By Aaron Ranck, Senior Fellow, and Tenley Smith, Program Associate
As leaves fall, the holidays approach, and a new administration starts measuring curtains, the Hill is still wrapping up a busy end to this Congress. Amid a flurry of nominations and maneuvering over the next Administration’s agenda, change remains the only constant in Washington right now. As veteran Republican pollster Bruce Mehlman has noted, we have had eleven change elections since the year 2000, where leadership of the House, Senate, and/or White House has changed. Voters are ousting incumbents and electing for change in the United States, Europe, Japan, India, and democracies around the world.
The question on our minds as we look toward Donald Trump’s return to the White House is what this age of disruption might mean for international financial institutions and the international monetary system. Will campaign promises of across-the-board tariffs materialize? What will the next Administration do about a rapidly strengthening dollar? Can Treasury nominee Scott Bessent pull off his daring promises so far?
These are some of the macro questions we can expect Senators will want to probe in their confirmation hearings for Mr. Bessent, and we will all be paying keen attention to see what we can glean from the responses. But what can we expect to happen between now and then? President Biden remains in office for a few more months and Congress has several important items on its agenda. Here’s a quick look at what we might see in the next few months.
Will a Lame Duck Congress tackle IMF Quota Reform?
The Biden Administration requested Congress authorize a $55 billion quota increase in March, along with authorization to use previously appropriated funds that would cover the subsidy costs of up to $21 billion in new lending from the IMF’s expanded concessional financing window, the Poverty Reduction and Growth Trust. Neither the quota increase nor any appropriations were included in the House and Senate draft appropriations bills, perhaps in part because of esoteric budget scorekeeping differences. While Congress is unlikely to complete the fiscal year 2025 appropriations process before Christmas, there is nevertheless a possibility quota reform could hitch a ride on another legislative vehicle before the end of the year. Expect the IMF Managing Director and senior management to be working overtime reaching out to key leaders in the new Congress and Administration to ensure the quota package is well understood.
A FY25 Budget Hangover
Through a bipartisan effort in late September, Congress was able to pass a stop-gap funding bill and avoid a government shutdown. This bill funds the government at current FY24 levels through December 20 and postpones the broader fight over individual spending bills. With Republicans now achieving unified control of the government in 2025 (albeit with a very thin margin in the House), the current Congress is very likely to push the appropriations process past the current December 20 deadline and into the new year, when Republicans will be able to put a greater stamp on their funding priorities. At the same time, Congressional leaders will want to wrap up the appropriations process by the arrival of spring so that they can focus on nominations and prepare for the Trump Administration’s budget request for the next year.
Given President Biden does not leave office until January 20 and statute requires the president to submit a budget to Congress “on or after the first Monday in January but not later than the first Monday in February”, how can an incoming president possibly meet this requirement? Past practice has been for the outgoing president to submit a budget to Congress immediately before leaving, and the incoming president has typically revised that budget to better align it with his administration’s priorities. We can anticipate the new president to present a broad economic plan in his first joint session of Congress in February, followed by an overview budget document not long after, as he did in 2017, with supplemental budget documents coming closer to summer.
IDA Pledging
One final big question remaining for the Biden Administration is on funding for the next International Development Association (IDA) replenishment cycle. IDA donor countries will be meeting in South Korea in early December to pledge resources to IDA’s 21st replenishment. The US commitment was recently announced by President Biden to be $4 billion over three years. This $500 million increase from the last cycle would almost certainly mean the US retains the distinction of being IDA’s largest donor in this cycle amid a tightened aid environment.
We are unlikely to hear more about this pledge until the new Administration takes office in a few months, and if the new Administration follows typical past practice, they will request approximately one third of the pledged amount in the fiscal year 2026 budget request next year.
A New Administration’s Potential Priorities
Many of the administration’s priorities will come into sharper focus during Congressional nomination and budget hearings next spring, so stay tuned to the nominations in the Senate Foreign Relations and Banking Committees, as well as budget hearings in the House Financial Services and House and Senate Appropriations Committees. We are focused here at BWC on the international financial institutions, but with reauthorization of the 2017 Tax Cuts and Jobs Act, a debt ceiling vote, USMCA reauthorization, farm bill, immigration issues, and many other items in the legislative docket, the next Congress will certainly be a very busy and productive one.