy political gravity in their small corner of the country.

New York’s 17th district is an example. There are almost 90,000 more Democrats than Republicans in Mr Lawler’s seat, which Mr Biden won by double digits in 2020. The candidate will have to buck national trends if he is to remain in Congress. On a recent Sunday, he visited New Life Pentecostal Church in New York’s Hudson Valley. Its pastor, Denochy Cowan, does not endorse candidates, but welcomes any to speak to his congregation, made up of immigrants from Antigua, Haiti, Ghana, Guyana, Jamaica and Kenya. Mr Lawler acknowledged that he may not have much in common with those in the pews, but said it’s OK because that’s what democracy is all about. Paraphrasing Ed Koch, a former New York City mayor, he joked, “If you agree with me on nine out of 12 things, vote for me. If you agree with me on 12 out of 12 things, have your head examined.”

Stay on top of American politics with The US in brief, our daily newsletter with fast analysis of the most important electoral stories, and Checks and Balance, a weekly note from our Lexington columnist that examines the state of American democracy and the issues that matter to voters.

Economics

Matt Gaetz vs the ethics committee

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On December 23rd a congressional committee released a lurid 37-page report alleging ethical misconduct by Matt Gaetz, the former maverick member of the House of Representatives who briefly stood as Donald Trump’s nominee for attorney-general. In a different time the investigation’s details about illicit sex and drug use would definitively end Mr Gaetz’s political career, and perhaps it will now. Yet he could soon test how far deviance has been defined down in America’s norm-smashing political era.

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Economics

At the state level, democracy in America is fracturing

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The residents of Bristol, Tennessee and Bristol, Virginia share a border, a downtown and even a Nascar speedway. But thanks to the quirks of American federalism, the 27,800 Bristolians who live in the Volunteer State reside in America’s least democratic state, while their 16,800 neighbors to the north live in one of the most democratic.

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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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