Midterms 2026: Democrats Take Congress, Trump Keeps the Veto

Leadership selections in the coming weeks will help clarify the agenda before the 120th Congress convenes on January 3, 2027. Committee and subcommittee assignments will further define legislative and oversight priorities as the transition proceeds.

The Lame-Duck Session: A Crowded Agenda Before Control Changes
Republicans retain control for the remaining weeks of the 119th Congress, but the election changes both parties’ incentives to reach year-end agreements. Democrats may prefer to defer major decisions until they hold the majority, while Republicans face pressure to secure legislative wins before losing control. Republican leadership contests, internal disagreements and poor attendance by outgoing Members could further complicate negotiations.

Government funding is the immediate deadline. The current continuing resolution expires on December 11, requiring lawmakers to complete FY2027 appropriations or approve another extension to avoid a government shutdown. A short-term extension could carry negotiations into early 2027, giving incoming Democratic majorities greater influence over the final agreement. Republicans may instead seek to settle spending levels and policy disputes before the transition.

The administration’s proposed $1.5 trillion defense funding package faces increasingly uncertain prospects. Pentagon officials and congressional appropriators are reportedly preparing for funding closer to $1.1 trillion as Republican divisions threaten the proposed $350 billion reconciliation measure. Potentially affected priorities include munitions procurement, F-35 purchases, space capabilities, and investments in drones, autonomy and robotics, including the planned Autonomous Warfare Command (AUTOWARCOM). Although reconciliation remains possible during the lame-duck session, failure to enact the measure would leave these initiatives competing for funding through bipartisan appropriations negotiations. For defense companies, the consequences could include delayed solicitations, reduced procurement quantities, deferred production expansions and anticipated awards that do not materialize. Exposure will depend on whether individual programs rely on proposed reconciliation funding or previously enacted appropriations.

The FY2027 National Defense Authorization Act presents a parallel challenge, with House passage complete and Senate passage still pending. Lawmakers must resolve differences over acquisition reform, industrial base investment and oversight requirements before securing passage of a common text. The resulting legislation could shape procurement practices and contractor obligations but would not resolve the underlying funding uncertainty. The NDAA generally authorizes defense appropriations and establishes policy and acquisition authorities; appropriations legislation supplies the budget authority needed to execute those activities. Other potential year-end business includes supplemental funding for the Iran war, extensions of farm and surface transportation programs, and a bipartisan package related to permitting of energy projects. Limited voting days will force decisions about which measures can advance independently, which might be combined into broader agreements and which will be deferred. The outgoing Republican-controlled Senate may also prioritize confirmation of judicial and Executive Branch nominees in the waning weeks of their majority before Democrats assume control.

The Legislative Agenda in the 120th Congress
Democratic control of both chambers will allow the party to set the congressional agenda, but President Trump’s veto power will constrain its ability to enact legislation. Differences over spending, regulatory policy and other priorities could complicate negotiations while creating incentives for narrower agreements where the parties’ interests overlap. Democrats will also have to contend with potential internecine debates over the contours of legislation being considered, though the large size of the Democratic majorities in each chamber could serve to limit the ability that certain factions within the conferences might seek to leverage to force changes to legislation.

Government funding and other legislation needed to sustain federal operations will remain recurring points of negotiation. These measures can provide opportunities to resolve policy disputes or advance proposals that have not moved independently.

Committee Leadership and Emerging Priorities
Committee and subcommittee chairs will help determine which proposals receive consideration, which witnesses appear at hearings and where committees direct their oversight resources.

Incoming chairs may elevate different issues, revisit stalled proposals or redirect oversight within their jurisdictions. Leadership selections and committee assignments in the coming weeks will provide a clearer picture of those priorities. With respect to several committees, there will be contests to consider who will chair the committee, pitting long-serving Democrats with greater seniority against younger Members angling to rise up the committee ranks.

Congressional Oversight and Investigations: A Shift in Focus and Pressure
Democratic control of both chambers will also shift the direction and intensity of congressional oversight. Committee majorities set investigative agendas and, subject to applicable rules, can use hearings, document requests and subpoenas to scrutinize companies and other organizations.

As noted in our prior analysis, congressional investigations are poised to take center stage as lawmakers pursue priorities that may be difficult to advance through legislation. The new majorities are expected to direct sustained attention toward the Trump administration’s decisions and its interactions with private entities. Inquiries initiated by Democrats while in the minority are likely to develop into formal committee investigations under which Democrats can utilize their subpoena power to compel participation.

Potential areas of focus include federal contracts and funding, regulatory relief, corporate donations and agreements with the administration. Committees may also seek records from contractors, vendors, financial institutions and business partners as part of broader investigations into government conduct, particularly where access to White House or agency records is contested.

Defense oversight is expected to encompass the conduct and costs of the Iran war strikes in the Caribbean, and other military operations, as well as procurement decisions and the Pentagon’s relationships with private companies. It may also extend to technologies and facilities used in immigration enforcement activities. Companies benefiting from expedited awards or direct federal investment should be prepared to explain both the operational rationale for the government’s decision and their performance against contractual commitments.

Voter concerns about affordability and consumer protection may also drive inquiries into corporate pricing practices, energy costs, consumer fees and business responses to tariffs. Financial institutions, energy companies and other consumer-facing businesses could receive particular attention. Stablecoins, prediction markets and betting platforms may face scrutiny concerning consumer safeguards and market integrity.

Technology oversight is also expected to remain active, with AI as a focal point. Potential areas of inquiry include workforce impacts, algorithmic pricing, privacy, and the energy and environmental demands of data centers. Children’s online safety, cybersecurity and national security supply chains are also likely to remain areas of bipartisan interest.

Congressional investigations can expose sensitive business information, require substantial management attention and create reputational consequences even where investigators identify no wrongdoing. Companies may face requests from multiple committees pursuing different objectives, including when they are not the principal targets of an investigation.

Preparing for the 120th Congress
Companies should use the lame-duck period to reassess their legislative priorities, identify opportunities for year-end action and determine how their objectives align with incoming congressional leaders. Proposals that do not advance before the 119th Congress ends will generally need to be reintroduced, making continued bipartisan support and relationships with incoming committee leaders particularly important.

Preparation for oversight should include reviewing significant federal contracts, funding awards and other government relationships, particularly if alongside ties to Trump family members or senior political personnel; evaluating relevant compliance programs and document preservation procedures; and identifying the legal, business and communications personnel responsible for responding to congressional inquiries. In certain high-risk scenarios, it may be advisable to develop a strategic response plan in advance of inquiry. As discussed in our prior alert on stakeholder relations, engagement with industry associations, nonprofits and other influential third-party groups can also strengthen credibility with policymakers and build support for shared policy objectives.

Pillsbury’s Government Law and Strategies team will continue to provide analysis as year-end negotiations proceed and the next Congress’s legislative and oversight priorities take shape.

For additional discussion of congressional investigative priorities and steps organizations can take to prepare, see our recent webinar, DC Disrupted: Preparing for Increased Congressional Oversight.